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Exhibit 10.4.a.1 SECOND AMENDMENT OF FMC CORPORATION EMPLOYEES' RETIREMENT PROGRAM PART I SALARIED AND NONUNION HOURLY EMPLOYEES' RETIREMENT PLAN (As Amended and Restated Effective January 1, 1999)           WHEREAS, FMC Corporation (the "Company") maintains the FMC Corporation Employees' Retirement Program Part I Salaried and Nonunion Hourly Employees' Retirement Plan (the "Plan"); and           WHEREAS, amendment of the Plan is now considered desirable;           NOW, THEREFORE, by virtue and in exercise of the powers reserved to the Company under Section 11.1 Plan Amendment or Termination of the Plan, and pursuant to authority delegated to the undersigned officer of the Company by resolution of its Board of Directors, the Plan is hereby amended, effective as of the dates specified below, in the following respects:           1.     Effective January 1, 1999, the Plan is hereby amended for purposes of clarification in Article I by deleting the definition Earnings is deleted in its entirety, and inserting the following in lieu thereof:           "Earnings means the total compensation paid by the Company or a Participating Employer to an Eligible Employee for each Plan Year that is currently includible in gross income for federal income tax purposes: (a)       including: overtime, administrative and discretionary bonuses (including, gainsharing bonuses, performance related bonuses and, effective May 1, 2000, completion bonuses (except as provided below); sales incentive bonuses; earned but unused vacation, back pay, sick pay (other than a cash payment of unused sick days) and state disability benefits; plus the Employee's Pre-Tax Contributions and amounts contributed to a plan described in Code Section 125 or 132; and the incentive compensation (including management incentive bonuses which may be paid in cash and restricted stock and local incentive bonuses) earned during the Plan Year;   (b)       but excluding: hiring bonuses; referral bonuses; stay bonuses; retention bonuses; awards (including safety awards, "Gutbuster" awards and other similar awards); .       amounts received as deferred compensation; disability payments from insurance or the Long-Term Disability Plan for Employees of FMC Corporation (other than state disability benefits); workers' compensation benefits; flexible credits (i.e., wellness awards and payments for opting out of benefit coverage); expatriate premiums (including completion of expatriate assignment bonuses); grievance or settlement pay; severance pay; incentives for reduction in force; accrued (but not earned) vacation; other special payments such as reimbursements, relocation or moving expense allowances; stock options or other stock-based compensation (except as provided above); any gross-up paid by a Participating Employer; other distributions that receive special tax benefits; any amounts paid by a Participating Employer to cover an Employee's FICA tax obligation as to amounts deferred or accrued under any nonqualified retirement plan of a Participating Employer; and, effective May 1, 2000, pay in lieu of notice           The annual amount of Compensation taken into account for a Participant must not exceed $160,000 (as adjusted by Internal Revenue Service for cost-of-living increases in accordance with Code Section 401(a)(17)(B)).           A Participant's Compensation will be conclusively determined according to the Company's records."           2.     Effective January 1, 1999, in Article I, the definition Period of Service is amended for purposes of clarification by deleting the second sentence thereof in its entirety and inserting the following in lieu thereof:           "Notwithstanding the foregoing, if an Employee incurs a One-Year Period of Severance at a time when he or she has no vested interest under the Plan and the Employee does not perform an Hour of Service within 5 years after the beginning of the One-Year Period of Severance, the Period of Vesting Service prior to such One-Year Period of Severance shall not be aggregated."           3.     Effective January 1, 1999, Section 4.1 Amount of Termination Benefit is hereby amended to correct a scrivener's error by changing the term "Years of Credited Service" to the term "Years of Vesting Service" in each place it appears in Section 4.2(c)(i) and 4.2(c)(ii).           4.     Effective January 1, 1999, Supplement 1 - Specialty Chemicals Division, Livonia, Michigan is hereby amended by deleting the title of the Supplement in its entirety and inserting the following in lieu thereof:           Specialty Chemicals Division, Livonia, Michigan and South Charleston, West Virginia; and by adding the words "or South Charleston, West Virginia" immediately after the words "Livonia, Michigan" in the first sentence of the text thereof; and by deleting the words "Sun Cleaner" in all places where they appear, and inserting the words "Sun Cleanser" in lieu thereof for clarification purposes.           5.     Effective January 1, 1999, the text of Supplement 2 - Marine Colloids Division is hereby deleted in its entirety to correct a scrivener's error.           IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 19th day of September, 2000.   FMC CORPORATION       By:   /s/ Stephen F. Gates --------------------------------------------------------------------------------     Member, Employee Welfare Benefits Plan Committe
EXHIBIT 10.3m TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 28, 2000 between Harcourt General, Inc. and Richard A. Smith (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 28, 2000 (the "Effective Date") and shall remain in effect until June 27, 2002 (the "Term"); provided, however, that commencing with June 28, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. No applicable. e. Retiree Medical. Following Executive's entitlement to continued active employee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool. Not Applicable. 5. Mitigation. 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, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and 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 Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty 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 the Gross-Up Payment required to be paid. 7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10.   11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive. 16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement on the 28th day of June, 2000. HARCOURT GENERAL, INC. /s/ Eric P. Geller               By: Eric P. Geller Title: Senior Vice President /s/ Richard A. Smith             EXECUTIVE   Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice; or (5) Executive's notice of termination of employment within the thirty-day period following the 183rd day following the Change of Control; provided Executive's employment actually terminates within such 30 day period. Except as provided in (5) above, Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 50% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1. Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive=s age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females. 3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed
EXHIBIT 10.15 REPLACEMENT PROMISSORY NOTE $3,000,000.00 May 19, 2000        FOR VALUE RECEIVED, the undersigned, Michael S. Jeffries, promises to pay to the order of Abercrombie & Fitch Co., a Delaware corporation, the principal sum of Three Million Dollars ($3,000,000.00), with interest thereon at the rate of six and one-half percent (6.5%) per annum, said principal and all accrued interest thereon being payable in full on May 18, 2001.      The undersigned reserves the privilege of prepaying all or a portion of the principal balance hereof at any time without penalty.      All persons now or hereafter liable for the principal amount due on this Note or any part hereof do expressly waive presentment for payment, notice of dishonor, protest and notice of protest and agree that the time for the payment of this Note may be extended without releasing or otherwise affecting their liability on this Note, or any other security agreements or guarantees, if any, securing this Note.      This Note was signed at Reynoldsburg, Ohio and shall be construed in accordance with and governed by the provisions of the laws of the State of Ohio. Any failure of Abercrombie & Fitch Co. or the legal holder hereof to exercise any option herein provided upon default shall not constitute a waiver of the right to exercise such option in the event of any continuing or subsequent default. The undersigned hereby agrees that the maturity of all or any part of the indebtedness evidenced hereby may be postponed or extended without prejudice to his liability on this Promissory Note.      If any provision of this Note is illegal, or hereafter rendered illegal, or is for any other reason void, voidable or otherwise unenforceable or invalid, or hereafter rendered void, voidable or otherwise unenforceable or invalid, the remainder of this Note shall not be affected by, but shall be construed as if it does not contain such provision.      This Replacement Note constitutes a replacement of, and substitute for, the Promissory Note, dated as of November 17, 1999, executed by the undersigned and payable to the order of Abercrombie & Fitch in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Original Note"). This Replacement Note evidences the increase in amount of the repayment obligations of the undersigned and the extension of the term of the Note. Upon the undersigned's execution of this Replacement Note, Abercrombie & Fitch shall mark the Original Note "Cancelled".   /S/ Michael S. Jeffries     --------------------------------------------------------------------------------     Michael S. Jeffries    
    First Union National Bank Exhibit 10.2       [LOGO TO COME]   Jill W. Akre Senior Vice President (215) 786-4135 July 27, 2000 VIA FACSIMILE (410-266-8400) Condor Technology Solutions, Inc. Annapolis Office Plaza 170 Jennifer Road, Suite 325 Annapolis, Maryland 21401 Attention: Mike Robbins, Chief Financial Officer     Re:  Credit Agreement (as herein defined) Dear Mike:     Condor Technology Solutions, Inc., Computer Hardware Maintenance Company, Inc., Decision Support Technology, Inc., Federal Computer Corporation, Global Core Strategies Acquisition, Inc., Interactive Software Systems Incorporated, Inventure Group, Inc., LINC Systems Corporation, Louden Associates, Inc., Management Support Technology Corp., MIS Technologies, Inc., Powercrew, Inc., Titan Technologies Group L.L.C., U.S. Communications, Inc., Corporate Access, Inc. and Condor System Solutions, Inc., as Borrowers (collectively, the "Borrowers"), First Union National Bank, as Collateral Agent, Administrative Agent and Issuing Lender (in all such capacities, the "Agent") and First Union Commercial Corporation, Fleet National Bank, Citizens Bank of Massachusetts and Mellon Bank, N.A. (the "Lenders") are parties to, inter alia: (a) a Credit Agreement dated as of April 16, 1999 (as amended from time to time prior to the date hereof, the "Existing Credit Agreement," and as amended hereby and from time to time hereafter, the "Credit Agreement"); and (b) that certain Forbearance Letter Agreement dated as of July 23, 1999, as amended by: (i) the First Amendment to Forbearance Letter Agreement dated as of July 30, 1999; (ii) the Second Amendment to Forbearance Letter Agreement dated as of August 13, 1999, as amended; (iii) the Third Amendment to Forbearance Letter Agreement and Amendment Agreement dated as of August 27, 1999; (iv) the Fourth Amendment to Forbearance Letter Agreement and Amendment Agreement dated as of November 15, 1999, as amended; (v) the Fifth Amendment Agreement dated as of March 1, 2000; and (vi) a First Amendment to Fifth Amendment dated as of May 15, 2000 (as amended, the "Forbearance Letter Agreement"). Capitalized terms contained herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement and the Forbearance Letter Agreement.     Pursuant to Section 10.9 of the Credit Agreement, the Borrowers are required to pay to the Lenders, on or before August 1, 2000, $8,000,000 to permanently reduce, on a pro rata basis, the Revolving Credit Loans and the Term Loans (the "$8,000,000 Payment"). The $8,000,000 Payment requirement was based upon the Borrowers' original estimate that the ISSI Assets would be sold for approximately $8,000,000 to $10,000,000.     Pursuant to that certain letter agreement dated June 30, 2000 (the "June 30 Letter Agreement"), between the Borrowers and the Lenders, the Lenders agreed to release their liens on the ISSI Assets (as defined in the June 30 Letter Agreement) in connection with the sale of the ISSI Assets. As part of the sale of the ISSI Assets, the Borrowers delivered to the Lenders: (i) $2,721,500 (the "ISSI Initial Payment"), which was applied to permanently reduce the Obligations; and (ii) an assignment of the Borrowers' rights to receive the deferred purchase price payable with respect to the ISSI Assets (the "ISSI Subsequent Payments"). --------------------------------------------------------------------------------     Because the sale of the ISSI Assets did not result in an immediate cash payment of $8,000,000, the Borrowers requested that the Lenders accept the ISSI Initial Payment and the assignment of the ISSI Subsequent Payments in lieu of the $8,000,000 Payment. This letter will confirm that the Lenders have agreed to accept from the Borrowers, in lieu of the $8,000,000 Payment, the ISSI Initial Payment and the assignment of the ISSI Subsequent Payments. Accordingly, the Borrowers will not be required to make the $8,000,000 Payment to the Banks on August 1, 2000.     Except as amended hereby, all of the Loan Documents shall remain in full force and effect and bind and inure to the benefit of the parties thereto and are hereby ratified and confirmed.     This Letter Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same Letter Agreement. This Letter Agreement shall be deemed to have been executed and delivered when the Agent has received counterparts hereof executed by all parties listed on the signature pages hereto.     Please indicate your agreement to the foregoing by executing this Letter Agreement in the appropriate signature block below. Sincerely, FIRST UNION NATIONAL BANK, as Agent           /s/ JILL W. AKRE -------------------------------------------------------------------------------- Jill W. Akre Senior Vice President CITIZENS BANK OF MASSACHUSETTS, SUCCESSOR IN INTEREST TO STATE STREET BANK AND TRUST COMPANY, as Lender       By:   /s/ DAVE BROWN    -------------------------------------------------------------------------------- Name:   Dave Brown Title:   Vice President   FLEET NATIONAL BANK, as Lender   By:       /s/ DANIEL D. BUTLER    -------------------------------------------------------------------------------- Name:   Daniel D. Butler Title:   Vice President   MELLON BANK, N.A., as Lender   By:       /s/ GREEN DIM    -------------------------------------------------------------------------------- Name:   Green Dim Title:   First Vice President   FIRST UNION COMMERCIAL CORPORATION, as Lender   By:       /s/ JILL AKRE    -------------------------------------------------------------------------------- Name:   Jill Akre Title:   Senior Vice President 2 --------------------------------------------------------------------------------
-------------------------------------------------------------------------------- Exhibit 10.16 July 12, 2000 Richard Beyer Employment Agreement Dear Rich:      On behalf of the Board of Directors of Elantec Semiconductor, Inc. (“Elantec”), I am pleased to offer you the position of President and Chief Executive Officer of Elantec on the terms set forth below.      1. Position. You will be employed by Elantec as its President and Chief Executive Officer effective commencing July 12, 2000 (the ”Commencement Date”) and continuing thereafter until termination pursuant to Section 6. You will have overall responsibility for the management of Elantec and will report directly to its Board of Directors. During your term, you will also be appointed to the Board of Directors. You will be expected to devote your full working time and attention to the business of Elantec, and you will not render services to any other business without the prior approval of the Board of Directors or, directly or indirectly, engage or participate in any business that is competitive in any manner with the business of Elantec. You will also be expected to comply with and be bound by the Company’s operating policies, procedures and practices that are from time to time in effect during the term of your employment.      2. Base Salary. Your initial base monthly salary will be $25,000, payable in accordance with Elantec’s normal payroll practices with such payroll deductions and withholdings as are required by law. Your base salary will be reviewed on an annual basis by the Compensation Committee of the Board of Directors and increased from time to time, in the discretion of the Compensation Committee, but in any event such compensation shall not be reduced below $25,000 per month during your term of employment.      3. Bonus. You will be eligible to receive a target bonus of $200,000 in accordance with Elantec’s Management Bonus Plan. For Elantec’s fourth quarter 2000 you will receive a prorated target bonus. Your Management Bonus will exclude the impact of any acquisition the Company may pursue.      4. Stock Options and Restricted Stock.      (a) On the Commencement Date, the Compensation Committee of the Board of Directors shall grant you nonqualified stock options to purchase 613,500 shares of Elantec common stock at an exercise price equal to such common stock closing price on the Commencement Date. Twenty-five percent of these options will vest if you are still employed with the Company on the one year anniversary of your employment Commencement Date. Thereafter for each month of your continuous service with the Company, you will vest in 1/48 of your total options.      (b) You will be granted 86,500 shares of restricted common stock on your first date of employment for a purchase price equal to the par value of the Elantec common stock of $0.01 per share. These shares of restricted stock will vest annually over a five year period. Unvested shares will be subject to repurchase by Elantec at $0.01 per share upon termination of your employment      5. Other Benefits. You will be eligible for the normal vacation, health insurance, 401(k), employee stock purchase plan and other benefits offered to all Elantec senior executives of similar rank and status.      6. Employment and Termination. Your employment with Elantec will be at-will and may be terminated by you or by Elantec at any time for any reason as follows: --------------------------------------------------------------------------------      (a) You may terminate your employment upon written notice to the Board of Directors at any time in your discretion (“Voluntary Termination”);      (b) Elantec may terminate your employment upon written notice to you at any time following a determination by the Board of Directors that there is “Cause,” as defined below, for such termination (“Termination for Cause”);      (c) Elantec may terminate your employment upon written notice to you at any time in the sole discretion of the Board of Directors without a determination that there is Cause for such termination (“Termination without Cause”);      (d) Your employment will automatically terminate upon your death or upon your disability as determined by the Board of Directors (“Termination for Death or Disability”); provided that “disability” shall mean your complete inability to perform your job responsibilities for a period of 180 consecutive days or 180 days in the aggregate in any 12-month period.      7. Definitions.      (a) “Cause” means the commission of an act of theft, embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or a Parent or Subsidiary of the Company.      (b) “Corporate Transaction” means (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Participants), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Internal Revenue Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company or by the stockholders of the Company).      8. Separation Benefits. Upon termination of your employment with Elantec for any reason, you will receive payment for all unpaid salary and vacation accrued to the date of your termination of employment; and your benefits will be continued under Elantec’s then existing benefit plans and policies for so long as provided under the terms of such plans and policies and as required by applicable law. Under certain circumstances, you will also be entitled to receive severance benefits as set forth below, but you will not be entitled to any other compensation, award or damages with respect to your employment or termination.      (a) In the event of your Voluntary Termination or Termination for Cause, you will not be entitled to any cash severance benefits or additional vesting of shares of restricted stock or options.      (b) In the event of your Involuntary Termination or Termination without Cause, you will be (i) entitled to a single lump sum severance payment equal to 12 months of your current annual base salary (less applicable deductions and withholdings) payable within 30 days after the effective date of your termination; (ii) entitled to a single lump sum payment equal to your full target bonus for the year of termination without regard to satisfaction of any target performance objectives, payable within 30 days following your termination; (iii) credited with 12 additional months of employment service after your termination date for purposes of your vesting with respect to the options granted hereunder; and (iv) credited with one additional year of employment service after your termination date for purposes of your vesting with respect to the restricted stock granted hereunder. In the event of your Involuntary Termination within the 12 months following a Corporate Transaction where you are not provided a comparable position within the Company, all of your options and restricted stock granted under this agreement shall become fully and immediately vested and exercisable. --------------------------------------------------------------------------------      (c) No payments due you hereunder shall be subject to mitigation or offset.      9. Indemnification Agreement. Upon your commencement of employment with Elantec, Elantec will enter into its standard form of indemnification agreement for officers and directors, a copy of which is attached to this letter as Exhibit C, to indemnify you against certain liabilities you may incur as an officer or director of Elantec.      10. Confidential Information and Invention Assignment Agreement. Upon your commencement of employment with Elantec, you will be required to sign its standard form of Employee Agreement, a copy of which is attached to this letter as Exhibit D, to protect Elantec’s confidential information and intellectual property.      11. Noncompete/Nonsolicitation. During the term of your employment with Elantec and for one year thereafter, you will not engage in any activity which is directly competitive with the business of the Company and you will not, on behalf of yourself or any third party, solicit or attempt to induce any employee of Elantec to terminate his or her employment with Elantec. The noncompete in the preceding sentence shall apply 1) in the counties of Santa Clara, San Mateo and San Francisco counties of California, 2) California, 3) the United States of America and 4) the world.      12. Arbitration. The parties agree that any dispute regarding the interpretation or enforcement of this agreement shall be decided by confidential, final and binding arbitration conducted by Judicial Arbitration and Mediation Services (“JAMS”) under the then existing JAMS rules rather than by litigation in court, trial by jury, administrative proceeding or in any other forum.      13. Miscellaneous.      (a) Authority to Enter into Agreement. Elantec represents that its Chairman of the Board has due authority to execute and deliver this agreement on behalf of Elantec.      (b) Absence of Conflicts. You represent that upon the Commencement Date your performance of your duties under this agreement will not breach any other agreement as to which you are a party.      (c) Attorneys Fees. If a legal action or other proceeding is brought for enforcement of this agreement because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and costs incurred, both before and after judgment, in addition to any other relief to which they may be entitled.      (d) Successors. This agreement is binding on and may be enforced by Elantec and its successors and assigns and is binding on and may be enforced by you and your heirs and legal representatives. Any successor to Elantec or substantially all of its business (whether by purchase, merger, consolidation or otherwise) will in advance assume in writing and be bound by all of Elantec’s obligations under this agreement.      (e) Notices. Notices under this agreement must be in writing and will be deemed to have been given when personally delivered or two days after mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. Mailed notices to you will be addressed to you at the home address which you have most recently communicated to Elantec in writing. Notices to Elantec will be addressed to its General Counsel at Elantec’s corporate headquarters.      (f) Waiver. No provision of this agreement will be modified or waived except in writing signed by you and an officer of Elantec duly authorized by its Board of Directors. No waiver by either party of any breach of this agreement by the other party will be considered a waiver of any other breach of this agreement.      (g) Entire Agreement. This agreement, including the attached exhibits,and such other agreements expressly referred to herein, including the applicable stock option plan, option agreement and related documents and restricted stock purchase agreement and related documents represent the entire agreement between us concerning the subject matter of your employment by Elantec. To the extent of any conflict between the provision of this agreement and other agreements referred to in the preceding sentence, the terms of this agreement shall control.      (h) Governing Law. This agreement will be governed by the laws of the State of California without reference to conflict of laws provisions.      (i) Severability. If any portion of this agreement shall be determined to be unenforceable, the remaining provisions of this agreement shall remain in force.      Rich, we are very pleased to extend this offer of employment to you and look forward to your joining Elantec as its President and Chief Executive Officer. Please indicate your acceptance of the terms of this agreement by signing in the place indicated below. Very truly yours,   Accepted July 12, 2000:   /s/ James V. Diller   /s/ Richard M. Beyer --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- James V. Diller   Richard M. Beyer Chairman of the Board of Directors Elantec Inc.
Exhibit 10.4   EMPLOYMENT AGREEMENT           THIS AGREEMENT ("Agreement") is made and entered into as of this 31st day of August, 2000, by and between LARRY C. HANGER, an individual resident of the State of Georgia ("Employee"), and INNOTRAC CORPORATION, a Georgia corporation (the "Employer"). W I T N E S S E T H:           WHEREAS, the parties hereto desire to enter into an agreement for the Company's continued employment of Employee on the terms and conditions contained herein;           NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: Section 1.          Employment.           Subject to the terms hereof, the Employer hereby employs Employee, and Employee hereby accepts such employment. Employee will serve as Senior Vice President - Business Development of the Employer or in such other executive capacity as the Board of Directors of Employer (the "Board of Directors") may hereafter from time to time determine. Employee agrees to devote his full business time and best efforts to the performance of the duties that Employer may assign Employee from time to time; provided that the Employee may also serve as an officer or director of Return.com Online, Inc. and may perform services for Return.com Online, Inc.; and provided further that the Employee may also serve on boards of directors or trustees of other companies and organizations, as long as such service does not materially interfere with the performance of his duties hereunder. Section 2.          Term of Employment.           The term of Employee's employment (the "Term") shall continue from the date hereof until the earlier of (a) December 31, 2005 or (b) the occurrence of any of the following events:           (i)          The death or total disability of Employee (total disability meaning the failure to fully perform his normal required services hereunder for a period of three (3) months during any consecutive twelve (12) month period during the term hereof, as determined by the Board of Directors, by reason of mental or physical disability);           (ii)          The termination by Employer of Employee's employment hereunder, upon prior written notice to Employee, for "good cause", as determined by the Board of Directors. For purposes of this Agreement, "good cause" for termination of Employee's employment shall exist (A) if Employee is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement, (B) if Employee fails to comply with the terms of this Agreement, and, within thirty (30) days after written notice from Employer of such failure, Employee has not corrected such failure or, having once received such notice of failure and having so corrected such failure, Employee at any time thereafter again so fails, (C) if Employee violates any of the provisions contained in Section 4 of this Agreement, or (D) if Employee tests positive for illegal drugs; or           (iii)          The termination of this Agreement by either party upon at least ninety (90) days prior written notice. Section 3.          Compensation.           3.1          Term of Employment. Employer will provide Employee with the following salary, expense reimbursement and additional employee benefits during the term of employment hereunder:           (a)          Salary. Employee will be paid a salary (the "Salary") of no less than One Hundred Fifty Thousand Dollars ($150,000) per annum, less deductions and withholdings required by applicable law. The Salary shall be paid to Employee in equal monthly installments (or on such more frequent basis as other executives of Employer are compensated). The Salary shall be reviewed by the Board of Directors of Employer on at least an annual basis.           (b)          Bonus. Employee will be entitled to an annual bonus (the "Bonus") of 60% of Salary at Plan (to be defined) with a 3-up-3-down formula. The Bonus shall be paid promptly upon the availability of annual financial results (which is expected to occur in early February of each year).           (c)          Vacation. Employee shall receive four (4) weeks vacation time per calendar year during the term of this Agreement. Any unused vacation days in any calendar year may not be carried over to subsequent years.           (d)          Expenses. Employer shall reimburse Employee for all reasonable and necessary expenses incurred by Employee at the request of and on behalf of Employer.           (e)          Benefit Plans. Employee may participate in such medical, dental, disability, hospitalization, life insurance and other benefit plans (such as pension and profit sharing plans) as Employer maintains from time to time for the benefit of other senior executives of Employer, on the terms and subject to the conditions set forth in such plans. 3.2          Effect of Termination.           (a)          Except as hereinafter provided, upon the termination of the employment of Employee hereunder for any reason, Employee shall be entitled to all compensation and benefits earned or accrued under Section 3.1 as of the effective date of termination (the "Termination Date"), but from and after the Termination Date no additional compensation or benefits shall be earned by Employee hereunder. Employee shall be deemed to have earned any Bonus payable with respect to the calendar year in which the Termination Date occurs on a prorated basis (based on the number of days in such calendar year through and including the Termination Date divided by 365) based upon the year to date financials and performance of the Employer and assuming performance at the target level for any individual performance criteria. Any such Bonus shall be payable upon termination.           (b)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount payable hereunder, Employer shall continue to pay Employee his normal Salary pursuant to Section 3.1(a) for a six-month period (on the same basis as if Employee continued to serve as an employee hereunder for such applicable period). If Employee's employment is terminated pursuant to Section 2(b)(i) hereof or if Employee's employment is terminated by Employer pursuant to Section 2(b)(iii), all options to purchase stock of the Company or an affiliate of the Company granted to Employee shall immediately become exercisable upon such termination. In the case of a termination pursuant to Section 2(b)(i) hereof, the options will expire in accordance with their respective scheduled expiration dates. Except as provided in Section 3.3 , in the case of a termination by Employer pursuant to Section 2(b)(iii) hereof, the options will expire on the first anniversary after the effective date of the termination of Employee's employment hereunder. Upon the death of Employee, any options that Employee would otherwise be entitled to exercise hereunder may be exercised by his personal representatives or heirs, as applicable. Except as provided in Section 3.3, if Employee's employment is terminated by Employer pursuant to Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those options which are exercisable as of the date of such termination shall be exercisable for a period of 90 days after such termination (and all other options not then exercisable shall be forfeited as of such date), and after such 90-day period, all unexercised options will expire. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer .           3.3          Effect of Change in Control. Notwithstanding Section 3.2(b) above, if there is a Change in Control (as defined below) of the Employer and the Employee's employment is terminated within 18 months following the date of the Change in Control, the following provisions shall apply.           (a)          If Employee's employment hereunder is terminated by Employer pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to received the compensation and benefits set forth in subsections (i) through (iv) below:           (i)          Base Salary. Employee will continue to receive his Salary as then in effect (subject to withholding of all applicable taxes) for a period of eighteen (18) months from his date of termination in the same manner as it was being paid as of the date of termination.           (ii)          Health, Dental and Life Insurance Coverage. The health, dental and group term life insurance benefits coverage provided to Employee at his date of termination shall be continued at the same level and in the same manner as if his employment under this Agreement had not terminated (subject to the customary changes in such coverages if Employee retires, reaches age 65 or similar events), beginning on the date of such termination and ending on the date eighteen (18) months from the date of such termination. Any additional coverages Employee had at termination, including dependent coverage, will also be continued for such period on the same terms, to the extent permitted by the applicable policies or contracts. Any costs Employee was paying for such coverages at the time of termination shall be paid by Employee by separate check payable to the Company each month in advance or by re duction of amounts owed to Employee by the Employer. If the terms of any benefit plan referred to in this Section, or the laws applicable to such plan, do not permit continued participation by Employee, then the Company will arrange for other coverage at its expense providing substantially similar benefits. The coverages provided for in this paragraph shall be applied against and reduce the period for which COBRA will be provided.           (iii)          Stock Options. Notwithstanding any provision in any option agreement, all outstanding stock options granted to Employee by Employer or an affiliate of Employer shall become fully vested on the date of Employee's termination of employment and shall remain exercisable as provided in the applicable option agreement or, if longer, for a period of three (3) years following the date of termination of employment. To the extent necessary, this provision shall be deemed an amendment of any option agreement between the Employee and the Employer or an affiliate of the Employer.           (b)          If Employee's employment hereunder is terminated by Employee pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as defined below, then, in addition to any other amount payable pursuant to Section 3.2(a), the Employee shall be entitled to receive the compensation and benefits set forth in subsections (i) through (iii) of Subsection 3.3(a) above, provided, however, that a period of 12 months shall be substituted for 18 months in subsections 3.3(a)(i) and (ii).           3.4          Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:                       (a)          "Change in Control" means any of the following events:           (i)          The acquisition (other than from the Employer) by any person of beneficial ownership of fifty percent (50%) or more of the combined voting power of the Employer's then outstanding voting securities; provided, however, that for purposes of this Section, person shall not include any person who on the date hereof owns 25% or more of the Employer's outstanding securities, and a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the Employer's then outstanding securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Employer or any of its subsidiaries, or (ii) any corporation, which, immediately prior to such acquisition, is owned directly or indirectly by the shareholders of the Employer in the same proportion as their ownership of stock in the Employer immediately prior to such acquisition.           (ii)          Approval by shareholders of the Employer of (1) a merger or consolidation involving the Employer if the shareholders of the Employer, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the Employer outstanding immediately before such merger or consolidation, or (2) a complete liquidation or dissolution of the Employer, or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Employer.           (iii)          A change in the composition of the Board such that the individuals who, as of the date of this Agreement, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Employer's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or t hreatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, including any successor to such Rule), or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, shall not be so considered as a member of the Incumbent Board.           (iv)          The occurrence of any other event or circumstance which is not covered by (i) through (iii) above which the Board determines affects control of the Company and adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement.           (b)          A "Good Reason" for termination by Employee of Employee's employment shall mean the occurrence (without the Employee's express written consent), within the eighteen (18) month period following the date of a Change in Control, of any one of the following acts by the Employer, or failures by the Employer to act, unless, in the case of any act or failure to act described in paragraph (i) or (iv) below, such act or failure to act is corrected within 30 days after notice by the Employee to the Employer of the act or failure to act:           (i)          the assignment to Employee of any duties inconsistent with Employee's title and status set forth herein, or a substantial adverse alteration in the nature or status of Employee's responsibilities at the Employer from those in effect immediately prior to the Change in Control;           (ii)          a substantial reduction by the Employer in Employee's Base Salary;           (iii)          the relocation of Employee's principal office to a place more than 50 miles from Atlanta, Georgia;           (iv)          the failure by the Employer to continue in effect any compensation or benefit plan or program in which Employee participates immediately prior to the Change in Control, which is material to Employee's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Employer to continue the Employee's participation in such plan (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Employee's participation relative to other participants, as existed at the time of the Change in Control.           The Employee's right to terminate the Employee's employment for Good Reason shall not be affected by the Employee's incapacity due to physical or mental illness, except for a total disability as defined in Section 2 above. The Employee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. Section 4.          Partial Restraint on Post-termination Competition.           4.1          Definitions.          For the purposes of this Section 4, the following definitions shall apply:           (a)          "Company Activities" means the business of selling caller ID technology and hardware, fulfillment services, e-commerce fulfillment and e-commerce return services as well as other similar services that Innotrac or its subsidiaries is involved in at the date of this agreement.           (b)          "Competitor" means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Employer or its affiliates or subsidiaries, engaged, wholly or partly, in Company Activities.           (c)          "Competitive Position" means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Employee will serve such Competitor in any managerial capacity.           (d)          "Confidential Information" means any confidential, proprietary business information or data belonging to or pertaining to Employer that does not constitute a "Trade Secret" (as hereinafter defined) and that is not generally known by or available through legal means to the public, including, but not limited to, information regarding Employer's customers or actively sought prospective customers, suppliers, manufacturers and distributors gained by Employee as a result of his employment with Employer.           (e)          "Customer" means actual customers or actively sought prospective customers of Employer during the Term.           (f)          "Noncompete Period" or "Nonsolicitation Period" means the period beginning the date hereof and ending on the first anniversary of the termination of Employee's employment with Employer.           (g)          "Territory" means the area within a thirty-five (35) mile radius of any corporate office of Employer or any of its subsidiaries, affiliates or divisions.           (h)          "Trade Secrets" means information or data of or about Employer, including but not limited to technical or non-technical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, products plans, or lists of actual or potential customers, clients, distributees or licensees, information concerning Employer's finances, services, staff, contemplated acquisitions, marketing investigations and surveys, that (i) derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from their disclosure or use; and (ii) are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.           (i)          "Work Product" means any and all work product, property, data documentation or information of any kind, prepared, conceived, discovered, developed or created by Employee for Employer or its affiliates, or any of Employer's or its affiliates' clients or customers.           4.2          Trade Name and Confidential Information.           (a)          Employee hereby agrees that (i) with regard to each item constituting all or any portion of the Trade Secrets, at all times during the Term and all times during which such item continues to constitute a Trade Secret under applicable law; and (ii) with regard to any Confidential Information, during the Term and the Noncompete Period:           (i)          Employee shall not, directly or by assisting others, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected in any manner with, any business conducted under any corporate or trade name of Employer or name similar thereto, without the prior written consent of Employer;           (ii)          Employee shall hold in confidence all Trade Secrets and all Confidential Information and will not, either directly or indirectly, use, sell, lend, lease, distribute, license, give, transfer, assign, show, disclose, disseminate, reproduce, copy, appropriate or otherwise communicate any Trade Secrets or Confidential Information, without the prior written consent of Employer; and           (iii)          Employee shall immediately notify Employer of any unauthorized disclosure or use of any Trade Secrets or Confidential Information of which Employee becomes aware. Employee shall assist Employer, to the extent necessary, in the procurement or any protection of Employer's rights to or in any of the Trade Secrets or Confidential Information.           4.3          Noncompetition.           (a)          The parties hereto acknowledge that Employee is conducting Company Activities throughout the Territory. Employee acknowledges that to protect adequately the interest of Employer in the business of Employer it is essential that any noncompete covenant with respect thereto cover all Company Activities and the entire Territory.           (b)          Employee hereby agrees that, during the Term and the Noncompete Period, Employee will not, in the Territory, either directly or indirectly, alone or in conjunction with any other party, accept, enter into or take any action in conjunction with or in furtherance of a Competitive Position. Employee shall notify Employer promptly in writing if Employee receives an offer of a Competitive Position during the Noncompete Term, and such notice shall describe all material terms of such offer.           Nothing contained in this Section 4 shall prohibit Employee from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.           4.4          Nonsolicitation During Employment Term. Employee hereby agrees that Employee will not, during the Term, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term.           4.5          Nonsolicitation During Nonsolicitation Period. Employee hereby agrees that Employee will not, during the Nonsolicitation Period, either directly or indirectly, alone or in conjunction with any other party solicit, divert or appropriate or attempt to solicit, divert or appropriate, any Customer for the purpose of providing the Customer with services or products competitive with those offered by Employer during the Term; provided, however, that the covenant in this clause shall limit Employee's conduct only with respect to those Customers with whom Employee had substantial contact (through direct or supervisory interaction with the Customer or the Customer's account) during a period of time up to but no greater than two (2) years prior to the last day of the Term. Section 5.          Miscellaneous.           5.1          Severability. The covenants in this Agreement shall be construed as covenants independent of one another and as obligations distinct from any other contract between Employee and Employer. Any claim that Employee may have against Employer shall not constitute a defense to enforcement by Employer of this Agreement.           5.2          Survival of Obligations. The covenants in Section 4 of this Agreement shall survive termination of Employee's employment, regardless of who causes the termination and under what circumstances.           5.3          Notices. Any notice or other document to be given hereunder by any party hereto to any other party hereto shall be in writing and delivered in person or by courier, by telecopy transmission or sent by any express mail service, postage or fees prepaid at the following addresses:                     Employer                     Innotrac Corporation                     6655 Sugarloaf Parkway                     Duluth, GA 30097                     Attention: Mr. Scott Dorfman                                        Chief Executive Office r                     Telephone No.: (678) 584-4000                     Employee                     Mr. Larry C. Hanger                     3440 Greenside Ct.                     Dacula, GA 30019 or at such other address or number for a party as shall be specified by like notice. Any notice which is delivered in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party or its agent.           5.4          Binding Effect. This Agreement inures to the benefit of, and is binding upon, Employer and their respective successors and assigns, and Employee, together with Employee's executor, administrator, personal representative, heirs, and legatees.           5.5          Entire Agreement. This Agreement is intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and is the complete and exclusive statement of the terms thereof, notwithstanding any representations, statements or agreements to the contrary heretofore made. This Agreement may be modified only by a written instrument signed by all of the parties hereto.           5.6          Governing Law. This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed, and governed by and in accordance with, the laws of the State of Georgia. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority or by any board of arbitrators by reason of such party or its counsel having or being deemed to have structured or drafted such provision.           5.7          Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.           5.8          Specific Performance. Each party hereto hereby agrees that any remedy at law for any breach of the provisions contained in this Agreement shall be inadequate and that the other parties hereto shall be entitled to specific performance and any other appropriate injunctive relief in addition to any other remedy such party might have under this Agreement or at law or in equity.           5.9          Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.           5.10          Public Announcement. Neither party shall disclose that this Agreement has been executed until such time as both parties mutually agree to such disclosure.           IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.   INNOTRAC CORPORATION           By:           /s/ Scott Dorfman                               Scott D. Dorfman         Chief Executive Officer           EMPLOYEE                    /s/ Larry C. Hanger                                  Larry C. Hanger
EXHIBIT 10.3e TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 29, 2000 between Harcourt General, Inc. and Paul F. Gibbons (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 29, 2000 (the "Effective Date") and shall remain in effect until June 28, 2002 (the "Term"); provided, however, that commencing with June 29, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B e. Retiree Medical. Following Executive's entitlement to continued activeemployee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool. In the event of a Change of Control, Executive shall be entitled to a 7.27% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. 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, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and 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 Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty 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 the Gross-Up Payment required to be paid. 7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10. 11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive. 16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement on the 29th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Paul F. Gibbons              EXECUTIVE   Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) 0any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice; or (5) Executive's notice of termination of employment within the thirty-day period following the 183rd day following the Change of Control; provided Executive's employment actually terminates within such 30 day period. Except as provided in (5) above, Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 35% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1. Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive=s age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females.   3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed
EXHIBIT 10.25 PROMISSORY NOTE For value received on April 12, 2000, Piyush Patel (hereinafter "Executive") promises to pay to the order of Cabletron Systems, Inc., or any of its subsidiaries (hereinafter "Company" or "Cabletron"), the principal sum of $385,000 Dollars (the "Loan Amount"). The outstanding principal amount of this Note, along with interest accruing at a rate of 6.46% per annum, shall be payable at 35 Industrial Way, Rochester New Hampshire, 03866, on the earlier of: (i) two years from the above stated date; and (ii) as described in the following sentence. Upon any sale by the Executive of any shares of Cabletron common stock within two years following the date of this Promissory Note, the Executive shall repay Cabletron an amount equal to the net proceeds of the sale (after tax) or the total remaining unpaid, whichever is less. In the event: (i) the Executive's employment with Cabletron is terminated by the Company without cause, or (ii) the death of the Executive, the entire remaining unpaid principal shall be forgiven. "Cause" shall mean a criminal felony, crimes of moral turpitude, deliberate harm of Cabletron, including fraud or embezzlement, and gross and repeated failure (after written notice) to perform Executive's duties. To secure Executive's prompt, punctual and faithful performance of each of Executive's obligations under this Note, Executive hereby assigns to Cabletron all rights of Executive to property, monies and credits for which Cabletron is obligated to Executive, and which is in the possession of Cabletron or any affiliate or subsidiary at the time of default by Executive under this Note and at any time after such default, which property, monies and credits shall include, without limitations, salary, bonuses, vacation pay, and insurance proceeds. The term "Collateral" shall refer to all interest of Executive assigned to Cabletron pursuant to this paragraph. In the event of a default by Executive under this Note, Cabletron shall be permitted to apply the Collateral toward the Executive's liabilities under this Note, and Executive hereby waives notice of nonpayment, demand, presentment, protest and all forms of demand and notice. The Executive shall remain liable to Cabletron for any deficiency remaining following such applications. This Note shall be in default upon the occurrence of any of the following: 1. Executive fails to pay all principal owed under this Note when due, and such failure continues uncured for fifteen (15) days; 2. The Executive shall (i) admit in writing his inability to pay his debts generally as they become due, (ii) file a petition to answer seeking reorganization or arrangement of the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, or any other jurisdiction, (iii) make an assignment or other arrangement for the benefit of his creditors generally, (iv) consent to the appointment of a receiver of himself, or (v) have an order for relief in bankruptcy entered against or with respect to him, provided such order shall not be vacated, set aside or stayed within thirty (30) days after the date of entry thereof. If this Note is in default, the entire outstanding principal balance on this Note shall become immediately due and payable, without further notice. Should any part of the principal amount be collected after default by law or through an attorney-at-law, the Company shall be entitled to collect from the Executive, in addition to the default amount, all attorney fees, together with all other costs of collection. All rights, powers, and remedies provided for herein are cumulative and nonexclusive. The failure or delay of the holder to exercise a right, power, or remedy hereunder shall not operate as a waiver thereof of the same or any other right, power, or remedy on any future occasion. This Note, and all rights, powers, remedies and obligations arising from this Note, shall be construed according to and governed by the laws of the State of New Hampshire. IN WITNESS WHEREOF, the Executive has hereunto set his hand and seal effective the date first above written Executive Cabletron Systems, Inc.     /s/Piyush Patel /s/David Kirkpatrick Piyush Patel David Kirkpatrick Executive Vice President and CFO     4/12/00 4/12/00 Date Date        
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 ASSET PURCHASE AGREEMENT     This Asset Purchase Agreement (this "Agreement") is made and entered into as of June 30, 2000, by and between Interactive Software Systems, Inc., a corporation duly organized and existing under the laws of the State of Colorado (the "Seller"), and Allen Systems Group, Inc., a corporation duly organized and existing under the laws of the State of Delaware (the "Buyer"). RECITALS:     WHEREAS, subject to the terms and conditions set forth in this Agreement, the Seller desires to sell to the Buyer for the consideration set forth below, and the Buyer desires to purchase from the Seller, the Transferred Assets (as defined below), all as more fully described in Section 2.2, and the Seller desires to cause the Buyer to assume, and the Buyer has agreed to assume from the Seller, certain specified liabilities and obligations of the Seller arising in connection with the Transferred Assets, all as more fully described in Section 2.3.     NOW, THEREFORE, in reliance upon the representations, warranties and agreements made herein and in consideration of the premises and covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION     Section 1.1  Definitions.  Except as otherwise specified or as the context may otherwise require, in addition to the capitalized terms defined elsewhere herein, the following terms shall have the respective meanings set forth below whenever used in this Agreement:     "AAA" has the meaning assigned to such term in Section 12.6 hereof.     "Affiliate" means, when used with respect to a specified Person, another Person that, directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this Agreement, the term "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).     "Alternative Transaction" means any direct or indirect acquisition or any merger, consolidation, business combination, sale, or similar transaction that would result in the acquisition of part of the Transferred Assets, other than the transactions contemplated by this Agreement.     "Assigned Contracts" has the meaning assigned to such term in Section 2.2(b) hereof.     "Assumed Liabilities" has the meaning assigned to such term in Section 2.3 hereof.     "Assumption Agreement" means the Assumption Agreement, to be dated the Closing Date, executed by the Seller and the Buyer, substantially in the form of Exhibit A hereto.     "Bill of Sale" means the Bill of Sale, to be dated the Closing Date, executed by the Seller and accepted by the Buyer, substantially in the form of Exhibit B hereto.     "Business Day" means any day which is not a Saturday, Sunday or a day on which banking institutions in the State of Florida are authorized by law to close. 1 --------------------------------------------------------------------------------     "Buyer's Damages" means all Damages sustained, incurred or suffered by the Buyer, its officers, directors, affiliates or employees resulting from or arising in connection with: (a) any material misrepresentation by the Seller contained in or made pursuant to this Agreement; or (b) any material breach of warranty or any default in the performance of any covenant or obligation of the Seller under this Agreement.     "Closing" has the meaning assigned to such term in Section 8.1(a) hereof.     "Closing Date" has the meaning assigned to such term in Section 8.1(a) hereof.     "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.     "Competing Computer Software" means any software product which has the same or substantially similar purposes as the Safari Solutions Product Line, which performs functions substantially similar to the Safari Solutions Software, and the marketing of which would tend to inhibit licensing or marketing of the Safari Solutions Software.     "Computer Documentation" means the technical documentation pertaining to the Safari Solutions Product Line including, without limitation, any end-user manuals, product specifications, algorithms, diagrams, bug lists, and electronic machine readable versions of such manuals, product answer books and other related documentation.     "Contemplated Transaction" means the transactions contemplated by this Agreement and the other Transaction Documents, including (a) the sale of the Transferred Assets, (b) the execution, delivery and performance of this Agreement and other Transaction Documents, and (c) the Buyer's assumption of the Assumed Liabilities.     "Contract" means any material note, bond, mortgage, indenture, lease, permit, contract, agreement or other instrument or obligation, whether written or oral, or any amendment, supplement or restatement of any of the foregoing.     "Contract Assignment" means the Assignment and Assumption of Contracts, to be dated the Closing Date, executed by the Buyer and the Seller, substantially in the form of Exhibit C hereto.     "Copyright Assignment" means the Copyright Assignment, to be dated the Closing Date, executed by the Seller and accepted by the Buyer, substantially in the form of Exhibit D hereto.     "Damages" means any and all damages, losses, liabilities, obligations, penalties, fines, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses (including, without limitation, reasonable attorneys' and experts' fees and disbursements) of any kind or of any nature whatsoever (whether based in common law, statute or contract; fixed or contingent; known or unknown) suffered or incurred by a party hereto, its employees, affiliates, successors and assigns.     "Date/Time Compliant" means, with respect to any Person's information technology, the information technology is designed to be used prior to, during and after any calendar date or time, and the information technology used during each such time period will accurately receive, provide and process date/time data (including calculating, comparing and sequencing) from, into and between any two dates, including the years 1999 and 2000, and leap-year calculations and will not malfunction, cease to function or provide invalid or incorrect results as a result of date/time data, to the extent that other information technology, used in combination with the information technology being acquired, properly exchanges date/time data with it. For purposes hereof, "information technology" means computer software, computer firmware, computer hardware (whether general or specific purpose) and other similar or related items of automated, computerized, or software systems(s) that are used or relied on by the specified Person in the conduct of its business. 2 --------------------------------------------------------------------------------     "Expiration Date" means the date which is one (1) year after the Closing Date.     "Governmental Entity" means any Federal, state, municipal, local or other governmental body, department, commission, board, bureau, agency or instrumentality, political subdivision or taxing authority, domestic or foreign.     "Indemnified Party" has the meaning assigned to such term in Section 10.3(a) hereof.     "Indemnitor" has the meaning assigned to such term in Section 10.3(a) hereof.     "Intellectual Property" means (a) all copyrights, patents, trademarks, trade names, and applications for any of the foregoing, of any party, or to which it has rights, and (b) all licenses granted by or to such party, and other agreements pertaining to any of the foregoing or any software, inventions, trade secrets or other proprietary know-how to which such party is a party or is bound.     "Intellectual Property Rights" means collectively the intellectual property rights in and to the Computer Documentation, Copyrights, Know-how, Safari Solutions Product Line, and Trademarks.     "Know-how" has the meaning assigned to such term in Section 2.2(e) hereof.     "Knowledge" means an individual will have "Knowledge" of a particular fact or other matter if such individual is actually aware of such fact or other and a Person (other than an individual) will have "Knowledge" of a particular fact or other matter if an individual who is serving as a director, officer or manager of such Person has actual awareness of such fact or other matter.     "Lien" means any mortgage, lien, pledge, deed of trust, charge, security interest, or other encumbrance of any kind or nature, or any interest or title of any vendor, lessor, lender or other secured party under any conditional sale, capital lease, trust receipt or other title retention agreement.     "Materially Adverse"; "Material Adverse Change"; "Material Adverse Effect" means in, on or to, as appropriate, any Person, a material adverse change in such Person's business or condition, a material adverse effect on such Person's business or condition or an event which is materially adverse to such Person's business or condition. Materiality shall be defined as any change which results in a loss in excess of $50,000.     "Order" means any order, writ, injunction, decree, judgment, award, determination, directive or demand of a court, arbitrator, tribunal or other Governmental Entity.     "Permitted Liens" means Liens in respect of (a) liabilities that constitute Assumed Liabilities, (b) Taxes not yet due and payable, and (c) other claims or Liens that are not material or that do not materially restrict the use of the subject asset. For the purposes of this definition, material and materially restrict as used in subsection (iii) shall mean any claim, Lien, or other encumbrance that results in a loss in excess of $50,000.     "Permits" means all permits, licenses, orders, approvals, franchises, registrations and any other authorizations of any Governmental Entity.     "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, entity or any Governmental Entity or political subdivision thereof or any other entity or organization.     "Purchase Price" has the meaning assigned to such term in Section 2.1 hereof.     "Records" has the meaning assigned to such term in Section 2.2(c) hereof. 3 --------------------------------------------------------------------------------     "Requirement of Law" means any statute, law, ordinance, rule, regulation, order, decree, judicial or administrative decision or directive.     "Safari Solutions Product Line" has the meaning assigned to such term in Section 2.2(a) hereof.     "Safari Solutions Division" means the Seller's business unit referred to from time to time as the Safari Solutions Division of Condor Technology Solutions, Inc. ("Condor"), Seller's parent company.     "Safari Solutions Employees" has the meaning assigned to such term in Section 3.6(a)(i) hereof.     "Safari Solutions Software" has the meaning assigned to such term in Section 2.2(g) hereof.     "Seller's Damages" means all Damages sustained, incurred or suffered by the Seller and its officers, directors, affiliates and employees, resulting from or arising in connection with: (a) any material misrepresentation by the Buyer contained in or made pursuant to this Agreement or in any certificate, instrument or agreement delivered to the Seller pursuant to or in connection with this Agreement; or (b) any material breach of warranty or any default in the performance of any covenant or obligation of the Buyer under or in connection with this Agreement..     "Taxes" means all taxes of any kind, including, without limitation, those on, or measured by or referred to as income, gross receipts, payroll, employment, profits, withholding, social security, unemployment, real property, personal property, sales, use, transfer, of any Federal, state, local or foreign Governmental Entity or other taxing authority.     "Trademarks" has the meaning assigned to such term in Section 2.2(d) hereof.     "Trademark Assignment" means the Trademark Assignment, to be dated the Closing Date, executed by the Seller and accepted by the Buyer, substantially in the form of Exhibit E hereto.     "Transaction Documents" means this Agreement, the Assumption Agreement, the Bill of Sale, the Contract Assignment, the Copyright Assignment and the Trademark Assignment.     "Transferred Assets" has the meaning assigned to such term in Section 2.2 hereof.     Section 1.2  Rules of Construction.  This Agreement and the other Transaction Documents shall be deemed to have been drafted by both the Seller and the Buyer and neither this Agreement nor any other Transaction Document shall be construed against any party as the principal draftsperson hereof or thereof. The Exhibits and Schedules attached hereto are incorporated herein by reference and shall be considered part of this Agreement. Other capitalized terms used in this Agreement and not defined in Section 1.1 shall have the meanings assigned to them elsewhere in this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and 4 -------------------------------------------------------------------------------- references to all attachments thereto and instruments incorporated therein. References to a Person are also to such Person's predecessors (to the extent applicable) and permitted successors and assigns. ARTICLE II TERMS OF THE TRANSACTION     Section 2.1  Purchase Price.  The Transferred Assets shall be sold, assigned, granted, transferred, conveyed and delivered by the Seller and shall be purchased, acquired and accepted by the Buyer in consideration for the purchase price as set forth in Schedule 2.1 (the "Purchase Price").     Section 2.2  Transfer of Assets.  On and subject to the terms and conditions of this Agreement, at the Closing, the Seller shall sell, grant, convey, transfer, assign and deliver to the Buyer, and the Buyer shall purchase, acquire and accept from the Seller, all of the Seller's right, title and interest in, the following assets, and rights of the Seller (collectively, the "Transferred Assets") free and clear of any Liens (other than Permitted Liens and Liens arising from any act or omission of the Buyer):     (a) all right title and interest in the products listed in Schedule 2.2(a) (the "Safari Solutions Product Line") and the Computer Documentation, free and clear of any Liens or other encumbrances whatsoever;     (b) rights in and to the contracts and agreements entered into by the Seller in connection with the Safari Solutions Product Line listed on Schedule 2.2(b) hereto (each an "Assigned Contract" and collectively, the "Assigned Contracts");     (c) all originals, or to the extent originals are not available including, but not limited to, copies of papers, sales and business files and records, contract records, test and design records, product specifications, drawings, engineering, maintenance, supplier and customer lists and other business records and documents used primarily in connection with the Safari Solutions Product Line, whether maintained in electronic or physical form (the "Records") provided, that the Seller shall be entitled to retain copies of all such Records;     (d) the trademarks, trade names, service marks, trade styles, trade dress and such unregistered rights as may exist through use and foreign counterparts thereof owned by the Seller and used primarily in the Safari Solutions Product Line as set forth in Schedule 2.2(d) hereto, including the name "Safari Solutions" (the "Trademarks");     (e) the technologies, trade-secrets, designs, improvements, formulae, manufacturing methods, practices, processes, technical data, product development data, research data, specifications, or methods and know-how, whether or not patentable, whether or not a secret and whether or not reduced to writing that are used in the Safari Solutions Product Line (the "Know-how");     (f) the copyrights, patents or other Intellectual Property of the Safari Solutions Product Line;     (g) the computer software, including source code, binary executable code, object code, compilers, assemblers and algorithms which have been developed by the Seller and incorporated into the Safari Solutions Product Line (the "Safari Solutions Software");     (h) all of the assets that are necessary for the Safari Solutions Division to conduct its business listed on Schedule 2.2(h) hereto; and     (i) all leases for offices currently occupied by the Safari Solutions Division listed on Schedule 2.2(i) hereto.     Section 2.3  Assumption of Liabilities.  (a) The Buyer shall assume, undertake to pay, perform or discharge the following obligations and liabilities of the Seller (all of which are hereinafter referred to collectively as the "Assumed Liabilities"), all of which the Buyer will assume and pay, discharge or perform, 5 -------------------------------------------------------------------------------- as appropriate, from and after the Closing Date: (i) all obligations of the Seller under the Assigned Contracts, and (ii) all obligations and liabilities set forth in Schedule 2.3. The Buyer shall be under no obligations to assume any other liabilities of the Seller not specifically assumed under this section, including but not limited to (i) any royalties, liens, bonuses or other encumbrances relating to the Transferred Assets attributable to periods before Closing; (ii) costs, expenses and liabilities relating to litigation and other claims against the Seller; (iii) Tax liabilities of Seller relating to the Contemplated Transactions, or otherwise; and (iv) legal, investment banking and broker fees of Seller relating to the negotiation and completion of the Contemplated Transactions. Buyer shall not assume any other liabilities, other than those set forth herein and in Schedule 2.3. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER     The Seller represents and warrants to the Buyer, that:     Section 3.1  Organization; Authority.  The Seller is a corporation validly existing and in good standing under the laws of the State of Colorado. The Seller has all necessary corporate power and authority, and possesses all Permits necessary to own or to lease, and to operate all its properties and to carry on its business as it is now being conducted. The Seller has all necessary corporate power and authority to sell, convey, transfer, assign and deliver the Transferred Assets to the Buyer as contemplated by this Agreement, and to execute, deliver and perform its obligations hereunder and under the other Transaction Documents to which it is a party.     Section 3.2  Authorization of Transaction; Non-Contravention.  (a) The Seller has duly authorized and approved the Contemplated Transactions, and the Seller has taken all action required by law, its articles of incorporation, its bylaws or otherwise to authorize and to approve the execution, delivery and performance of this Agreement, the other Transaction Documents to which it is to be a party and the documents, agreements and certificates executed and delivered by it or to be executed and delivered by it in connection herewith and therewith. This Agreement is, and each other Transaction Document to which the Seller is to be a party, when executed and delivered by the Seller at the Closing will be duly executed and delivered by the Seller, and shall constitute a valid and legally binding obligation of the Seller, enforceable against the Seller, in accordance with its terms. All persons who have executed this Agreement on behalf of the Seller or who will execute on behalf of the Seller any other Transaction Document or other documents, agreements and certificates in connection herewith or therewith, have been duly authorized to do so by all necessary corporate action.     (b) Neither the execution and delivery of this Agreement or the other Transaction Documents, nor the consummation of the Contemplated Transactions on the terms and subject to the conditions hereof and thereof, will (i) conflict with or result in any violation of or constitute a breach of or give rise to a right of termination or cancellation of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of the articles of incorporation or bylaws of the Seller or under any Assigned Contract; (ii) result in the creation of any Lien or other encumbrance upon any of the Transferred Assets; or (iii) violate any material Order against or binding upon, the Seller or any of the Transferred Assets.     Section 3.3  Consents and Approvals; No Violations.  Except for filings, permits, authorizations, consents and approvals as may be required under applicable law, neither the execution, delivery or performance of this Agreement by the Seller nor the consummation by the Seller of the transactions contemplated hereby will require any filing with, notice to, or Permit, authorization, consent or approval of, any Governmental Entity.     Section 3.4  Financial Statements; Other Financial Information; Accounts Receivable.  (a) Attached hereto as Schedule 3.4(a) are true and complete copies of the (i) annual financial statements of the Seller as of the end of the most recent fiscal year, and (ii) unaudited financial statements of the Seller for the 6 -------------------------------------------------------------------------------- interim period ended March 31, 2000. All such financial statements are complete and correct and present fairly and accurately the financial position of the Seller as of the respective dates thereof in conformity with United States generally accepted accounting principles applied on a consistent basis.     (b) All accounts receivable of the Seller reflected in the financial statements have arisen from bona fide services provided in the ordinary course of business to third parties which are not Affiliates of the Seller or any of their officers, directors or employees. All accounts receivable are good and collectible in the ordinary course of business consistent with past practice at the aggregate recorded amounts thereof, subject to reserves taken consistent with past practices.     Section 3.5  Transferred Assets.  (a) The Seller has good and marketable title to, or valid leasehold interests in, all of the Transferred Assets except for such as are no longer used in the conduct of its businesses or as have been disposed of in the ordinary course of business. All such Transferred Assets are free and clear of all Liens other than Permitted Liens and those Liens specifically noted on Schedule 3.5(a). All of the Transferred Assets are free and clear of any restrictions on, or conditions to, transfer and assignment. All of the Transferred Assets are in good repair and operating condition, and are sufficient for the conduct of the business of the Seller as presently conducted. Specifically, the Safari Solutions Product Line performs in all material respects all of the functions as previously disclosed to the Buyer in writing and presentations and as outlined in the relevant product manuals and presentations in accordance with their written specifications.     (b) The Seller has complied in all material respects with the terms of all leases set forth in Schedule 2.2(i) under which the Seller is in occupancy, and all such leases are in full force and effect. The Seller enjoys peaceful and undisturbed possession under all such leases.     Section 3.6  Safari Solutions Employees.  (a) The Seller has delivered to Buyer (i) a list of all employees, including without limitation, directors, executive officers and management employees, and consultants of the Safari Solutions Division as of the date hereof set forth in Schedule 3.6(a)(i) (the "Safari Solutions Employees"), and (ii) the aggregate salary, bonus and other cash compensation paid to each employee, including without limitation, each director, officer or management employee, and the rate of compensation paid to consultants as of the date hereof. Except as set forth in Schedule 3.6(a)(i), there exist no employment, consulting, severance, termination or indemnification agreements or arrangements between the Seller and any current or former employee, officer or director of the Seller.     (b) The Safari Solutions Employees are not subject to any collective bargaining agreement or other union agreement. No disputes or claims against the Seller have been asserted by or on behalf of any of these employees, including, but not limited to, claims of employment discrimination, violation of wage and labor laws, or claims relating to past unpaid compensation.     Section 3.7  Compliance With Law; Permits.  The Seller is not in violation or default under any Requirement of Law of any Governmental Entity or any Order applicable to the Transferred Assets. The Seller has not received, and to the Seller's Knowledge, there does not exist, any notice of any action, suit, hearing, charge or investigation to the effect that the Transferred Assets are, were or may be in violation of any Requirement of Law or any Order. The Seller is duly licensed under all Requirements of Law and possesses all material licenses, clearances and Permits necessary or required in connection with the Transferred Assets.     Section 3.8  Legal Proceedings.  There is no (a) action, suit, claim, proceeding or investigation pending or, to the Knowledge of the Seller threatened against or directly or indirectly affecting the Transferred Assets at law or in equity, or before or by any Governmental Entity, or (b) arbitration proceeding relating to the Transferred Assets.     Section 3.9  Intellectual Property.  (a) Schedule 3.9(a) sets forth a list of all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, registered copyrights and software products of the Seller, other than commercially available software subject to 7 -------------------------------------------------------------------------------- a shrink-wrap license. The Seller has disclosed to Buyer or its counsel correct and complete copies of all applications, filings, licenses, agreements and related correspondence and documents embodying the Intellectual Property of the Safari Solutions Product Line.     (b) Except as set forth in Schedule 3.9(b): (i) the Seller owns or has the right to use all of the Intellectual Property of the Safari Solutions Product Line necessary for the Seller to conduct its business as presently conducted, including the right to sell and distribute the products of the Safari Solutions Division; (ii) no proceedings have been instituted, are pending or, to the best of the Seller's Knowledge, threatened, which challenge the Seller's rights in respect of the aforesaid or the validity thereof; (iii) none of the Intellectual Property of the Safari Solutions Product Line owned by the Seller is the subject of any Lien or other agreement granting rights therein to any third party; (iv) the Seller has not received notice of any charges of interference or infringement of any Intellectual Property owned by the Seller; (v) to the Seller's Knowledge, (A) no method or product owned by the Safari Solutions Division infringes upon or otherwise violates the Intellectual Property rights of others and the Seller has not received any claims of such infringements or violation, and (B) none of the patents held by the Seller are being infringed by others and none are subject to any outstanding order, decree, judgment, stipulation or charge; (vi) the employees and consultants who are engaged to develop Intellectual Property of the Safari Solutions Product Line are required to sign confidentiality and assignment of inventions agreements, in the form previously provided to Buyer; (vii) the Seller does not have Knowledge of any facts or claims which would cause any of the patents, trademarks, or copyrights held by the Seller to be invalid; and (viii) the Intellectual Property of the Safari Solutions Product Line was not developed under a grant from any Governmental Entity or private source. To the Knowledge of the Seller, the Intellectual Property Rights do not, and their use by Seller does not, infringe any valid patents, trademark, copyright or trade secret.     (c) Specifically, except for the Safari OLAP product, which has embedded in it a product called DBProbe (which is duly licensed from its owner, Internetivity, Inc.), the Seller has one hundred percent interest and is the rightful owner of and to the source code and the Intellectual Property of the Safari Solutions Product Line.     Section 3.10  Assigned Contracts and Commitments.  The Seller has delivered or made available to the Buyer true and complete copies of the Assigned Contracts all of which are listed on Schedule 2.2(b). Except as set forth on Schedule 3.10, to the Knowledge of the Seller, no default, alleged default or anticipatory breach exists on the part of the Seller under any Assigned Contract. There are no material agreements or arrangements, whether written or oral, of the parties relating to any Assigned Contract that have not been set forth on Schedule 3.10. To the Knowledge of the Seller, each such Assigned Contract is legal, valid, binding and enforceable against the parties thereto. The Seller is not a party to or bound by any agreement that would materially detract from or interfere with the present or with its currently intended use of the Safari Solutions Product Line. Nothing contained within the Assigned Contracts would preclude Buyer from charging the customers prevailing maintenance fees     Section 3.11  Operations Since the Financial Statements.  Since the date of the most recent financial statements included in Schedule 3.4(a), there has not been, and there will not be as of the Closing Date:     (a) Any change in the business, results of operations, assets, financial condition, or manner of conducting the business of the Seller which has or may be reasonably expected to have a Material Adverse Effect on such business, results of operations, assets, or financial condition;     (b) Any damage, destruction, or loss (whether covered by insurance) which has, or may reasonably be expected to have, a Material Adverse Effect upon any material asset and/or the business operations of the Safari Solutions Division; 8 --------------------------------------------------------------------------------     (c) Except as set forth on Schedule 3.11(c), and except for pay increases made in the ordinary course of business or pay increases required by contract, any increase in the compensation payable or to become payable by the Seller to any of its officers, directors, employees, consultants, or agents;     (d) Any employment, bonus, or deferred compensation agreement entered into between the Safari Solutions Division and any of its respective directors, officers, agents or other employee or consultants;     (e) Any amendment or termination by the Seller of any material Contract, franchise, permit, license or other agreement that relates to the Safari Solutions Division, except in the ordinary course of business; or     (f) The imposition of any Lien on the Transferred Assets, except in the ordinary course of business.     Section 3.12  Customer Agreements.  The agreements listed on Schedule 3.12 hereto represents all of the obligations of the Seller to provide maintenance and support to the Seller's customers relating to the Safari Solutions Product Line under which the Seller is entitled to receive payments in excess of $5,000 per year, or is obligated to provide services having a value in excess of $5,000 per year.     Section 3.13  Litigation.  (a) Except as set forth on Schedule 3.13, there is no claim, court recorded settlement, suit, action, proceeding or investigation pending or, to the Knowledge of the Seller, threatened against or affecting the Transferred Assets and there is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Seller that could reasonably be expected to have a Material Adverse Effect on the Transferred Assets or could affect the performance of the Seller's obligations under this Agreement.     (b) The Safari Solutions Product Line, including without limitation all of the software products listed on Schedule 2.2(a), does not, and their use does not, infringe upon any patent, copyright, trademark or trade secret.     Section 3.14  Finders or Brokers.  Except as set forth on Schedule 3.14, no broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Contemplated Transactions based upon arrangements make by or on behalf of the Seller. Seller shall be solely responsible to pay any fees to parties listed on Schedule 3.14 or any third party related to this transaction retained by Seller.     Section 3.15  Complete Disclosure.  This Agreement and the schedules hereto do not contain any untrue statement of a material fact by the Seller. None of the representations and warranties made by the Seller in this Agreement, or made in any certificate or other document furnished hereunder will contain any untrue statement of material fact, or omit to state a material fact necessary in order to make the statement contained herein or therein, in light of the circumstances under which such statements were made, not misleading.     Section 3.16  Compliance with Laws.  The Safari Solutions Division is in compliance in all material respects with all applicable statutes, laws, codes, ordinances, regulations, rules, material permits, judgments, decrees and orders of any Governmental Entity applicable to its assets, properties, business or operations. The Seller has in effect all material Permits necessary for it to own, lease or operate its properties and Transferred Assets and to carry on the Safari Solutions Division's business as now conducted (and the Seller has timely made appropriate filings for issuance or renewal thereof). Schedule 3.16 contains a list of all material Permits. No material default under any Permit has occurred.     Section 3.17  Date/Time Compliance.  The Seller warrants that all products within the Safari Solutions Product Line are Date/Time Compliant. 9 --------------------------------------------------------------------------------     Section 3.18  Distributors.  Schedule 3.18 sets forth all material distribution agreements that relate to the Safari Solutions Product Line and the revenue associated with each such distribution agreement during the period of the most recent annual financial statements of the Seller.     Section 3.19  Insurance.  The Seller maintains adequate insurance with qualified insurance carriers with respect to liability and property loss or damage as it relates to Transferred Assets. Copies of all such policies have been provided to the Buyer. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER     The Buyer represents and warrants to the Seller, that:     Section 4.1  Organization; Authority.  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Buyer has all necessary corporate power and authority, and possesses all Permits necessary to own or to lease, and to operate all of its assets and properties and the Transferred Assets, and to carry on its business as it is now being conducted and as proposed to be conducted and that no approvals or consent of any Persons is necessary in connection with the Contemplated Transactions. The Buyer has all necessary power and authority to purchase and accept the Transferred Assets (including the Assigned Contracts), as contemplated by this Agreement, and to execute, deliver and perform its obligations hereunder and under the other Transaction Documents to which it is a party.     Section 4.2  Authorization of Transaction; Non-Contravention.  (a) The Buyer has duly authorized and approved the Contemplated Transactions, and the Buyer has taken all action required by law, its articles of incorporation, its bylaws or otherwise to authorize and to approve the execution, delivery and performance of this Agreement, the other Transaction Documents to which it is to be a party and the documents, agreements and certificates executed and delivered by it or to be executed and delivered by it in connection herewith and therewith. This Agreement is, and each other Transaction Document to which the Buyer is to be a party, when executed and delivered by the Buyer at the Closing will be duly executed and delivered by the Buyer, and shall constitute a valid and legally binding obligation of the Buyer, enforceable against the Buyer, in accordance with its terms. All persons who have executed this Agreement on behalf of the Buyer or who will execute on behalf of the Buyer any other Transaction Document or other documents, agreements and certificates in connection herewith or therewith, have been duly authorized to do so by all necessary corporate action.     (b)  Neither the execution and delivery of this Agreement or the other Transaction Documents, nor the consummation of the Contemplated Transactions on the terms and subject to the conditions hereof and thereof, will (i) conflict with or result in any violation of or constitute a breach of or give rise to a right of termination or cancellation of any of the terms or provisions of, or result in the acceleration of any obligation under, or constitute a default under any provision of the articles of incorporation or bylaws of the Buyer or any contract to which the Buyer is a party; or (ii) violate any Order against or binding upon, the Buyer or any of its assets.     Section 4.3  Consents and Approvals.  No approval, consent, waiver or authorization to any Governmental Entity or other Person is required (a) for or in connection with the valid execution and delivery by the Buyer of this Agreement or the other Transaction Documents to which it is a party or the consummation by the Buyer of the Contemplated Transactions, including without limitation, the assignment of all Assigned Contracts to the Buyer, (b) for or in connection with the sale, transfer, assignment, conveyance, or delivery of the Transferred Assets to the Buyer, or (c) as a condition to the legality, validity or enforceability as against the Buyer of this Agreement or the other Transaction Documents to which it is a party. 10 --------------------------------------------------------------------------------     Section 4.4  Legal Proceedings.  There is no action, suit, claim, proceeding or investigation pending or, to the Knowledge of the Buyer threatened against or directly affecting it, which either individually or in the aggregate, is likely to have a Material Adverse Effect on (a) the Buyer's ability to use or operate any of the Transferred Assets in a manner consistent with the Seller's operations, (b) the Buyer's use of any of the Transferred Assets for the purposes which they have been used by the Seller, or (c) the Buyer's ability to consummate the Contemplated Transactions. The Buyer is not in default with respect to any Order known to or served upon the Buyer.     Section 4.5  Finders or Brokers.  The Buyer has not utilized the services of any investment banker, broker, finder or intermediary in connection with the Contemplated Transactions who might be entitled to a fee or commission in connection with this Agreement or upon consummation of the Contemplated Transactions.     Section 4.6  Financial Statements.  Attached hereto as Schedule 4.6 are true and complete copies of the (a) audited annual financial statements of the Buyer as of the end of the most recent fiscal year, and the (b) unaudited financial statements of the Buyer for the interim period ended March 31, 2000. All such financial statements are complete and correct and present fairly and accurately the financial position of the Buyer as of the respective dates thereof in conformity with United States generally accepted accounting principles applied on a consistent basis.     Section 4.7  Compliance with Law; Permits.  The Buyer is not in violation or default under any Requirement of Law of any Governmental Entity or any Order applicable to the Buyer's business. The Buyer has not received, and to the Buyer's Knowledge, there does not exist, any notice of any action, suit, hearing, charge or investigation to the effect that the Buyer's business was or may be in violation of any Requirement of Law or any Order. The Buyer is duly licensed under all Requirements of Law and possesses all material licenses, clearances and Permits necessary or required in connection with the conduct of its business.     Section 4.8  Operations Since the Financial Statements.  Since the date of the most recent audited financial statements of Buyer included in Schedule 4.6, there has not been any material change in the business, results of operations, assets or financial condition of the Buyer which has or may be reasonably expected to have a Material Adverse Effect on such business, results of operations, assets, or financial condition.     Section 4.9  Compliance with Laws.  The Buyer is in compliance in all material respects with all applicable statutes, laws, codes, ordinances, regulations, rules, material permits, judgments, decrees and orders of any Governmental Entity applicable to its assets, properties, business or operations.     Section 4.10  Complete Disclosure.  This Agreement and the schedules hereto do not contain any untrue statement of a material fact by the Buyer. None of the representations and warranties made by the Buyer in this Agreement, or made in any certificate or other document furnished hereunder will contain any untrue statement of material fact, or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which such statements were made, not misleading. ARTICLE V COVENANTS PENDING THE CLOSING     The Seller and the Buyer hereby covenant and agree that after the date hereof until the Closing and except as otherwise agreed to in writing by the other party:     Section 5.1  Approvals; Consents.  The Seller and Buyer shall use commercially reasonable efforts to obtain or cause to be obtained all material consents, approvals, authorizations and waivers required by any applicable Requirement of Law or by any Assigned Contracts, to be obtained by the Seller or Buyer in 11 -------------------------------------------------------------------------------- connection with the consummation of the sale and transfer by the Seller of the Transferred Assets and the other Contemplated Transactions.     Section 5.2  Access to Premises and Information.  From the date hereof to the Closing Date, each party shall give to, or cause to be made available for, the other and its other representatives access and the right, upon reasonable notice and in such a manner that does not disrupt disclosing party's business, to inspect during normal business hours all the documents, contracts, employees, books and records of the disclosing party and shall permit them to consult with the employees, officers, accountants and agents of the disclosing party for the purpose of making such investigation, provided, that the parties shall maintain the confidentiality of any disclosed information to the extent set forth in the Confidentiality Agreement, as amended, between the Buyer and the Seller dated January 31, 2000. ARTICLE VI CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS     The obligations of the Buyer to purchase the Transferred Assets are subject to the satisfaction or fulfillment, at or before the Closing Date, of each of the following conditions precedent (any of which may be waived, in whole or in part, by the Buyer in its sole discretion):     Section 6.1  Representations and Warranties.  All of the representations and warranties of the Seller contained in this Agreement, or in any certificate or document delivered to the Seller in connection herewith, shall be true and correct in all material respects at the Closing Date.     Section 6.2  Compliance with this Agreement.  The Seller shall have duly performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by the Seller at or before the Closing Date.     Section 6.3  Closing Documents.  The Seller shall have delivered to the Buyer a certificate executed on its behalf by an authorized officer, dated the Closing Date, representing and certifying, that the conditions set forth in Sections 6.1 and 6.2 have been fulfilled at or prior to the Closing Date. The Seller shall have furnished the Buyer with such documents, certified resolutions, instruments, good standing certificates or incumbency certificates as the Buyer reasonably may have requested in respect of the Contemplated Transactions.     Section 6.4  Other Transaction Documents.  The Seller shall have duly executed and delivered to the Buyer (a) the instruments of conveyance and transfer and the other documents specified in Section 8.1(b)(iii), and (b) the other Transaction Documents to which it is a party, each substantially in the forms attached as exhibits hereto. ARTICLE VII CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS     The obligations of the Seller under this Agreement are subject to the satisfaction or fulfillment, at or before the Closing Date, of each of the following conditions precedent (any of which may be waived, in whole or in part, by the Seller in its sole discretion):     Section 7.1  Representations and Warranties.  All of the representations and warranties of the Buyer contained in this Agreement, or in any certificate or document delivered to the Seller in connection herewith, shall be true and correct in all material respects at the Closing Date.     Section 7.2  Compliance with this Agreement; Payments.  The Buyer shall have duly performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by the Buyer at or before the Closing Date. The Buyer shall have paid or caused to be paid to the Seller the portion of Purchase Price payable at Closing pursuant to, and in accordance with, Section 2.1. 12 --------------------------------------------------------------------------------     Section 7.3  Closing Documents.  The Buyer shall have delivered to the Seller a certificate executed on its behalf by an authorized officer, dated the Closing Date, representing and certifying, that the conditions set forth in Sections 7.1 and 7.2 have been fulfilled at or prior to the Closing Date. The Buyer shall have furnished the Seller with such documents, certified resolutions, good standing certificates or incumbency certificates as the Seller reasonably may have requested in respect of the Contemplated Transactions.     Section 7.4  Other Transaction Documents.  The Buyer shall have duly executed and delivered to the Seller the (a) the instruments of assumption and acceptance and the other documents specified in Section 8.1(b)(iv), and (b) the other Transaction Documents to which it is a party, each substantially in the forms attached as exhibits hereto. ARTICLE VIII CLOSING     Section 8.1  The Closing.  (a) Subject to the terms and conditions set forth herein, the closing (the "Closing") of all Contemplated Transactions will occur on June 30, 2000 (the "Closing Date"). The transactions at Closing, when effective, will be deemed to be effective as of the opening of the business on the day of Closing, except as otherwise specifically provided at the time of Closing. All actions to be taken at Closing will be considered to be taken simultaneously and no documents will be considered to be delivered until all documents to be delivered at the Closing have been executed and delivered.     (b)  The following actions will occur at the Closing:     (i)  An officer of each party will execute a certificate, in substantially the form attached hereto as Exhibit F, stating that all representations and warranties made by such party in this Agreement continue to be true and complete as of the Closing Date and that all conditions precedent to Closing have been satisfied.     (ii)  The Seller will deliver to Buyer an opinion of counsel to the Seller in form and substance reasonably satisfactory to Buyer.     (iii)  The Seller shall execute and deliver to the Buyer the Bill of Sale, the Contract Assignment, the Copyright Assignment, and the Trademark Assignment, and execute and deliver to the Buyer such other bills of sale, assignments, endorsements, and other good and sufficient instruments and documents of transfer and assignment, all dated as of the Closing Date, and in a form reasonably satisfactory to the Buyer as shall be necessary and effective to transfer and assign to, and further vest in, the Buyer, all of the Transferred Assets.     (iv)  The Buyer shall execute and deliver the Assumption Agreement and shall accept each of the Bill of Sale, the Contract Assignment, the Copyright Assignment, and the Trademark Assignment.     (v)  The Buyer shall deliver to the Seller the portion of the Purchase Price to be delivered at Closing.     (vi)  The Seller shall, in cooperation with the Buyer, take all steps reasonably necessary to put the Buyer in actual possession and operating control of the Transferred Assets.     (vii)  The parties shall also execute, deliver to the other party (A) the other Transaction Documents to which they are respectively a party, (B) such other certified charters, incumbency certificates, good standing certificates and other instruments reasonably requested by the other party in advance of the Closing, and (C) all other documents necessary to effectuate the transactions contemplated by, and the terms of, this Agreement. 13 --------------------------------------------------------------------------------     Section 8.2  Further Assurances.  From time to time, pursuant to the request of a party delivered to the other party after the Closing Date, such party shall execute, deliver and acknowledge such other instruments and documents of conveyance and transfer or assumption and shall take such other actions and shall execute and deliver such other documents, certifications and further assurances as the other party reasonably may request in order to vest and confirm more effectively in the Buyer title to or to put the Buyer more fully in legal possession of, or to enable the Buyer to use, any of the Transferred Assets, or to enable the Buyer to complete, perform or discharge any of the Assumed Liabilities or otherwise enable the parties to carry out the purposes and intent of this Agreement. ARTICLE IX ADDITIONAL COVENANTS OF THE PARTIES     Section 9.1  Employment Matters; Transition.  (a) The Seller agrees to cooperate with the Buyer in assisting the Buyer to extend offers of employment from the Buyer to the Safari Solutions Employees. The parties will handle the employee transition as follows: prior to the Closing, the Seller will use commercially reasonable efforts to keep available to the Buyer the services of the Safari Solutions Employees. Prior to the Closing, the Seller will also use commercially reasonable efforts to preserve for the benefit of the Buyer the relations between the Seller and its customers, suppliers and other Persons having business relations with the Seller with respect to the Safari Solutions Division.     (b)  After the Closing Date, the Buyer shall be free to contact and recruit the Safari Solutions Employees. The Seller shall not interfere with the Buyer's negotiations and shall assist the Buyer in transferring the employment of such persons to the Buyer. The Buyer shall be responsible for all payments, both current and accrued to the Safari Solutions Employees, including but not limited to, salaries, bonuses, commissions, expense reimbursements and accounts, fringe benefits and any other similar obligations through the Closing Date. The Buyer shall have no responsibility to provide any severance payments or compensation to the Safari Solutions Employees who do become employed with the Buyer, and the Buyer shall indemnify and hold harmless Seller from claims made by the Safari Solutions Employees or any Governmental Entity in respect of severance or other compensation for such Safari Solutions Employees.     Section 9.2  Non-Compete.  (a) For a period of five years, after the date of execution of this Agreement, Condor and its subsidiaries (including the Seller) shall not, directly or indirectly, engage in a business or enterprise in the development or marketing of any Competing Computer Software (except for sales of "off-the-shelf" software bundled with other products or services sold by Condor and/or its subsidiaries incidental to such sales or services), and during such period shall not solicit or attempt to solicit sales or licenses of any Competing Computer Software, interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise between Buyer and its customers, suppliers, agents, consultants, officers or employees. This paragraph shall be enforceable on a worldwide basis.     (b)  The provisions of this section shall prevent the Seller from investing its assets in securities of any corporation engaged in business of the type described in Section 9.2(a) above, provided that the Seller shall not be prevented from owning up to two percent (2%) of the total shares of all classes of stock outstanding of any corporation.     (c)  The undertaking of this non-competition covenant is an integral part of this transaction and the consideration paid by Buyer pursuant to this Agreement shall be consideration not only for the asset purchase, but also for the undertaking of this non-competition covenant. If this covenant is unenforceable in any one jurisdiction, it shall not render the covenant unenforceable in other jurisdictions. If this covenant is deemed too broad in any jurisdiction, the covenant shall be altered to meet the requirements of that jurisdiction, for purposes of enforcement. 14 -------------------------------------------------------------------------------- ARTICLE X INDEMNIFICATION     Section 10.1  Indemnification by the Seller.  Subject to Section 10.5 below, the Seller shall be liable for, shall indemnify Buyer, its officers, directors, affiliates and employees for, shall hold harmless, protect and defend Buyer, its officers, directors, affiliates or employees from and against, and shall reimburse Buyer, its officers, directors, affiliates and employees for, any and all Buyer's Damages.     Section 10.2  Indemnification by Buyer.  Subject to Section 10.5 below, the Buyer shall be liable for, shall indemnify the Seller its officers, directors, affiliates and employees for, shall hold harmless, protect and defend the Seller and the Seller and its officers, directors, Affiliates and employees, from and against, and shall reimburse the Seller, its officers, directors, affiliates and employees for, any and all Seller's Damages.     Section 10.3  Matters Involving Third Parties, Etc.  (a) If any legal proceeding shall be instituted, or any claim or demand made, against an indemnified party or a party which proposes to assert that the provisions of this Article X apply (the "Indemnified Party") such Indemnified Party shall give prompt written notice of the claim to the party obliged or alleged to be so obliged so to indemnify such Indemnified Party (the "Indemnitor"). The omission so to notify such Indemnitor, however, shall not relieve such Indemnitor from any duty to indemnify which otherwise might exist with regard to such claim unless (and only to the extent that) the omission to notify materially prejudices the ability of the Indemnitor to assume the defense of such claim. After any Indemnitor has received notice from an Indemnified Party that a claim has been asserted against such Indemnified Party, the Indemnitor shall within 30 days pay to the Indemnified Party the amount of such Damages in accordance with and subject to the provisions of this Section; provided, however, that no such payment shall be due during any period in which the Indemnitor is contesting in good faith either its obligation to make such indemnification or the amount of Damages payable, or both. After any Indemnitor has received notice from an Indemnified Party that a claim has been asserted against it by a third party, the Indemnitor shall have the right, upon giving written notice to the Indemnified Party, to participate in the defense of such claim and to elect to assume the defense against the claim, at its own expense, through the Indemnified Party's attorney or an attorney selected by the Indemnitor and approved by the Indemnified Party, which approval shall not be unreasonably withheld. If the Indemnitor fails to give prompt notice of such election, then the Indemnitor shall be deemed to have elected not to assume the defense of such claim and the Indemnified Party may defend against the claim with its own attorney.     (b)  If the Indemnitor so elects to participate in the defense of such claim or to assume the defense against a claim, then the Indemnified Party will cooperate and make available to the Indemnitor (and its representatives) all employees, information, books and records in its possession or under its control which are reasonably necessary or useful in connection with such defense; and if the Indemnitor shall have elected to assume the defense of a claim, then the Indemnitor shall have the right to compromise and settle in good faith any such claim provided such release or settlement contains an unconditional release of the Indemnified Party. If such conditions are not satisfied and such unconditional release not obtained, then the Indemnitor will not compromise or settle such action, suit, proceeding, or claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed. If the Indemnitor is conducting the defense of a claim, the Indemnified Party may retain separate co-counsel at its cost and expense and participate in such defense.     (c)  If the Indemnitor does not elect to assume or is deemed to have elected not to assume the defense of a claim then: (i) the Indemnified Party shall have the right to conduct such defense; (ii) the Indemnified Party shall have the right to compromise and to settle, in good faith, the claim without the prior consent of the Indemnitor; (iii) the Indemnitor will periodically reimburse the Indemnified Party for costs (including reasonable legal fees); and (iv) if it is ultimately determined that the claim of 15 -------------------------------------------------------------------------------- loss which shall form the basis of such judgment or settlement is one that is validly an obligation of the Indemnitor that elected not to assume the defense, then such Indemnitor shall be bound by any ultimate judgment or settlement as to the existence and the amount of the claim and the amount of said judgment or settlement (including the costs and expenses of defending such claims) shall be conclusively deemed for all purposes of this Agreement to be a liability on account of which the Indemnified Party is entitled to be indemnified hereunder, subject to any limits on the right to be so indemnified hereunder. Upon the determination of liability under and subject to Section 10.1 or 10.2 hereof, the appropriate party shall within thirty (30) days of such determination, pay the amount of such claim.     Section 10.4  Credits Against Future Payment.  If Buyer is determined to be entitled to indemnification by the Seller under the terms of this Agreement, then Buyer shall first (a) credit such amount for which it is entitled to indemnification against future payment which it may be required to make to the Seller hereunder, and (b) upon the exhaustion of all future payments which Buyer may be required to make to Seller hereunder, demand indemnification in the form of cash from Seller.     Section 10.5  Limitations and Conditions on Indemnification.  Except as otherwise specifically provided in this Agreement:     (a)  The Buyer and the other Persons indemnified pursuant to Section 10.1 shall not assert any claim for indemnification hereunder against the Seller until such time as, and solely to the extent that, the aggregate of all claims which the Buyer may have against the Seller exceeds fifty thousand dollars ($50,000). Except for claims for payment of Purchase Price, for which there shall be no minimum claim, the Seller and the other Persons indemnified pursuant to Section 10.2 shall not assert any claim for indemnification hereunder against the Buyer until such time as, and solely to the extent that, the aggregate of all claims which the Seller may have against the Buyer exceeds fifty thousand dollars ($50,000).     (b)  Notwithstanding any other term of this Agreement, the Seller shall not be liable under this Article X for any amounts after such time as the total amounts received by Buyer under this Article X exceed, in the aggregate, one-half (1/2) of the total Purchase Price actually received (or due to be received) by Seller in connection with this Agreement.     (c)  Except as specifically set forth in this Agreement, no party shall be entitled to indemnification for claims or conditions which have been waived, or deemed to be waived, by such party.     (d)  Notwithstanding any provision herein to the contrary, no Indemnified Party shall be entitled to make any claim for indemnification hereunder after the appropriate Expiration Date, provided, however, that if prior to the close of business on the Expiration Date an Indemnifying Party shall have been notified of a claim for indemnity hereunder and such claim shall not have been finally resolved or disposed of at such date, the basis for such claim shall continue to survive with respect to such claim and shall remain a basis for indemnification hereunder with respect to such claim until such claim is finally resolved or disposed of in accordance with the terms hereof; provided, however, that any claim for damages in connection with Taxes shall not expire until the expiration of all applicable statutes of limitations and any claim for damages involving fraud shall never expire.     (e)  Upon making a claim for indemnification, the Indemnifying Party shall be subrogated, to the extent of such payment, to any rights that the Indemnified Party may have against any other parties with respect to the subject matter underlying such indemnified claim. 16 -------------------------------------------------------------------------------- ARTICLE XI NON-DISCLOSURE     Section 11.1  Non-Disclosure of Agreement.  Except by mutual agreement, no party shall disclose any of the terms and conditions of this Agreement except as may be necessary to enforce its terms, or as ordered by a court of competent jurisdiction.     Section 11.2  Confidentiality.  Each of the Seller and the Buyer acknowledge that any information that it has learned about the other during the course of this transaction is confidential and may contain valuable proprietary trade secrets and, accordingly its use and disclosure, must be strictly controlled. All parties, their officers, directors, and other representatives will hold any information in strict confidence and will not use, disclose, or proliferate any information derived about the other during the course of this transaction prior to the Closing Date. After the Closing Date, the Seller shall not disclose any information learned about the Buyer without the written approval of the Buyer. ARTICLE XII MISCELLANEOUS PROVISIONS     Section 12.1  Costs and Expenses.  Except as otherwise provided herein, each party shall pay its own expenses in connection with the preparation and performance of the terms of this Agreement. The provisions of this Section shall survive the termination of this Agreement.     Section 12.2  Survival of Representations and Warranties.  The representations and warranties contained herein or in any certificate, statement, document or instrument furnished hereunder or under the other Transaction Documents shall survive the Closing for a period of one (1) year following the Closing Date, after which all liability with respect to such representations and warranties shall terminate, except as to any alleged inaccuracy or breach thereof of which any party prior to the expiration of such period, shall have advised the other party in writing, specifying in reasonable detail the representation or warranty that is alleged to be inaccurate or breached. The covenants of the Buyer and the Seller shall continue in full force and effect in accordance with their respective terms.     Section 12.3  Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without giving effect to the conflict of laws provisions thereof.     Section 12.4  Notices.  All notices, requests, demands or other communications hereunder shall be in writing, hand delivered or mailed by certified mail, return receipt required, or by overnight courier, receipt signature required or by facsimile transmission with verification of transmission received by the sender, to each party at the address that follows, or at such other place as either party may, by written notice to the other parties hereto, direct: If to Buyer: Allen Systems Group, Inc. 1333 Third Avenue South Naples, Florida 34102 United States Attention: Kristine K. Rieger, Esq., General Counsel Telecopy No. (941) 263-7443 17 -------------------------------------------------------------------------------- With a copy to: Allen Systems Group, Inc. 1333 Third Avenue South Naples, Florida 34102 United States Attention: Arthur L. Allen, President and CEO Telecopy No. (941) 263-0043 If to Seller: Condor Technology Solutions, Inc. Annapolis Office Plaza 170 Jennifer Road, Suite 325 Annapolis, Maryland 21401 Attn: General Counsel Telecopy No: 410-266-8400     Any such notice, when sent in accordance with the provisions hereof, shall be deemed to have been given and received (a) on the day personally delivered or faxed, (b) on the second day after the day overnight delivered, or (c) on the fifth day following the date mailed.     Section 12.5  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be illegal, invalid, void or unenforceable, then the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect.     Section 12.6  Dispute Resolution.  If a dispute arises our of or relates to this Agreement or the breach hereof, and if the dispute cannot be settled through negotiation, the parties agree first to attempt, in good faith, to settle the dispute by mediation administered by the American Arbitration Association ("AAA") under its Commercial Mediation Rules before resorting to litigation or some other dispute resolution procedure. In the event of unsuccessful mediation, all disputes shall be resolved in a court of competent jurisdiction.     Section 12.7  No Third Party Beneficiary.  This Agreement is entered into solely for the benefit of the parties hereto, and in the case of Article X hereof, the other Indemnified Parties and the provisions of this Agreement shall be for the sole and exclusive benefit of such parties and their respective successors and permitted assigns. No Person not a party hereto or their successors and permitted assigns (including employees or creditors of the Seller) shall be entitled to enforce any provisions hereof or exercise any right hereunder, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over or against any party to this Agreement.     Section 12.8  Sales and Transfer Taxes.  Each party shall be solely responsible to pay their own Taxes arising as a result of the transactions contemplated by this Agreement.     Section 12.9  Waiver.  Neither the waiver by either of the parties hereto of a breach of or a default under any one or more of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any such provisions, rights or privileges hereunder. No waiver shall be binding unless executed by the party making the waiver.     Section 12.10  Assignment; Amendment.  Neither the Buyer nor the Seller shall assign any of their rights or obligations under this Agreement whether by written agreement or by operation of law (including 18 -------------------------------------------------------------------------------- by merger or sale of all or substantially all assets), without the prior written consent of the other, which shall not be unreasonably withheld. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. No provision of this Agreement may be amended, modified, discharged or terminated except by written agreement duly executed by each of the parties.     Section 12.11  Entire Agreement.  This Agreement and the Transaction Documents embody and constitute the entire agreement and understanding between the parties with respect to the subject matter hereof and supersede and cancel any prior and contemporaneous oral or written agreement, letter of intent, proposal executed or delivered by or on behalf of any of the parties or understanding related to the subject matter hereof.     Section 12.12  Counterparts.  This Agreement may be executed in one or more counterparts (including telecopy facsimile), and it shall not be necessary that the signature of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more such counterparts. All counterparts shall constitute one and the same instrument. Signatures may be exchanged by telecopy, and each party agrees that it will be bound by its telecopied signature and that it accepts the telecopied signatures of the other parties to this Agreement.     Section 12.13  Independent Contractor; Reliance on Counsel.  Each party hereto is an independent contractor, and nothing contained in this Agreement shall be construed to be inconsistent with this relationship or status. Neither party owes a fiduciary duty to the other. Nothing in this Agreement shall be in any way construed to constitute either party as the agent, employee, or representative of the other. As an independent contractor, each party has relied on its own expertise or the expertise of its legal, financial, technical, or other advisors. No party has relied upon any oral representation of any other party in entering into this Agreement. All discussions, estimates, pro forma financial statements or projections developed by a party during the course of negotiating the terms and conditions of this Agreement or the other Transaction Documents are by way of illustration only, are not binding or enforceable against the other party in law or equity and do not form the basis of any liability or a representation or warranty.     Section 12.14  Successor Liability.  This entire Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors, heirs, executors and assigns.     Section 12.15  Costs.  If any legal action or other proceeding is brought or any dispute arising regarding the enforcement or interpretation of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable costs and expenses, including attorney's fees, incurred in that action or proceeding, in addition to any other relief to which it may be entitled.     Section 12.16  Cooperation of Parties.  Each party shall give its full cooperation to the other in achieving and fulfilling the terms of this Agreement and to that end each party shall give all consents and information and execute all such documents as may reasonably be required to so fulfill and achieve these purposes, including such as may be required by governmental laws or regulations.     Section 12.17  Specific Performance.  Each of the parties hereto acknowledges that the rights, benefits and obligations of such party pursuant to this Agreement are unique and that no adequate remedy exists at law if any such party shall fail to perform any of its obligations hereunder, and each party therefore confirms and agrees that each such party's right to specific performance is essential to protect the interests of each party hereto. Accordingly, each party hereby agrees that each party shall, in addition to any other remedies which the parties may have hereunder or at law or in equity or otherwise, have the right to have all obligations, undertakings, agreements and other provisions of this Agreement specifically performed by each other party hereto. Notwithstanding any breach or default by any of the parties of any of their representations, warranties, covenants or agreements under this Agreement, if the transactions 19 -------------------------------------------------------------------------------- contemplated by it shall be consummated at the Closing, each of the parties waives any rights that it may have to rescind this Agreement or the transactions contemplated hereby; provided, however, that this waiver shall not affect any other rights or remedies available to the parties under this Agreement or under applicable law.     Section 12.18  Effect of Closing.  All representations, warranties, covenants and agreements of the parties contained in this Agreement, or any instrument, certificate, opinion or other writing provided for in it, shall survive the Closing. 20 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the parties hereto on the day and year first above written.     INTERACTIVE SOFTWARE SYSTEMS, INC.           By:   /s/ KENNARD F. HILL    -------------------------------------------------------------------------------- Name: Kennard F. Hill Title: CEO and President   Witness:               /s/ JOHN F. MCCABE    --------------------------------------------------------------------------------               --------------------------------------------------------------------------------                       ALLEN SYSTEMS GROUP, INC.           By:   /s/ ARTHUR ALLEN    -------------------------------------------------------------------------------- Arthur Allen President and Chief Executive Officer Witness:         --------------------------------------------------------------------------------               --------------------------------------------------------------------------------                 The undersigned executes this Agreement solely for the purposes of consenting to the provisions of Section 9.2 hereto:     CONDOR TECHNOLOGY SOLUTIONS, INC.           By:   /s/ KENNARD F. HILL    -------------------------------------------------------------------------------- Name: Kennard F. Hill Title: CEO and President 21 -------------------------------------------------------------------------------- SCHEDULE 2.1 PRICING SCHEDULE     1.  Purchase Price.  The Transferred Assets shall be sold, assigned, granted, transferred, conveyed and delivered by the Seller and shall be purchased, acquired and accepted by the Buyer in consideration for an aggregate purchase price (the "Purchase Price") equal to the sum of the Initial Purchase Price and the Contingent Purchase Price, as described below. The Purchase Price shall be paid by the Buyer to the Seller as follows:     2.  Payment Terms:       (a)  Initial Purchase Price.  On the Closing Date, by wire transfer of same-day funds in accordance with wire transfer instructions set forth on Schedule A attached hereto, Buyer shall pay to the Seller the sum of four million two hundred fifty thousand dollars ($4,250,000).     (b)  Contingent Purchase Price.  Following the Closing, the Buyer shall be obligated to make the following payments to the Seller, which collectively shall be referred to as the "Contingent Purchase Price":     (i)  Within forty-five (45) days after the end of each calendar quarter after the Closing Date, the Buyer shall pay to the Seller an amount equal to thirty percent (30%) of all collected Gross Revenues, against which the Buyer shall take a credit equal to twenty five percent (25%) of all collected Gross Revenues. As a result of such credit, the Buyer shall only make payment to Seller of an amount equal to five percent (5%) of all collected Gross Revenues. The Buyer shall continue making the payments and taking the credits under this paragraph 2(b)(i) until such credits total in the aggregate the Deferred Maintenance Revenue.     (ii)  Upon the completion of the payments and credits set forth in paragraph 2(b)(i) above, within forty-five (45) days after the end of each calendar quarter thereafter, the Buyer shall pay to the Seller an amount equal to Fifteen Percent (15%) of all collected Gross Revenues. The payments made to the Seller under this paragraph 2(b)(ii) shall continue until the payments made under paragraphs 2(b)(i) and 2(b)(ii) (to the extent actually paid to Seller and not credited to Buyer) total in the aggregate seven million six hundred sixty eight thousand seven hundred fifty three dollars ($7,668,753) (the "Cap"), provided that if Deferred Maintenance Revenue exceeds $2,581,247, the Cap shall be reduced by such excess, and if Deferred Maintenance Revenue is less than $2,581,247, the Cap shall be increased by such shortfall.     The Contingent Purchase Price will be calculated as earned on an accrual basis pursuant to customer contracts, but will be paid on a cash basis when the Buyer, its Affiliates and/or agents actually receives payment regardless of the time period payment is made. The Contingent Purchase Price will be made based on the Buyer's internal financial statements, which shall be provided to the Seller on a quarterly basis along with, upon written request from the Seller, a copy of any contracts and invoices related to such Contingent Purchase Price.     The Buyer shall continue the Safari Solutions Product Line until such time as no further Contingent Purchase Price payments are owing to the Seller under this Schedule 2.1, and during such period the Buyer shall maintain sufficient facilities, resources and personnel to properly and adequately sell and market the Safari Solutions Product Line.     3.  Definitions.  For the purposes of this Schedule 2.1, the following terms shall be defined as follows:     (a)  Deferred Maintenance Revenue shall mean the dollar amount of the liability for "Deferred Maintenance Revenue" shown on the Seller's balance sheet as of June 30, 2000.     (b)  Gross Revenues shall mean the gross revenues of the Buyer related to the Transferred Assets purchased under this Agreement, including for all maintenance, sales, license fees and upgrade 22 -------------------------------------------------------------------------------- amounts (or similar items, but not including fees for professional services rendered by the Buyer after the Closing Date).     Except as specifically set forth herein, all terms shall have the meanings ascribed to them under generally accepted accounting principles of the United States. 23 -------------------------------------------------------------------------------- QUICKLINKS ASSET PURCHASE AGREEMENT RECITALS: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION ARTICLE II TERMS OF THE TRANSACTION ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER ARTICLE V COVENANTS PENDING THE CLOSING ARTICLE VI CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS ARTICLE VII CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS ARTICLE VIII CLOSING ARTICLE IX ADDITIONAL COVENANTS OF THE PARTIES ARTICLE X INDEMNIFICATION ARTICLE XI NON-DISCLOSURE ARTICLE XII MISCELLANEOUS PROVISIONS SCHEDULE 2.1 PRICING SCHEDULE
EXHIBIT 10.44 STOCKHOLDERS’ AGREEMENT         THIS STOCKHOLDERS’ AGREEMENT (the “Agreement”) dated as of August 7, 2000 by and among SanDisk Corporation, a Delaware corporation (“SanDisk”), Photo-Me International, Plc. (“PMI”), a corporation organized under the laws of England and Wales (each referred to herein as a “Stockholder” and together as the “Stockholders”), and DigitalPortal Inc., a Delaware corporation (the “Company”). RECITALS         WHEREAS, SanDisk holds 50% of the outstanding Common Stock of the Company; and         WHEREAS, PMI holds 50% of the outstanding Common Stock of the Company;         WHEREAS, the parties to this Agreement desire to make certain provisions for the management and regulation of the Company’s affairs and to establish the rights and obligations of each of the Stockholders;         NOW, THEREFORE, in consideration of the mutual covenants contained herein and the mutual benefits to be derived herefrom, the parties agree that:         1.  Certain Definitions. In addition to defined terms appearing throughout this Agreement, the following capitalized terms shall have the following meanings, unless otherwise indicated:               “Affiliate” of a party means a corporation, partnership or other entity which is (a) a direct or indirect wholly-owned subsidiary entity of such party, (b) such party’s ultimate parent entity or (c) a direct or indirect wholly-owned subsidiary entity of such party’s ultimate parent entity.               “Definitive Agreement” means that certain Definitive Agreement to Form Vending Business, dated as of even date herewith, to which the Stockholders are parties and to which this Agreement is an Exhibit.               “Dividend Payment” means dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any Stock of any class of capital stock of the Company, or of any warrants, options or other rights to acquire the same.               “Fair Market Value” means, *.               “Interested Party” means each Person who, as a result of an Involuntary Transfer, has an interest in Stock previously owned by a Stockholder, including (as applicable) the affected Stockholder’s estate, personal representative, spouse or successor.               “Involuntary Transfer” means any transfer of Shares owned by a Stockholder or a Permitted Transferee pursuant to Section 2(b)(iv) below that results from (a) an involuntary transfer resulting from a bankruptcy or similar proceeding affecting such Stockholder; or (b) a foreclosure or similar exercise of remedies in respect of a pledge of Shares.               “Person” means any individual, corporation, partnership, trust or other entity.               “Voluntary Transfer” means any sale, pledge or other transfer of Shares by a Stockholder, except (a) a bona fide pledge to secure a loan to such Stockholder, but only if the pledgee agrees in writing to accept such pledge subject to the terms of this Agreement; or (b) an Involuntary Transfer. CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.         *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. --------------------------------------------------------------------------------               “Board of Directors” or “Board” means the board of directors of the Company.               “Common Stock” or “Stock” means the Common Stock, par value $0.001 per share, of the Company.               “Exchange Act” means the Securities Exchange Act of 1934, as amended.               “Initial Public Offering” means the closing of the initial public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act, except that an Initial Public Offering shall not include an offering made in connection with an employee benefit plan.               “Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.               “Restricted Period” means the period commencing on the date hereof and ending upon the closing of the Initial Public Offering.               “Securities Act” means the Securities Act of 1933, as amended.               “Transfer” of shares of Common Stock of any Person shall mean the sale, assignment or transfer, directly or indirectly, of such shares (including by a pledge, assignment, encumbrance or security interest that gives the pledgee, assignee or secured party, upon the occurrence or non-occurrence of an event, the right to acquire such shares or to require that such shares be sold, but not, in any event, including any “negative pledge” or similar type covenant); however, a “Transfer” by a Person shall not include a transfer to any Person by reason of a merger of such Person into such other Person or a consolidation of such Person with such other Person (“Excluded Transaction”).         2.  Recitals Correct. Each of the parties to this Agreement acknowledges and declares that the foregoing Recitals, insofar as they relate to it, are true and correct both in substance and in fact, and constitute representations and warranties which shall survive the execution of this Agreement and the completion of the actions which it contemplates.         3.  Board of Directors.               (a)  The Board of Directors shall have the rules of operation, powers, duties and responsibilities set forth in the Certificate of Incorporation and the Bylaws of the Company and shall provide overall policy direction and supervision of the affairs of the Company. Directors of the Company may, but need not, be officers or employees of the Company or its stockholders or their respective Affiliates.               (b)  During the Restricted Period, the Stockholders agree that they shall vote all of the shares of Stock now or hereafter owned by them, whether beneficially or otherwise and shall take or cause to be taken all such action as may be required from and after the date hereof:         (i)  to establish and maintain the size of the Board of Directors at an even number of directors;         (ii)  to maintain the quorum and voting requirements of the Board of Directors in accordance with the Bylaws;         (iii)  to cause the Board of Directors to meet at least quarterly, with at least one meeting per year in Grenoble, France and one meeting per year in Sunnyvale, CA, USA.         (iv)  to cause the Bylaws, unless otherwise required by law, to be consistent with the Definitive Agreement.         4.  Election of Directors. During the Restricted Period, the Stockholders agree that they shall vote all of the shares of Stock now or hereafter owned by them, whether beneficially or otherwise in the following manner:               (a)  Except as otherwise provided in this Agreement, at any annual or special meeting called, or any other action taken, for the purpose of electing directors to the Company’s Board of Directors, the Stockholders agree to vote all of their Stock so as always to elect as directors the following designated nominees: 50% of the total authorized number of directors to be representatives designated by PMI (or its assignee as provided -------------------------------------------------------------------------------- in Section 6 hereof) and 50% of the total authorized number of directors to be representatives designated by SanDisk (or its assignee as provided in Section 6 hereof).               (b)  Either party may remove one or all of its designated directors at any time and designate one or more new directors to fill the vacancy or vacancies caused by such removal in accordance with Section 4 (c) below.               (c)  In the event of any vacancy on the Board of Directors for any reason, the Stockholders will vote their Stock to fill such vacancy with a nominee designated by the Stockholder or the assignee of the Stockholder who designated the person who held the directorship so vacated.         5.  Election of Chairman. During the Restricted Period, the Stockholders agree that they shall vote all of the shares of Stock now or hereafter owned by them, whether beneficially or otherwise in the following manner:               (a)  At any annual or special meeting called, or any other action taken, for the purpose of electing a chairman of the Company’s Board of Directors, the Stockholders agree to vote all of their Stock so as always to elect as chairman a nominee designated by SanDisk in even years and a nominee designated by PMI in odd years.               (b)  In the event of a vacancy of the chairmanship, the Stockholders will vote their Stock to fill such vacancy with a nominee designated in the same manner as the person who held the chairmanship so vacated.         6.  Assignment of Designation Rights. With respect to Transfers (other than to the Stockholders), unless the other Stockholder consents to a transfer of such rights to a third party transferee, the rights to designate directors and the chairman pursuant to Sections 4 and 5 hereof shall remain with a Stockholder so long as such Stockholder retains at least * of the outstanding Stock of the Company. Notwithstanding Section 4(a) to the contrary, in the event that a Stockholder acquires more than * of the outstanding Stock of the Company, the right to designate directors pursuant to Section 4(a) shall be adjusted so that the percentage of directors designated by each Stockholder is proportionate to such Stockholder’s percentage ownership of outstanding Stock shall be rounded up for the purpose of determining the number of directors it is entitled to designate; provided, that for so long as a Stockhold er owns at least * of the outstanding Stock of the Company, such Stockholder shall be entitled to designate one director. Any shares transferred by any Stockholder to any third party shall not be deemed to be owned by such Stockholder for purposes of calculating the number of directors to be designated by such Stockholder. In the event that the number of nominees which a Stockholder is entitled to designate is reduced pursuant to this Section, the Stockholder shall cause the appropriate number of directors to resign.         7.  Restrictions on Transfer of Common Stock. During the Restricted Period or three years from the date of this Agreement, whichever occurs first, the Stockholders shall not Transfer or dispose of any of their respective shares of Stock or any portion thereof, except as part of an Excluded Transaction or if the other Stockholder consents in writing thereto. Thereafter, the Stockholders may Transfer or dispose of any of their respective shares of Stock, provided that (a) any such Transfer or disposition is in full compliance with Section 8 below or is part of an Excluded Transaction; (b) the other Stockholder consents in writing thereto; or (c) the Transfer is to an Affiliate and  the assignee agrees in writing, in form and substance reasonably satisfactory to the Company, to be bound by this Agreement and all obligations of the transferring Stockholder pursuant to the Definitive Agreement. Th e Company shall not be required to recognize any such assignment, until the certificate representing such Stock and the accompanying stock transfer power has been delivered to the Company for recordation. Any purported assignment, sale, exchange, pledge, or other disposition or hypothecation of Stock of the Company which does not comply with the provisions of this Section shall be null and void ab initio and ineffective against the Company and the other Stockholder.         *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 3 --------------------------------------------------------------------------------         8.  Rights of First Refusal and Purchase.               (a)  Rights of First Refusal on Voluntary Transfers. Subsequent to three years from the date of this Agreement, if no Initial Public Offering has closed, with respect to any transaction, other than an Excluded Transaction, and subsequent to the closing of the Initial Public Offering, with respect to any private transaction, other than a sale made pursuant to Rule 144 or Rule 144k or an Excluded Transaction, any Stockholder (the “Selling Stockholder”) intending to sell all or a portion of his Stock and thereby effect a Voluntary Transfer to any person other than in a transfer authorized by Section 7, shall make such sale or Transfer on the following terms:                      (i)  Notice of Sale. The Selling Stockholder will deliver a written notice (the “Notice of Sale”) to the Company and the other Stockholder (the “Other Stockholder”) describing the proposed Voluntary Transfer. The Notice of Sale will include (i) a statement of the Selling Stockholder’s bona fide intention to sell or transfer Stocks; (ii) the name and address of the proposed transferee (the “Buyer”); (iii) the type and number of shares to be sold or transferred (the “Offered Stock”); (iv) the per share purchase price, which must be in cash; (v) the other material terms and conditions of the proposed sale and (vi) expected date of closing.                      (ii)  Other Stockholder’s Option. The Notice of Sale will constitute an irrevocable offer by the Selling Stockholder to sell to the Other Stockholder the Offered Stock on the same per share terms and conditions stated in the Notice of Sale. The Other Stockholder may accept such offer, in whole only by delivering to the Selling Stockholder written notice of its irrevocable election to accept such offer within 30 days after delivery of the Notice of Sale. If the Other Stockholder has not elected to purchase all of the Offered Stock, by the end of such 30-day period, the Selling Stockholder will be free to sell or transfer the Offered Stock to the Buyer at a price or on terms no more favorable to the Buyer than described in the Notice of Sale, within 30 days after the expiration of such 30 day period. If the sale to the Buyer is not so c onsummated, the terms of this Section will again be applicable to any sale or transfer of Stock by such Selling Stockholder.                      (iii)  Closing. If the Other Stockholder elects to purchase Offered Stock, the closing of the purchase and sale will occur on the 30th day following expiration of the Other Stockholder’s option (or such earlier date as may be agreed among the purchasing and selling parties). At such closing, the purchasers will deliver (by wire transfer or as otherwise specified in the Notice of Sale) the consideration payable to the order of the Selling Stockholder, against delivery by the Selling Stockholder of certificates evidencing the Offered Stock being so purchased, free and clear of all liens, claims and encumbrances (other than this Agreement) and endorsed in good form for transfer.               (b)  Rights of Purchase on Involuntary Transfers. Upon any Involuntary Transfer of Stock affecting a Stockholder (the “ Former Stockholder”), each Interested Party will comply with the following provisions:                      (i)  Notice of Involuntary Transfer. The Interested Party will deliver a written notice (the “Notice of Involuntary Transfer”) to the Company and the Other Stockholder no later than 30 days after such Involuntary Transfer. The Notice will include (i) a description of the circumstances resulting in the Involuntary Transfer; (ii) the name and address of the Interested Party; and (iii) the number of shares of Common Stock subject to such Involuntary Transfer.                      (ii)  Other Stockholders’ Option. The Notice of Involuntary Transfer will constitute an irrevocable offer by the Interested Party to sell the Common Stock at Fair Market Value to the Other Stockholder. The Other Stockholder may elect to accept such offer by delivering to the Interested Party written notice of their irrevocable election to accept such offer within 30 days after delivery of the Notice of Involuntary Transfer.                      (iii)  Closing. If the Other Stockholder elects to purchase Stock pursuant to this Section 3, the closing of the purchase and sale will occur on the 40th day following delivery of the Notice of Involuntary Transfer (or such earlier date as may be agreed among the purchasing and selling parties). At such closing, the purchaser will deliver by wire transfer the consideration payable to the order of the Interested Party, against delivery by the Interested Party of certificates evidencing the Stock being so purchased, free and clear of all liens, claims and encumbrances (other than this Voting Agreement) and endorsed in good form for transfer.               (c)  Merger or Consolidation. The merger or consolidation by a Stockholder with another corporation shall be considered a Transfer or assignment of Stock, unless the Stockholder is the survivor of such merger or consolidation. 4 --------------------------------------------------------------------------------         9.  Procedures Upon Deadlock to Adopt Business Plan. Effective upon the completion of the second year anniversary of the filing of the Articles of the Corporation, and only for the period during which PMI and SanDisk are the only two Stockholders of the Corporation, and further provided the Corporation has not closed an IPO, the parties agree with respect to any deadlock of the Board of Directors to adopt a revised Business Plan as follows:               (a)  If the Board of Directors deadlock on the adoption of a annual Business Plan, or fail to act to adopt a Business Plan, * of the year preceding the year for which the Business Plan is to be adopted and do not unanimously agree to continue discussions for one or more * day periods in order to adopt a new Business Plan, the Approval Agents shall promptly contact one another by telephone to conduct one or more conversations to endeavor to resolve the matter so to enable the Board of Directors to adopt an annual Business Plan.               (b)  If agreement is reached by the Approval Agents, the mutually agreeable resolution shall be implemented by the Corporation. Should no solution be agreed upon within thirty (30) days after the matter has first been discussed by the Approval Agents, and the Approval Agents do not agree in writing to extend their discussions in order to resolve the dispute for one or more additional 30 day periods, or arrive at such other written agreement to resolve the matter, then within ten days following the end of such period, either party may submit the matter to non-binding mediation in accordance with Section (i), below               (c)  If agreement is reached as a result of such mediation process, then the mutually agreeable resolution shall be implemented by the Corporation. Should no solution be agreed upon as a result of such mediation process, then, within ten (10) days following the conclusion of such mediation process, either Stockholder may elect by written notice to the other Stockholder to declare a deadlock (“Deadlock”) and request a valuation of the Corporation pursuant to the procedures set forth in Section (f).               (d)  Within ten (10) days after the results of the valuation referred to in Section (f) are made available, either Stockholder (the “Selling Stockholder”) may submit to the other Stockholder (the “Buying Stockholder”) a written irrevocable notice (the “Deadlock Selling Notice”) stating that the Selling Stockholder offers to sell to the Buying Stockholder, the Selling Stockholder’s Shares for a cash purchase price equal to the Fair Market Value of the Corporation, as determined in such valuation, multiplied by the Selling Stockholder’s fraction of ownership of the Corporation’s issued. shares of Common Stock owned by the Selling Stockholder.               (e)  The Buying Stockholder may accept such offer by written response within 45 days of receipt of the Deadlock Selling Notice indicating that it elects to purchase the Shares of the Selling Stockholder. If the Buying Stockholder declines to exercise its right to purchase the Shares of the Selling Stockholder pursuant to this Section (f) or fails to respond (or if both Stockholders submit Deadlock Selling Notices), the Stockholders shall immediately take all steps necessary to sell the assets of, or cause the liquidation and dissolution of, the Corporation.               (f)  If either Stockholder declares a Deadlock and requests a valuation of the Corporation pursuant to Section (c), such Stockholder may initiate a determination of the Corporation’s Fair Market Value in accordance with this Section (f). Such valuation shall be made by a single appraiser appointed jointly by both Stockholders or, in lieu thereof, by two appraisers, one of which will be appointed by each Stockholder. Such appraiser or appraisers shall be knowledgeable in the area of the Vending Business. If the Stockholders have not mutually selected the appraiser within twenty (20) days of receipt of the notice pursuant to this Section (f), each Stockholder shall select an appraiser and such two persons shall act as the appraisers; provided, however, that if, within twenty (20) days of receipt of such notice, either Stockholder has selected an appraiser while the other h as not, then the person so selected shall act as the sole appraiser. If two appraisers are selected, they will be instructed to reach a joint determination if feasible. Once the appraiser or appraisers have been selected, each Stockholder will submit to the appraiser or appraisers in writing, within thirty (30) days of such selection, such Stockholder’s estimate of the Fair Market Value of the Corporation, together with such supporting information justifying such value as the submitting Stockholder determines appropriate. After receipt of such information, the appraiser or appraisers shall furnish such information on a confidential basis to the non-providing Stockholder which will have         *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 5 -------------------------------------------------------------------------------- ten days to respond in writing to such information. The Fair Market Value of the Corporation shall be the amount determined by the appraiser (if there is only one appraiser) or the average of the amounts determined by the appraisers (if there are two appraisers); provided, that if the higher of such amounts exceeds the lower of such amounts by more than * of the lower of such amounts, then the two appraisers shall, as promptly as practicable, select a third person to act as appraiser to determine the fair market value within the range of the two amounts previously determined. Such determination of Fair Market Value by the appraiser or appraisers initially appointed shall be made and advised to both Stockholders not later than forty-five (45) days from the selection of the appraiser or appraisers and shall be final and binding unless a third appraiser is required to be appointed. Such determination by the third appraiser shall be made and advised to both Stockholders not earl ier than ten (10) days nor later than twenty (20) days from the selection of such appraiser and shall be final and binding. In making such determination the appraiser or appraisers may request additional information from the Stockholders and may hold sessions with the Stockholders, provided that no communications may be on an ex parte basis. The fees and expenses of any appraiser shall be paid by the Stockholder selecting such appraiser, except that the fees and expenses of a single, jointly selected appraiser or the third appraiser (if necessary) shall be paid by the Selling Stockholder. All other costs and expenses of the valuation procedure will be borne by the Stockholder incurring such cost or expense.               *               (g)  The closing of any purchase Shares by a Buying Stockholder shall take place not later than thirty (30) days after its acceptance to purchase the shares offered pursuant to the Deadlock Selling Notice, except that such period shall be extended as necessary in order to comply with any governmental order or ruling. The Buying Stockholder shall pay for the Selling Stockholder’s Shares being acquired by wire transfer of immediately available funds to an account specified by the Selling Shareholder. The Selling Stockholder shall execute all documents necessary to effect the conveyance of such interest in the Corporation, free and clear of all liens, to the Buying Stockholder. In addition, the Stockholders shall enter into an indemnity and release agreement in a form reasonably satisfactory to each Stockholder indemnifying and holding harmless the Selling Stockholder and its Affiliates for liabilities or claims made after the date of the purchase and sale under any guarantees or other agreements supporting the obligations of the Corporation which may have been extended by the Selling Stockholder or any of its Affiliates.               (h)  Upon the liquidation of the Corporation, the Stockholders shall proceed as promptly as practicable to (i) wind-up the affairs of the Corporation and satisfy the Corporation’s liabilities and (ii) dispose of the Corporation’s assets as promptly as practicable consistent with obtaining the full Fair Market Value of the Corporation, preferably, to the extent it is commercially practicable to do so, by selling the Corporation as a going concern; provided, however, neither Stockholder shall be under any obligation to extend the terms of any Transaction Document or to offer to enter into any other agreement with a prospective purchaser of the Corporation for the purchase or sale of goods or services or the use of facilities or any other business arrangement. Upon the completion of the liquidation of the Corporation, a Certificate of Dissolution shall be filed in the Office of the Secretary of State of Delaware. (i)  Either SanDisk or PMI may request non-binding mediation in accordance with Section (b) before a single mediator with expertise in intellectual property licensing transactions selected by mutual agreement of the parties or appointed by JAMS in San Francisco, California. The mediation session will be held in San Francisco, California within thirty (30) days following the request and shall be attended by the Approval Agents or such other representatives of SanDisk and PMI who have full settlement authority. The parties will follow the recommendation of the mediator regarding the agenda most likely to resolve the dispute. The parties will participate in the mediation in good faith, and will share equally in its costs. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator and any JAMS employees, are confidential, privileged and in admissible for any purpose, including impeachment, in any litigation or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation. The provisions of this clause may be enforced by any court of competent jurisdiction, and the party seeking enforcement shall be entitled to an award of all costs, fees and expenses, including attorneys fees, to be paid by the party against whom enforcement is ordered.         *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS 6 --------------------------------------------------------------------------------         10.  Guarantee. Each Stockholder agrees that, in the event that shares are transferred to an Affiliate of such Stockholder, such Stockholder shall unconditionally and irrevocably guarantee the obligations of the Affiliate hereunder.         11.  Covenants of the Company. The Company covenants and agrees with each of the Stockholders as follows:               (a)  Dividend Payments. The Company shall declare an annual dividend to the Stockholders on a pro rata basis consisting of all net profits less allocations to research, development, reserves and other items approved by the Board and the Approval Agents (as defined in the Definitive Agreement dated as of even date herewith, to which this Agreement is an Exhibit). The Company will not, nor will the Company permit any of its Subsidiaries to, declare or make any Dividend Payment at any time unless such Dividend Payment is made on a pro rata basis to each Stockholder of the Company. Nothing herein shall be deemed to prohibit the payment of dividends by any subsidiary of the Company to the Company or to any other subsidiary of the Company.               (b)  Restricted Loans and Advances. The Company will not, nor will the Company permit any of its subsidiaries to, make any loan or advance to any of the Stockholders of the Company or to any of their respective Affiliates, unless such loans or advances are made on a pro rata basis to each of the Stockholders of the Company and approved by the Board of Directors.               (c)  Business Activities. The Company will not engage in any business other than as provided in the Business Plan approved by the Board of Directors.               (d)  Consolidation, Merger or Disposition of Assets as an Entirety; Sale of Material Assets. The Company will not consolidate or merge with, or sell, lease, assign, transfer or otherwise dispose of its assets as an entirety or substantially as an entirety or any material portion thereof, whether in a single transaction or a series of transactions, to any person unless (i) in the case of a merger or consolidation, each Stockholder receives on a pro rata basis the same form and amount of consideration, and (ii) in the case of a sale, lease, assignment, transfer or other disposition of the Company’s assets as an entirety or substantially as an entirety or any material portion thereof, the Company distributes the proceeds therefrom to the Stockholders on a pro rata basis.         12.  Initial Public Offering. In the event that the Board approves an Initial Public Offering, the Stockholders will enter into such underwriting agreements and documents, including without limitation, indemnification or contribution agreements and lock-up agreements, as the managing underwriter shall deem reasonably necessary or appropriate to facilitate the completion of the Initial Public Offering.         13.  Duration of Agreement. This Agreement shall terminate upon the earlier of (i) the consummation of a sale of all the capital stock of the Company, the merger of the company with or into another entity or the sale of all or substantially all of the assets of the Company (an “Approved Sale”), (ii) the closing of an Initial Public Offering or (iii) ten (10) years from the date hereof. The rights and obligations of each Stockholder under this Agreement shall terminate as to such Stockholder upon the Transfer of all Stock owned by such Stockholder in compliance with the terms and conditions of this Agreement (but nothing shall relieve such Stockholder from a claim for damages for a breach prior to such Transfer). Notwithstanding the termination of this Agreement upon an Initial Public Offering, either Stockholder may nonetheless continue to enforce Section 8 of this Agreement with respect to transfers of Securities. The Company shall imprint such legends on any certificates evidencing Stock outstanding prior to the date hereof or issued hereafter. The legends set forth below shall be removed from the certificates evidencing any Stock which ceases to be Stock subject to this Agreement or which may be transferred pursuant to Rule 144(k) under the Securities Act, as appropriate.         14.  General Provisions.               (a)  Notices; Addresses. Any notice, communication, payment or demand required or permitted to be given or made hereunder shall be in writing and will be deemed to have been given or made for all purposes if (i) delivered personally (effective upon delivery), (ii) sent by an international overnight delivery service (effective one day after delivery to such delivery service), or (iii) sent by telecopy (effective upon confirmation of transmission), in each addressed as indicated in the stock transfer records of the Company.               (b)  Legend on Certificates. All certificates representing the Stock of Common Stock shall bear the following legend: 7 --------------------------------------------------------------------------------         THESE SECURITIES ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT COVERING THESE SECURITIES IS EFFECTIVE UNDER THE ACT OR (B) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL SATISFACTORY TO THE CORPORATION.         THE SHARES OF CAPITAL STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS’ AGREEMENT DATED AS OF AUGUST 7, 2000, AND ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SUCH AGREEMENT. NO SALE, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF ANY SHARES OF COMMON STOCK OF THE CORPORATION REPRESENTED BY THIS CERTIFICATE IN CONTRAVENTION OF THE TERMS OF SUCH AGREEMENT SHALL BE VALID OR EFFECTIVE.               (c)  Deposit of Agreement With Stock Transfer Records. The Company shall cause a copy of this Agreement to be deposited with the stock transfer records of the Company and to be retained there during the term of this Agreement.               (d)  Severability of Provisions. If any article, section or any portion of any section of this Agreement is determined to be unenforceable or invalid by the decision of any court of competent jurisdiction, which determination is not appealed or appealable, for any reason whatsoever, the unenforceable provision shall be construed as narrowly as possible so as to minimize the adverse impact upon the terms of this Agreement, such unenforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement, and such unenforceable or invalid article, section or portion thereof shall be severed from the remainder of this Agreement.               (e)  Dispute Resolution. All disputes arising in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The arbitration shall take place in New York, New York and shall be conducted in the English language. The parties hereby agree to the enforceability of any judgements worldwide and to the authority of the arbitrator to award injunctive relief.               (f)  Governing Law. This Agreement shall in all respects be construed according to the laws of the State of California, without regard to the conflict of laws principles thereof.               (g)  Equitable Relief. Each party to this Agreement acknowledges and agrees that the remedy at law for any breach of any of the terms of this Agreement would be inadequate, and agrees and consents that temporary and permanent injunctive and other equitable relief may be granted in any proceeding which may be brought to enforce any provision hereof, including specific performance with such other equitable relief, without the necessity of proof of actual damage or inadequacy of legal remedy.               (h)  Amendment. No provision of this Agreement may be amended, supplemented, waived, discharged or terminated except by a written instrument signed by all of the parties hereto.               (i)  Waivers. No waiver of any breach of default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature.               (j)  EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NEITHER PARTY SHALL BE RESPONSIBLE OR LIABLE TO THE OTHER FOR LOST PROFITS, OR LOST BUSINESS OPPORTUNITIES OR FOR INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH PERFORMANCE OF WORK PROVIDED FOR UNDER THIS AGREEMENT OR FOR TERMINATION OF THIS AGREEMENT AS PROVIDED FOR HEREIN.               (k)  Additional Assurances. Each party to this Agreement shall sign such further and other papers, cause such meetings to be held, resolutions passed and bylaws enacted, exercise their vote and influence and 8 -------------------------------------------------------------------------------- do and perform and cause to be done and performed such further and other acts as may be necessary or desirable to implement the provisions of this Agreement.               (l)  Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.               (m)  Binding Effect. Subject to subsection (l) below, each and all of the covenants, terms, provisions and agreements contained herein shall inure to the benefit of and be binding upon the parties hereto, their respective receivers, trustees, administrators, legal or personal representatives, and, to the extent permitted by this Agreement, their respective successors and assigns.               (n)  Effectiveness. This Agreement shall be effective as to each Stockholder who is a signatory upon the acquisition by such Stockholder beneficially and of record of any issued and outstanding Stock of Common Stock of the Company and shall apply to all Stock of Common Stock owned beneficially and of record by such Stockholder, whether now owned or subsequently acquired. [SIGNATURE PAGE FOLLOWS] 9 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, PMI and SanDisk have caused this Agreement to be executed by their duly authorized officers as of the date first set forth above.      PHOTO-ME INTERNATIONAL, PLC   By:   /S/ Serge Crasnianski      --------------------------------------------------------------------------------      Name: Serge Crasnianski Title: Chief Executive Officer      SANDISK CORPORATION   By:   /S/ Eli Harari      --------------------------------------------------------------------------------      Name: Eli Harari Title: President      DIGITALPORTAL INC.   By:   /S/ Nelson Chan      --------------------------------------------------------------------------------      Name: Nelson Chan Title: President and Chief Executive Officer 9 --------------------------------------------------------------------------------
EXHIBIT 10.3 EMPLOYMENT AGREEMENT SAKS INCORPORATED AND SUBSIDIARIES EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is entered into as of the 1st day of November 2000, by and between Saks Incorporated (the "Company"), and Douglas E. Coltharp ("Executive").     Company and Executive agree as follows:     1. Employment. Company hereby employs Executive as Executive Vice President and Chief Financial Officer of Company or in such other capacity with Company and its subsidiaries as Company's Board of Directors shall designate.     2. Duties. During his employment, Executive shall devote substantially all of his working time, energies, and skills to the benefit of Company's business. Executive agrees to serve Company diligently and to the best of his ability and to use his best efforts to follow the policies and directions of Company's Board of Directors.     3. Compensation. Executive's compensation and benefits under this Agreement shall be as follows:         (a) Base Salary. Company shall pay Executive a base salary ("Base Salary") at a rate of no less than $410,000 per year. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law.         (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus of with a maximum target of 60% of Base Salary based upon his performance in accordance with specific annual objectives, set in advance, all as approved by the Board of Directors.         (c) New Option Grant. Executive is granted a non-qualified option ("Option") to purchase 350,000 shares of Company common stock at an option price equal to the closing price of the stock at the close of business on November 1, 2000 (the "Grant Date"), as reported in the Wall Street Journal. The Option is granted pursuant to the Company's 1994 Amended and Restated Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable at the following times: to the extent of 20% on May 1, 2001, 20% on November 1, 2001, 20% on November 1, 2002, 20% on November 1, 2003, and 20% on November 1, 2004. The Option may be exercised up to ten (10) years from the Grant Date; provided, however, that 100% of the option shall be exercisable at the time the closing price of the Company common stock reaches $22 per share on any day, and Executive shall then have 6 months to exercise the option or it shall expire.         (d) Vesting of Restricted Stock Grants. Company has declared earned the 25,416 unvested shares of restricted stock granted under the TARSAP programs in 1996 and 1998. One third of those shares shall vest on each of the first three anniversaries of this Agreement provided that Executive remains employed by Company on those dates.         (e) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the Company's 1994 Plan), any Options granted to Executive prior to such Change of Control shall immediately vest.     4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position.     5. Term. The term of this Agreement shall be for three years, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company without Cause, as defined below, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid in one lump sum. In the event that Executive's employment is terminated without Cause, as defined below, during the final two years of the Term, or thereafter if Executive is working without an employment contract, he shall be entitled to two years' Base Salary as severance pay, and he shall have one year after termination of employment to exercise any vested options.     In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any employee benefit arrangement or plan maintained by Company.     6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for Cause, in which event no salary or bonus shall be paid after termination for Cause. Termination for Cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "Cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's willful and continual material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors.         (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate.     7. Change in Control. If Executive's employment is terminated by Executive for "Good Reason" after a Change in Control, or by Company in any way connected with a Change in Control of Company or a Potential Change in Control of Company, as defined below, Executive shall receive a sum equal to three times his Base Salary then in effect, continuation in the Company's health plans for three years at no cost, and vesting in Company's Supplemental Savings Plan at the retirement rate. The phrase "Good Reason" shall mean: (1) a mandatory relocation from the Birmingham, Alabama area, (2) a reduction in duties or status within the combined company as a result of or after the Change in Control, or (3) any time during the 13th month after a Change in Control the Executive terminates employment and deems it to be for Good Reason. If any payment, right or benefit provided for in this Agreement or otherwise paid to Executive by Company is treated as an "excess parachute payment" under Section 280(G)(b) of the Internal Revenue Code of 1986, as amended, (the "Code"), Company shall indemnify and hold harmless and make whole, on an after-tax basis, Executive for any adverse tax consequences, including but not limited to providing to Executive on an after-tax basis the amount necessary to pay any tax imposed by Code Section 4999.     As used herein, the term "Change in Control" means the happening of any of the following:         (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or         (b) As the 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, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or         (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period.     As used herein, the term "Potential Change in Control" means the happening of any of the following:         (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or         (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement.     8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months. This means that Executive shall continue to be employed for twelve consecutive months after he becomes disabled, so that he continues to enjoy all protections of this Agreement and his options and restricted stock shall continue to vest during such period. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year.     9. Non-competition; Unauthorized Disclosure.         (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of one year thereafter, Executive:             (i) shall not engage in any activities, whether as employer, proprietor, partner, stockholder (other than the holder of less than 5% of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (i) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (ii) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period;             (ii) shall not do business with any vendor that is one of the top 100 vendors of the businesses conducted by Company or its affiliates at the date hereof or at any time during the term of this Agreement; and             (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate their employment relationship.         (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of one year thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive).         (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9:             (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company or its affiliates or subsidiaries are actively engaged in the conduct of business while Executive is employed under this Agreement;             (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; provided, however, Company shall be entitled to injunctive relief only to protect itself from unfair competition of the type protected under Tennessee law.             (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and             (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company.     10. General Provisions.         (a) Notices. Any notice to be given hereunder by either party to the other may be effected in writing by personal delivery, mail, electronic mail, overnight courier, or facsimile. Notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt.     If to Executive:    Douglas E. Coltharp                                                          750 Lakeshore Parkway                         Birmingham, AL 35211     If to Company:      General Counsel                                                          Saks Incorporated                         750 Lakeshore Parkway                         Birmingham, AL 35211         (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way.         (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee.         (d) Entire Agreement. Except for any prior grants of options, restricted stock, or other forms of incentive compensation evidenced by a written instrument or by an action of the Board or Directors, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged.         (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach.         (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof.         (g) Attorney's Fees. If Executive brings any action to enforce his purported rights under this Agreement after a Change in Control, Company shall reimburse Executive for his reasonable costs, including attorney's fees, incurred. Company shall reimburse Executive as the costs are incurred and without regard to the outcome of the action.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.                         SAKS INCORPORATED                           BY: _____________________                                                                   Brian J. Martin                             Executive Vice President                               _____________________                                                                   Douglas E. Coltharp                                                                   Executive
> Exhibit (10) (f) EMPLOYMENT AGREEMENT             THIS EMPLOYMENT AGREEMENT (the "Agreement") dated October 5, 2000 ("Effective Date") between Ronald A. Fromm ("Fromm") and Brown Shoe Company, Inc., a New York corporation (as further defined in Section 15 ("Brown").             WHEREAS, Fromm has been the Chairman, President and Chief Executive Officer of Brown; and             WHEREAS, Fromm desires to continue to be employed by Brown in such positions and Brown desires to retain Fromm in such positions; and             WHEREAS, Brown believes it is essential that members of its Operating Committee, such as Fromm, be encouraged to remain with Brown during management transition and thereafter and in the event there is any change in corporate structure which results in a Change in Control, as defined herein; and             WHEREAS, Fromm wishes to have the protection provided for in this Agreement and, in exchange for such protection, is willing to give to Brown, under certain circumstances, his covenant not to compete.             NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, Brown and Fromm covenant and agree as follows:               1. Definitions. > >         a. "Cause" means (i) engaging by Fromm in willful misconduct which > > is materially injurious to Brown; (ii) conviction of Fromm of a felony; > > (iii) engaging by Fromm in fraud, material dishonesty or gross misconduct in > > connection with the business of Brown; (iv) engaging by Fromm in any act of > > moral turpitude reasonably likely to materially and adversely affect Brown > > or its business; or (v) habitual use by Fromm of narcotics or alcohol.           b. "Change of Control" means (i) any person other than Brown acquiring more than 25 percent of Brown's Common Stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of Brown following the sale of all or substantially all of its assets; or (iii) Brown not being the surviving parent corporation resulting from any merger or consolidation to which it has been a party.          c. "Competitor" shall mean any person, firm, corporation, partnership or other entity which in its prior fiscal year had annual gross sales volume or revenues of shoes of more than $20,000,000 or is reasonably expected to have such sales or revenues in either the current fiscal year or the next following fiscal year.   --------------------------------------------------------------------------------         d. "Confidential Information" shall have the meaning set forth in Section 13.         e. "Customer" shall mean any wholesale customer of Brown which either purchased from Brown during the one (1) year immediately preceding the Termination Date, or is reasonably expected by Brown to purchase from Brown in the one (1) period immediately following the Termination Date, more than $1,000,000 in shoes.         f. "Good Reason," when used with reference to a voluntary termination by Fromm of his employment with Brown, shall mean (i) a reduction in Fromm's base salary as in effect on the date hereof, or as the same may be increased from time to time; (ii) a reduction in Fromm's status, position, responsibilities or duties; or (iii) notice of termination of this Agreement by the Company pursuant to Section 1.g. below, provided Employee terminates employment with the Company within six months of the expiration of the Term.         g. "Term" means the period commencing on the Effective Date and terminating one year after the Effective Date; provided, however, that the Term shall automatically be extended for successive additional one year periods unless either party to this Agreement provides the other party with notice of termination of this Agreement at least ninety (90) days prior to the expiration of the original one-year period or any one- year period thereafter.         h. "Termination Date" shall mean the effective date as provided hereunder of the termination of Fromm's employment.             2. Employment. Fromm shall continue his current employment with Brown and agrees to serve as the Chairman, President and Chief Executive Officer. The provisions of this Agreement shall apply during the Term hereof.             3. Compensation. Subject to the terms of this Agreement, in consideration of Fromm's agreements contained herein, for the period beginning January 30, 2000 and ending February 3, 2001, Fromm shall be paid base compensation of Twenty-Five Thousand Nine Hundred Sixty-One and 53/100 ($25,961.53) on a biweekly basis, or at an annual rate of no less than Six Hundred Seventy-Five Thousand ($675,000.00). After February 4, 2001, Fromm shall be paid base compensation at an annual rate mutually agreed upon between Fromm and Brown. Compensation shall be paid in approximately equal installments no less frequently than monthly.             4. Incentive Payment. While serving as Chairman, President and Chief Executive Officer of Brown, Fromm shall be eligible to receive annually an incentive payment in accordance with the annual incentive plan of Brown.             5. Termination During Term -- Change in Control Severance Inapplicable. 2 --------------------------------------------------------------------------------         a. Fromm's employment may be terminated by Brown for Cause at any time, effective upon the giving to Fromm of a written notice of termination specifying in detail the particulars of the conduct of Fromm deemed by Brown to justify such termination for Cause.         b. Fromm's employment may be terminated by Brown without Cause at any time, effective upon the giving to Fromm of a written notice of termination specifying that such termination is without Cause.         c. Fromm may terminate his employment with Brown at any time.         d. Upon a termination by Brown of Fromm's employment for Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Fromm shall be entitled only to the payments specified in Section 6.a. below. Upon a termination by Brown of Fromm's employment without Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Fromm shall be entitled to all of the payments and benefits specified in Section 6 below.         e. If Fromm voluntarily terminates his employment during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, he shall notify Brown in writing if he believes the termination is for Good Reason. Fromm shall set forth in reasonable detail why Fromm believes there is Good Reason. If such termination is for Good Reason, Fromm shall be entitled to all of the payments and benefits specified in Section 6 below. If such voluntary termination is for other than Good Reason, then Fromm shall be entitled only to the payments specified in Section 6.a. below.             6. Payments and Benefits Upon Termination During Term -- Change in Control Severance Inapplicable. To the extent provided in Section 5 above, upon termination of his employment during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Fromm shall receive the following payments and benefits:         a. The Company shall pay to Fromm on the Termination Date (i) the full base salary earned by Fromm through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Fromm but not taken at the Termination Date, plus (iii) all other amounts earned by Fromm and unpaid as of the Termination Date.         b. The Company shall continue to pay to Fromm his base monthly salary at the highest rate in effect at any time during the twelve months immediately preceding the Termination Date (including his targeted bonus in the current year) for the thirty-six months succeeding his Termination Date. Such amounts shall be paid in accordance with Brown's regular pay period policy for its employees.   3 --------------------------------------------------------------------------------           c. Brown, at its expense, shall provide to Fromm for a period of thirty-six months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by Brown. Upon Fromm's re-employment during such period, to the extent covered by the new employer's plan, coverage under Brown's plan or plans shall lapse. Additionally, Brown shall make a cash lump sum payment in an amount equal to the sum of (i), (ii) and (iii) below:               (i) the fair market value (determined as of the Termination Date) of that number of shares of non-vested restricted stock of Brown held by Fromm which would have vested within the thirty-six-month period following Fromm's Termination Date had Fromm remained employed with Brown; plus             (ii) with respect to each non-vested option to purchase Brown stock held by Fromm which would have vested within the thirty-six-month period following Fromm's Termination Date had Fromm remained employed with Brown , the excess, if any, of the fair market value (determined as of the Termination Date) of Brown stock subject to such option over the exercise price of such option; plus             (iii) an amount such that after payment by Fromm of all income taxes imposed on such amount, Fromm retains an amount equal to the income taxes imposed upon the payments received in Sections 6.c.(i) and (ii) above.   Fromm's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by Brown shall cease effective as of the Termination Date.         d. Brown shall pay the reasonable costs of outplacement services selected by Brown.         e. For purposes of determining Fromm's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional three years of Credited Service shall be credited to Fromm's actual or deemed Credited Service.             7. Termination Within 24 Months After a Change in Control Which Occurs During the Term.         a. Fromm's employment may be terminated by Brown for Cause at any time, effective upon the giving to Fromm of written notice of termination specifying in detail the particulars of the conduct of Fromm deemed by Brown to justify such termination for Cause.         b. Fromm's employment may be terminated by Brown without Cause at any time, effective upon the giving to Fromm of a written notice of termination specifying that such termination is without Cause.   4 --------------------------------------------------------------------------------           c. Fromm may terminate his employment with Brown at any time.         d. Upon a termination by Brown of Fromm's employment for Cause within twenty-four months after a Change in Control which occurs during the Term, Fromm shall be entitled only to the payments specified in Section 8.a. below. Upon a termination by Brown of Fromm's employment without Cause within twenty-four months after a Change in Control which occurs during the Term, Fromm shall be entitled to all of the payments and benefits specified in Section 8 below.         e. If Fromm voluntarily terminates his employment within twenty-four months after a Change in Control which occurs during the Term, he shall notify Brown in writing if he believes the termination is for Good Reason. Fromm shall set forth in reasonable detail why Fromm believes there is Good Reason. If such termination is for Good Reason, Fromm shall be entitled to all of the payments and benefits specified in Section 8 below. If such voluntary termination is for other than Good Reason, then Fromm shall be entitled only to the payments specified in Section 8.a. below.             8. Payments and Benefits Upon Termination Within 24 Months after a Change in Control Which Occurs During Term. To the extent provided in Section 7 above, upon termination of his employment within twenty-four months after a Change in Control which occurs during the Term, Fromm shall receive the following payments and benefits:         a. Brown shall pay to Fromm on the Termination Date (i) the full base salary earned by Fromm through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Fromm but not taken at the Termination Date, plus (iii) all other amounts earned by Fromm and unpaid as of the Termination Date.         b. Brown shall pay to Fromm in a lump sum not later than thirty (30) days after his Termination Date an amount equal to 500 percent of the sum of (i) his base annual salary at the highest rate in effect at any time during the twelve months immediately preceding the Termination Date, and (ii) his targeted bonus for the current year. In addition, Brown shall pay to Fromm his targeted bonus payment for the year of termination prorated to the Termination Date.         c. The Company, at its expense, shall provide to Fromm for a period of sixty months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by Brown. Upon Fromm's re-employment during such period, to the extent covered by the new employer's plan, coverage under Brown's plan or plans shall lapse. Fromm's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by Brown shall cease effective as of the Termination Date.         d. Brown shall pay the reasonable costs of outplacement services selected by Brown.   5 --------------------------------------------------------------------------------           e. For purposes of determining Fromm's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional five years of Credited Service shall be credited to Fromm's actual or deemed Credited Service.           f. Brown shall pay Fromm in a lump sum not later than thirty days after his Termination Date an amount such that after payment by Fromm of all taxes, including, without limitation, any income taxes imposed on such amounts, Fromm retains an amount equal to the income taxes imposed upon amounts recognized by Fromm due to the accelerated vesting of any restricted stock or amounts payable under the Brown Group, Inc. Supplemental Employment Retirement Plan.             9. Mitigation or Reduction of Benefits. Fromm shall not be required to mitigate the amount of any payment provided for in Section 6 or Section 8 by seeking other employment or otherwise. Except as otherwise specifically set forth herein, the amount of any payment or benefits provided in Section 6 or Section 8 shall not be reduced by any compensation or benefits or other amounts paid to or earned by Fromm as the result of employment by another employer after the Termination Date or otherwise.             10. Fromm Expenses After Change in Control. If Fromm's employment is terminated by Brown within 24 months after a Change in Control which occurs during the Term and there is a dispute with respect to this Agreement, then all Fromm's costs and expenses (including reasonable legal and accounting fees) incurred by Fromm (a) to defend the validity of this Agreement, (b) if Fromm's employment has been terminated for Cause, to contest such termination, (c) to contest any determinations by Brown concerning the amounts payable by Brown under this Agreement, or (d) to otherwise obtain or enforce any right or benefit provided to Fromm by this Agreement, shall be paid by Brown if Fromm is the prevailing party.             11. Release. Notwithstanding anything to the contrary stated in this Agreement, no benefits will be paid pursuant to Sections 6 and 8 except under Sections 6.a. and 8.a. prior to execution by Fromm of a release to Brown in the form attached as Exhibit A.             12. Covenant Not to Compete. Benefits payable pursuant to Sections 6.b, 6.c, and 6.e are subject to the following restrictions.   > > a. Post-Termination Restrictions.                 i. Fromm acknowledges that (i) Brown has spent substantial money, time and effort over the years in developing and solidifying its relationships with its Customers throughout the world and in developing its Confidential Information; and (ii) under this Agreement, Brown is agreeing to provide Fromm with certain benefits based upon Fromm's assurances and promises contained herein not to divert Brown's Customers' goodwill or to put himself in a position following his employment with Brown in which the confidentiality of Brown's Confidential Information might somehow be compromised.   6 --------------------------------------------------------------------------------               ii. Accordingly, Fromm agrees that, for thirty-six (36) months after a Termination Date described in the second sentence of Section 5.d, Fromm will not, directly or indirectly, on Fromm's own behalf or on behalf of any other person, firm, corporation or entity (whether as owner, partner, consultant, employee or otherwise):               A. provide any executive- or managerial-level services in the shoe industry in the United States in competition with Brown, for any Competitor;             B. hold any executive- or managerial-level position with any Competitor in the United States;             C. engage in any research and development activities or efforts for a Competitor, whether as an employee, consultant, independent contractor or otherwise, to assist the Competitor in competing in the shoe industry in the United States;             D. cause or attempt to cause any Customer to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with Brown;             E. cause or attempt to cause any shoe supplier or manufacturer of Brown to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with Brown; and             F. solicit, entice, employ or seek to employ, in the shoe industry, any executive- or managerial-level Fromm of, or any consultant or advisor to, Brown.           b. Acknowledgment Regarding Restrictions. Fromm recognizes and agrees that the restraints contained in Section 12.a. (both separately and in total) are reasonable and should be fully enforceable in view of the high-level positions Fromm has had with Brown, the national and international nature of both Brown's business and competition in the shoe industry, and Brown's legitimate interests in protecting its Confidential Information and its Customer goodwill and relationships. Fromm specifically hereby acknowledges and confirms that he is willing and intends to, and will, abide fully by the terms of Section 12.a. of this Agreement. Fromm further agrees that Brown would not have adequate protection if Fromm were permitted to work for its competitors in violation of the terms of this Agreement since Brown would be unable to verify whether (i) its Confidential Information was being disclosed and/or misused, and (ii) Fromm was involved in diverting or helping to divert Brown's Customers and/or its Customer goodwill.   7 --------------------------------------------------------------------------------           c. Company's Right to Injunctive Relief. In the event of a breach or threatened breach of any of Fromm's duties and obligations under the terms and provisions of Section 12.a. of this Agreement, Brown shall be entitled, in addition to any other legal or equitable remedies it may have in connection therewith (including any right to damages that it may suffer), to temporary, preliminary and permanent injunctive relief restraining such breach or threatened breach. Fromm hereby expressly acknowledges that the harm which might result to Brown's business as a result of noncompliance by Fromm with any of the provisions of Section 12.a. would be largely irreparable. Fromm specifically agrees that if there is a question as to the enforceability of any of the provisions of Section 12.a. hereof, Fromm will not engage in any conduct inconsistent with or contrary to such Section until after the question has been resolved by a final judgment of a court of competent jurisdiction. Fromm undertakes and agrees that if Fromm breaches or threatens to breach the Agreement, Fromm shall be liable for any attorneys' fees and costs incurred by Company in enforcing its rights hereunder.         d. Fromm Agreement to Disclose this Agreement. Fromm agrees to disclose, during the thirty-six month period following a Termination Date described in the second sentence of Section 5.d, the terms of this Section 12 to any potential future employer.             13. Confidential Information. Fromm acknowledges and confirms that certain data and other information (whether in human or machine readable form) that comes into his possession or knowledge (whether before or after the date of this Agreement) and which was obtained from Brown, or obtained by Fromm for or on behalf of Brown, and which is identified herein is the secret, confidential property of Brown (the "Confidential Information"). This Confidential Information includes, but is not limited to:         a. lists or other identification of customers or prospective customers of Brown (and key individuals employed or engaged by such parties);         b. lists or other identification of sources or prospective sources of Brown's products or components thereof (and key individuals employed or engaged by such parties);         c. all compilations of information, correspondence, designs, drawings, files, formulae, lists, machines, maps, methods, models, notes or other writings, plans, records, regulatory compliance procedures, reports, specialized or technical data, schematics, source code, object code, documentation, and software used in connection with the development, manufacture, fabrication, assembly, marketing and sale of Brown's products;         d. financial, sales and marketing data relating to Brown or to the industry or other areas pertaining to Brown's activities and contemplated activities (including, without limitation, manufacturing, transportation, distribution and sales costs and non-public pricing information);   8 --------------------------------------------------------------------------------         e. equipment, materials, procedures, processes, and techniques used in, or related to, the development, manufacture, assembly, fabrication or other production and quality control of Brown's products and services;         f. Brown's relations with its customers, prospective customers, suppliers and prospective suppliers and the nature and type of products or services rendered to such customers (or proposed to be rendered to prospective customers);         g. Brown's relations with its employees (including, without limitation, salaries, job classifications and skill levels); and         h. any other information designated by Brown to be confidential, secret and/or proprietary (including without limitation, information provided by customers or suppliers of Brown). Notwithstanding the foregoing, the term "Confidential Information" shall not consist of any data or other information which has been made publicly available or otherwise placed in the public domain other than by Fromm in violation of this Agreement.             14. Certain Additional Payments by Brown.         a. Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by Brown to or for the benefit of Fromm (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section) (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 interest or penalties are incurred by Fromm with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Fromm shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Fromm of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Fromm retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 14.a., if it shall be determined that Fromm is entitled to a Gross-Up Payment, but that the Payments do not exceed 110 percent of the greatest amount (the "Reduced Amount") that could be paid to Fromm such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Fromm, and the Payments, in the aggregate, shall be reduced to the Reduced Amount.         b. Subject to the provisions of Section 14.c., all determinations required to be made under this Section 14, including whether and when a Gross-Up Payment is   9 --------------------------------------------------------------------------------   required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young or such other certified public accounting firm as may be designated by Fromm (the "Accounting Firm") which shall provide detailed supporting calculations both to Brown and Fromm within 15 business days of the receipt of notice from Fromm that there has been a Payment, or such earlier time as is requested by Brown. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, Fromm shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Brown. Any Gross-Up Payment, as determined pursuant to this Section 14, shall be paid by Brown to Fromm within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon Brown and Fromm. 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 Brown should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that Brown exhausts its remedies pursuant to Section 14.c. and Fromm 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 Brown to or for the benefit of Fromm.         c. Fromm shall notify Brown in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Brown of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Fromm is informed in writing of such claim and shall apprise Brown of the nature of such claim and the date on which such claim is requested to be paid. Fromm shall not pay such claim prior to the expiration of the 30-day period following the date on which Fromm gives such notice to Brown (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Brown notifies Fromm in writing prior to the expiration of such period that it desires to contest such claim, Fromm shall:               i. give Brown any information reasonably requested by Brown relating to such claim,             ii. take such action in connection with contesting such claim as Brown 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 Brown,             iii. cooperate with Brown in good faith in order to effectively contest such claim, and   10 --------------------------------------------------------------------------------               iv. permit Brown to participate in any proceedings relating to such claim;   provided, however, that Brown 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 Fromm harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 14.c., Brown shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Fromm to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Fromm 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 Brown shall determine; provided, however, that if Brown directs Fromm to pay such claim and sue for a refund, Brown shall advance the amount of such payment to Fromm, on an interest-free basis and shall indemnify and hold Fromm harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Fromm with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Brown's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Fromm 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 Fromm of an amount advanced by Brown pursuant to Section 14.c., Fromm becomes entitled to receive any refund with respect to such claim, Fromm shall (subject to Brown's complying with the requirements of Section 14.c.) promptly pay to Brown the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Fromm of an amount advanced by Brown pursuant to Section 14.c., a determination is made that Fromm shall not be entitled to any refund with respect to such claim and Brown does not notify Fromm in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.             15. Notice. All notices hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered personally or by courier, or (b) on the third business day following the mailing thereof by registered or certified mail, postage prepaid, or (c) on the first business day following the mailing thereof by overnight delivery service, in each case addressed as set forth below:   11 -------------------------------------------------------------------------------- > >         a. If to Brown:                                     Brown Shoe Company, Inc.                                     8300 Maryland Avenue                                     St. Louis, Missouri 63166-0029                                     Attention: General Counsel                             b. If to Fromm:                                     Ronald A. Fromm                                     10 Dromara Road                                     St. Louis, Missouri 63124 Any party may change the address to which notices are to be addressed by giving the other party written notice in the manner herein set forth.             16. Successors; Binding Agreement.         a. Brown 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 Brown, upon or prior to such succession, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Brown would have been required to perform it if no such succession had taken place. A copy of such assumption and agreement shall be delivered to Fromm promptly after its execution by the successor. Failure of Brown to obtain such agreement upon or prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Fromm to benefits from Brown in the same amounts and on the same terms as Fromm would be entitled hereunder if Fromm terminated his employment for Good Reason. For purposes of the preceding sentence, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Agreement, "Company" shall mean Brown as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 16.a. or which otherwise becomes bound by the terms and provisions of this Agreement by operation of law.         b. This Agreement is personal to Fromm and Fromm may not assign or delegate any part of his rights or duties hereunder to any other person, except that this Agreement shall inure to the benefit of and be enforceable by Fromm's legal representatives, executors, administrators, heirs and beneficiaries.             17. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.   12 --------------------------------------------------------------------------------             18. Headings. The headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement.         19. Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.         20. Waiver. Neither any course of dealing nor any failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of such right, power or privilege or of any other right, power or privilege or of the same right, power or privilege in any other instance. Without limiting the generality of the foregoing, Fromm's continued employment without objection shall not constitute Fromm's consent to, or a waiver of Fromm's rights with respect to, any circumstances constituting Good Reason. All waivers by either party hereto must be contained in a written instrument signed by the party to be charged therewith, and, in the case of Brown, by its duly authorized officer.         21. Entire Agreement. This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement between the parties, oral or written, concerning the same subject matter (including, but not limited to, the following agreements executed by the parties: (i) the Severance Agreement dated July 27, 1998, (ii) the Employment Agreement dated May 14, 1998, and (iii) the First Amendment to the Employment Agreement dated July 27, 1998.)         22. Amendment. This Agreement may be amended only by a writing which makes express reference to this Agreement as the subject of such amendment and which is signed by Fromm and by a duly authorized officer of Brown.         23. Governing Law. In light of Brown's and Fromm's substantial contacts with the State of Missouri, the facts that Brown is headquartered in Missouri and Fromm resides in and/or reports to Brown management in Missouri, the parties' interests in ensuring that disputes regarding the interpretation, validity and enforceability of this Agreement are resolved on a uniform basis, and Brown's execution of, and the making of, this Agreement in Missouri, the parties agree that: (i) any litigation involving any noncompliance with or breach of the Agreement, or regarding the interpretation, validity and/or enforceability of the Agreement, shall be filed and conducted exclusively in the state or federal courts in St. Louis City or County, Missouri; and (ii) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. 13 --------------------------------------------------------------------------------             IN WITNESS WHEREOF, Fromm and Brown have executed this Agreement as of the day and year first above written.                                                                                           BROWN SHOE COMPANY, INC.                                                                                              By: /s/ Ronald A. Fromm                                                                                               RONALD A. FROMM                                                                                                   /s/ Joseph L. Bower                                                                                                       Chair, Compensation Committee   14 --------------------------------------------------------------------------------
SYSTEMS AND MARKETING AGREEMENT   This Systems and Marketing Agreement ("Agreement") is entered into as of July 1, 2000 ("Effective Date") between H&R Block Mortgage Corporation, a Massachusetts corporation having an address at 3 Ada, Irvine, California 92618 ("HRBM") and E-LOAN, Inc., a Delaware corporation having an office at 5875 Arnold Road, Dublin, California 94568 ("E-LOAN") (collectively, the "Parties") WHEREAS, HRBM is engaged in providing mortgage services that include processing, origination, and funding mortgage loans secured by residential properties located in the United States; and WHEREAS, E-LOAN is engaged in marketing mortgage services via the Internet including attracting visitors to E-LOAN's website, providing visitors with a variety of mortgage options, and displaying a variety of competitive loan products available on the market; WHEREAS, HRBM and E-LOAN wish to develop and continue a systems communication and marketing program("Program") to facilitate and market HRBM's loan products to visitors of E-LOAN's website; NOW, THEREFORE, in consideration of their mutual promises, the Parties hereby agree as follows:   1. The Program. (a) E-LOAN shall market HRBM's various mortgage programs and products to Internet users. The Program shall include a comprehensive marketing plan designed, executed, and paid for by E-LOAN, to attract visitors to E-LOAN's website ("Customers") for the purpose of obtaining mortgage loans from HRBM and other mortgage companies. All Customers meeting HRBM Specified Criteria, as set forth in Exhibit A, will be noted and the on-line preliminary application will be transferred to HRBM for processing; provided, however, that all such preliminary applications relating to Customers sourced by or through any of E-LOAN's affinity relationships ("Affinity Customers") shall be processed by E-LOAN and shall not be transferred to HRBM under this Agreement. For purposes of this Agreement, "Affinity Customers" are Customers (1) who are employed by or in like manner associated with companies or other entities with which E-LOAN has a significant strategic relationship evidenced by a strategic alliance agreement (or similarly named agreement), and (2) for whom E-LOAN elects to retain the right to process such loans in order to maintain or support a strategic alliance in accordance with a strategic alliance agreement (or similarly named agreement), including the fulfillment of promotion or special advantage programs offered to such Customers by virtue of such alliance. (b) Although E-LOAN shall market HRBM to its Customers as required by the Program: (i) E-LOAN shall not be required to, and shall not, endorse HRBM, in any communications under the Program that are targeted to Customers;(ii) E-LOAN shall not be required to recommend HRBM as a mortgage provider and (iii) E-LOAN shall not be required to, and shall not as part of the Program, provide advice, counseling or assistance to Customers (other than Affinity Customers) in connection with any particular HRBM mortgage product or program, for which they have applied. E-Loan shall not hold itself out as a partner, joint venturer, or similar business affiliate of HRBM. (c) E-LOAN agrees that in the event E-LOAN makes loans meeting the Specified Criteria set forth on Exhibit A to Affinity Customers, E-LOAN will make its best efforts to work with HRBM to transfer such loans to HRBM on a wholesale basis. 2. Compensation. (a) HRBM shall pay E-Loan a marketing fee of [*] per month (the "Monthly Marketing Fee") for the marketing activities provided under this Agreement in connection with the Program. Each Monthly Marketing Fee shall be paid on or before the twentieth (20th) day following the end of each month. To illustrate, the Monthly Marketing Fee due for October, 2000 marketing shall be due on or before November 20,2000. The Parties each acknowledge and agree that the Monthly Marketing Fee reflects the reasonable and fair market value of the goods and services to be provided by E-LOAN under the Program, without regard to the value or volume of mortgage loans that may be attributable to the Program. 3. Term and Termination. (a) The term of this Agreement shall be for a period of three (3) months commencing on its Effective Date unless earlier terminated in accordance with the provisions of this Section 3. (b) Notwithstanding anything to the contrary in this Agreement, either party may terminate this Agreement at any time, in the following situations ("Events of Default"): (1) Material breach or this Agreement by the other party which remains uncured after thirty (30) days' written notice thereof; (2) A party makes a general assignment for the benefit of creditors, or files a voluntary petition in bankruptcy or for reorganization or arrangement under the bankruptcy laws, or a petition in bankruptcy is filed against a party and is not dismissed within sixty (60) days after filing, or a receiver or trustee is appointed for all or any part of the property or assets of a party. (c) Upon expiration or earlier termination of this Agreement, all of the parties' obligations hereunder shall terminate, except: (i) HRBM shall continue to process, in due course any mortgage loan applications submitted by any Customer and transferred to HRBM prior to the date of termination; (ii) HRBM's obligation to pay any then due Monthly Marketing Fee will be prorated as of such date; and (iii) the provisions of Sections 7, 8 and 14 of this Agreement shall survive. 4. Relationship. The relationship between HRBM and E-LOAN shall be that of independent contractors and neither party shall be or represent itself to be an agent, employee, partner or joint venturer of the other, nor shall either party have or represent itself to have any power or authority to act for, bind or commit the other. 5. Representations and Warranties. (a) HRBM's Authority/Legal Actions. HRBM is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts with full corporate power and authority to transact the business contemplated by this Agreement and it possesses all requisite authority, power, license. permits and franchises to conduct its business as presently conducted. Its execution, delivery and compliance with its obligations under the terms of this Agreement are not prohibited or restricted by any government agency. There is no claim, action, suit, proceeding or investigation pending or, to the best of HRBM's knowledge, threatened against it or against any of its principal officers, directors or key employees, which, either in any one instance or in the aggregate may result in an adverse change in the business, operations, financial condition, properties or assets of HRBM, or in any impairment of the right or ability of HRBM to carry on its business substantially as now conducted through its existing management group, or in any material liability on the part of HRBM, or which would draw into question the validity of this Agreement. (b) E-LOAN's Authority/Legal Actions. E-LOAN is a corporation duly organized, validly existing and in good standing under the laws of the State or Delaware with full corporate power and authority to transact any and all business contemplated by this Agreement and it possesses all requisite authority. power, license, permits and franchises to conduct its business as presently conducted. Its execution, delivery and compliance with its obligations under the terms of this Agreement are not prohibited or restricted by any government agency. There is no claim, action, suit. proceeding or investigation pending or, to the best of E-LOAN's knowledge, threatened against it or against any of its principal officers, directors or key employees which, either in any one instance or in the aggregate, may result in an adverse change in the business, operations, original condition, properties or assets of E-LOAN, or in any impairment of the right or ability of E-LOAN to carry on its business substantially as now conducted through its existing management group, or in any material liability on the part of E-LOAN, or which would draw into question the validity of this Agreement. The information and content on the E-LOAN website (other than information supplied by HRBM)and the E-LOAN Marks (as defined below) licensed hereunder, do not and will not infringe on the patent, copyright, trademark, trade name or other proprietary right of any third party. (c) E-LOAN's Compliance. E-LOAN's website structure, format, information, and content, as built and as used by E-LOAN shall be in full compliance with all applicable federal and state laws and this Agreement. E-LOAN has obtained, or will have obtained in connection with the transactions contemplated by this Agreement, all necessary federal and state approvals in connection with operation and ownership or its website and the content thereof and will make the necessary changes to its website to reflect this Agreement and insure accurate representation. The Privacy notices and Privacy Policies of E-LOAN's website shall be consistent with the Federal Trade Commission's procedure or rules, and comply with acceptable trade practices. 6. Execution/Conflict with Existing Laws or Contracts. The parties have taken all necessary action to authorize their respective execution, delivery and performance of this Agreement The execution and delivery of this Agreement and the performance of the obligations of the respective parties hereunder will not (i) conflict with or violate the Certificate or Incorporation or By-laws of either party or any provision of any law or regulation or any decree, demand or order to which either pad is subject or (ii) conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under any or the terms, conditions or provisions of any agreement or instrument to which either party is a party or by which it is bound, or any order or decree applicable to either party, or result in the creation or imposition of any lien on any of their assets or property. 7. Confidential Information. Each party recognizes that during the term of this Agreement, its directors, officers, employees and authorized representatives such as attorneys and accountants, may obtain knowledge or trade secrets, customer lists, membership lists and other confidential information or the other party which is valuable, proprietary, special or unique to the continued business of that party, which information is initially delivered in written form including electronic form or is summarized and delivered in writing within thirty (30) days after initial delivery in non-written form, and which writing is marked "Confidential" or in a similar nature to indicate its nonpublic and proprietary nature ("Confidential information. However, Confidential Information does not include information that is or (i) becomes available to the general public other than through a breach by the recipient party, (ii) already known to the recipient party as or the time of communication to the recipient party, (iii) developed by the recipient party independently or and without reference to information communicated by the other party, or (iv) rightfully received by the recipient party from a third party which third party is not under a legal duty of confidentiality with respect to such information. Accordingly, each party as a recipient of the other's Confidential Information agrees to hold the Confidential Information of the communicating party and the terms and conditions of this Agreement in confidence and to use diligent efforts to ensure that the communicating party's Confidential Information the terms hereof are held in confidence by it officers, directors, employees, representatives and others over whom it exercises control Upon discovering any unauthorized disclosure of the communicating party's Confidential Information or the terms or this Agreement, the recipient will use diligent efforts to recover such information and to prevent its further disclosure to additional third parties. In addition, the recipient party will promptly notify the communicating party in writing of any such unauthorized disclosure of the communicating party's Confidential Information. The parties' obligations under this paragraph will survive for a period or three (3) years following the expiration or earlier termination of this Agreement. 8. Hold Harmless. (a) HRBM agrees to indemnify, defend and hold E-LOAN harmless from and against any andall claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which E-LOAN, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any misrepresentation, negligent act or omission by HRBM, its affiliates, officers. agents, representatives or employees or out of any act by HRBM, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit or action, liability or loss, expense or damage that resulted from E-LOAN'S negligent act or omission or a breach by E-LOAN of any of its representations, warranties or obligations under this Agreement, or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of F-LOAN. As a condition of the foregoing indemnity obligation, E-LOAN agrees to give HRBM reasonably prompt notice of any third party claim.   (b) E-LOAN agrees to indemnify, defend and hold HRBM harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which HRBM, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any misrepresentation, negligent act or omission by E-LOAN, its affiliates, officers, agents, representatives or employees or out of any act by E-LOAN, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit or action, liability or loss, expense or damage that resulted from a negligent act or omission of HRBM or that is attributable to a breach by HRBM of any of its representations, warranties or obligations pursuant to this Agreement, or(b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of HRBM. As a condition of the foregoing indemnity obligation, HRBM agrees to give E-LOAN reasonably prompt notice of any third party claim. 9. Notices. All notices required or permitted by this Agreement shall be in writing and shall be given by certified mail, return receipt requested or by reputable overnight courier with package tracing capability and sent to the address at the read of this Agreement or such other address that a party specified in writing in accordance with this paragraph. 10. Disclaimer Concerning Tax Effects. Neither party to this Agreement makes any representation or warranty to the other regarding the effect that this Agreement and the consummation of the transactions contemplated hereby may have upon the foreign, federal, state or local tax liability of the other. 11. Disclaimer of Warranties. Neither E-LOAN nor HRBM guarantees continuous or uninterrupted display or distribution of any links contemplated hereunder, or continuous or uninterrupted operation of their respective websites. In the event of interruption of display or distribution of E-LOAN's or HRBM's links or the parties' websites (or any portion there to the parties' sole obligation to each other shall be to restore service as soon as practical. In no event will either party be liable for consequential, punitive. special or indirect damages in connection with this Agreement or the obligations contemplated hereby even if they are advised of the possibility of such damages. Notwithstanding the foregoing, or any other provision in this Agreement, should operation be interrupted for eight or more hours throughout a day (an "Interrupted Day") for five consecutive calendar days or longer, the Monthly Marketing Fee shall be reduced by that amount equal to $2,500 per day for each Interrupted Day. 12. Capitalized Terms. Capitalized terms used herein shall have the meanings set forth herein. 13. Amendment. The terms and conditions of this Agreement may not be modified or amended other than by a writing signed by both parties. 14. Trademark License. Neither party may use the other parties trademarks, service marks, trade names, logos, or other commercial or product designation (collectively, "Marks") for any purpose whatsoever without the prior written consent of the other party. 15. Assignment/Binding Nature. Neither party may assign, voluntarily, by operation of law, or otherwise, any rights, or delegate any duties under this Agreement to any party that is not an affiliate of itself as of the Effective Date, without the other party's prior written consent, except that either party may assign this Agreement or any of its rights or obligations arising hereunder to the surviving entity in a merger, acquisition, reorganization or consolidation in which it participates, or to a purchaser of substantially all of its assets; providing that the assigning party will give reasonable written notice to the non-assigning party in advance of such merger, acquisition or other assignment and that the surviving entity is not a competitor to the non-assigning party. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties. 16. Entire Agreement. This Agreement and any Exhibits attached hereto constitute the entire Agreement between the Parties and supersede all oral and written negotiations of the Parties with respect to the subject matter hereof. 17. Governing Law. This agreement shall be subject to and construed under the laws of the State of California, without reference to conflicts of law provisions thereof. 18. Severability. If any provision of this Agreement should be invalid, illegal or in conflict with any applicable state or federal law or regulation, such law or regulation shall control, to the extent or such conflict, without affecting the remaining provisions or this Agreement. This Agreement shall be deemed to be severable and, if any provision is determined to be void or unenforceable, then that provision will be deemed severed and the remainder or the Agreement will remain in effect. Without limiting the foregoing, if either party is advised by counsel or a regulatory body having jurisdiction over the party's activities that any provision of this Agreement violates any applicable federal or state law or regulation, then the parties agree cooperate to comply with such advice by modifying or terminating this Agreement (in whole or in part). IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written.     E-LOAN, Inc., H&R Block Mortgage Corporation By: By:           Exhibit A   HRBM Specified Criteria   [*] [*].
EXHIBIT 10.3 AUTOZONE, INC. SECOND AMENDED AND RESTATED 1998 DIRECTOR STOCK OPTION PLAN             This Second Amended and Restated 1998 Director Stock Option Plan shall be effective as of the 21st day of March, 2000, the date of its adoption by the Board of Directors of AutoZone, Inc. 1. PURPOSE OF THE PLAN.             Under this 1998 Director Stock Option Plan (the "Plan) of AutoZone, Inc. (the "Company"), non-qualified options to purchase shares of the Company's capital stock shall be granted to Non-Employee Directors of the Company. The Plan is designed to enable the Company to attract and retain Non-Employee Directors of the highest caliber and experience, and to increase their ownership of the Company's capital stock. 2. STOCK SUBJECT TO PLAN.             The maximum number of shares of stock for which options ("Options") granted hereunder may be exercised shall be 70,000 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), subject to the adjustments provided in Section 7. All shares of stock subject to Options shall be treasury shares of Common Stock. Shares of stock subject to the unexercised portions of any Options which expire or terminate or are canceled may again be subject to Options granted hereunder. 3. PARTICIPATING DIRECTORS.             Each member of the Board of Directors of the Company (the "Board") who is not, at the time that eligible directors are granted Options pursuant to Section 5 hereof, an employee or officer of the Company or any of its subsidiaries (a "Non-Employee Director"), shall be eligible to participate in the Plan. 4. ADMINISTRATION. (a) The Plan shall be administered by a committee (the "Committee") which shall consist of two or more directors who are not Non-Employee Directors, appointed by and holding office at the pleasure of the Board. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies on the Committee shall be filled by the Board. (b) It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Board shall have no right to exercise any of the rights or duties of the Committee under the Plan. (c) The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee. (d) All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons, and the Committee, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding on each Non-Employee Director who has been granted an Option hereunder (sometimes referred to hereinafter as an "Optionee"), the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company with respect to any such action, determination or interpretation. 5. GRANT OF OPTIONS.         During the existence of the Plan, Options shall be granted as follows: (a) On January 1 of each year, each Non-Employee Director as of such date shall be granted an Option to purchase 1,500 shares of Common Stock (subject to the adjustments provided in Section 7); provided, however, that (i) with respect to the calendar year beginning January 1, 1998, each Non-Employee Director who is an Non-Employee Director on the effective date of the Plan shall be granted an Option to purchase 1,000 shares of Common Stock (subject to the adjustments provided in Section 7) as of the effective date of the Plan, and (ii) each new Non-Employee Director who is elected a director after January 1, 2000, shall be granted an initial Option to purchase 3,000 shares of Common Stock as of the date of his or her election as a director and a pro-rata portion of that year's annual grant set forth in (i); (b) Beginning on January 1, 2001, and on each January 1 thereafter, each Non-Employee Director who, as of December 31 of the prior year, beneficially owns shares of Common Stock having an aggregate Fair Market Value (as determined below) greater than or equal to five (5) times such Non- Employee Director's annual director fee (not including meeting fees) payable by the Company for such year, shall be granted an Option to purchase 1,500 shares of Common Stock (subject to the adjustments provided in Section 7). For purposes of this Plan, the "Fair Market Value" of a share of Common Stock shall mean, as to any particular day, the average of the highest and lowest prices quoted for a share of Common Stock trading on the New York Stock Exchange on that day, or if no such prices were quoted for the shares of Common Stock on the New York Stock Exchange for that day for any reason, the average of the highest and lowest prices quoted on the last Business Day (as defined below) on which prices were quoted. The highest and lowest prices for the shares of Common Stock shall be those published in the edition of The Wall Street Journal or any successor publication for the next Business Day. For purposes of this Plan, the term "Business Day' shall mean a day on which the Company's executive offices in Memphis, Tennessee, are open for business and on which trading is conducted on the New York Stock Exchange. (c) Each Non-Employee Director as of March 21, 2000, shall be granted an Option to purchase 500 shares of Common Stock (subject to the adjustments provided in Section 7) as of such date.             Notwithstanding any other provision of the Plan, no Option shall be granted unless sufficient shares (subject to said adjustments) are then available therefor under Sections 2 and 7. In consideration of the granting of an Option, the Optionee shall be deemed to have agreed to remain as a Director of the Company for a period of at least one year after the date upon which the Option was granted (the "date of grant"). Nothing in the Plan shall, however, confer upon any Optionee any right to continue as a director of the Company or shall interfere with or restrict in any way the rights of the Company or the Company's stockholders, which are hereby expressly reserved, to remove any Optionee at any time for any reason whatsoever, with or without cause, to the extent permitted by the Company's bylaws and applicable law. 6. OPTION PROVISIONS.             Each Option shall be evidenced by an agreement between the Company and the Non-Employee Director and shall contain the following terms and provisions, and such other terms and provisions as the Committee may authorize: (a) The exercise price of each Option shall be equal to the aggregate Fair Market Value of the shares of Common Stock subject to the Option on the date of grant; (b) Payment for shares of Common Stock purchased upon any exercise of the Option shall be made in full at the time of such exercise (i) in cash, (ii) by delivery of shares of Common Stock already owned by the Optionee, duly endorsed for transfer to the Company, (iii) by delivery of a notice that the Optionee has placed a market sell order with a broker approved by the Company with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the option exercise price, or (iv) by a combination of any of the foregoing methods of payment. For purposes of exercising the Option, the value of any shares of Common Stock delivered in payment shall be the Fair Market Value of such shares of Common Stock on the last Business Day prior to deliver; (c) Subject to subsection (d) below and Section 7 hereof, the Option shall become fully vested and exercisable on the third anniversary of the date of grant; (d) The Option shall terminate and may not be exercised to any extent by anyone after the first to occur of the following events: (i) the expiration of ten years from the date of grant; (ii) the expiration of five years from the date upon which the Non-Employee Director ceases to be a director of the Company if the Non-Employee Director has reached the age of 70 on or before such date ("Normal Retirement Age"); (iii) the expiration of 90 days from the date of the Non-Employee Director's death; (iv) the date that the Non-Employee Director ceases to be a director of the Company (for a reason other than the death of the Non-Employee Director) if the Non-Employee Director has not reached Normal Retirement Age; (v) subject to Section 7(b) hereof, the effective date of a Corporate Transaction (as defined below), unless the Committee waives this provision in connection with such transaction.   In the event that a Non-Employee Director ceases to be a director of the Company prior to the time that the Option has become vested and exercisable pursuant to subsection (c) above, the Option shall continue to vest and become exercisable pursuant to subsection (c) above until such time as the Option terminates pursuant to this subsection (d). (e) Notwithstanding any other provision herein, the Option may not be exercised prior to the admission of the shares of stock issuable upon exercise of the Option to listing on notice of issuance on any stock exchange on which shares of the same class are then listed; nor unless and until, in the opinion of counsel for the Company, such securities may be issued and delivered without causing the Company to be in violation of or incur any liability under any Federal, state or other securities law, any requirement of any securities exchange listing agreement to which the Company may be a party, or any other requirement of law or of any regulatory body having jurisdiction over the Company; and (f) The Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, may not be pledged or hypothecated, and shall be exercisable during the Optionee's lifetime only by the Optionee or by his or her guardian or legal representative. 7. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS. (a) Subject to subsection (d) below, in the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin- off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company (including, but not limited to, a Corporate Transaction, as defined below), or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee's sole discretion, affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits intended to be made available under the Plan or with respect to any Option, then the Committee shall, in such manner as it may deem equitable, adjust any or all of:   (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Options may be granted under the Plan (including, but not limited to, adjustments of the limitations in Section 2 on the maximum number and kind of shares which may be issued under the Plan); (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options; and (iii) the grant or exercise price with respect to any Option.   (b) Subject to subsection (d) below, in the event of any Corporate Transaction (as defined below), the Plan shall terminate, and all outstanding Options shall terminate, unless provisions shall be made in writing in connection with such Corporate Transaction for the continuance of the Plan and/or for the assumption of Options theretofore granted, or the substitution for such Options of options covering the stock of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, in which event the Plan and Options theretofore granted shall continue in the manner and under the terms so provided. If the Plan and unexercised Options would otherwise terminate pursuant to the foregoing sentence, then, for such period of time prior to the consummation of such Corporate Transaction as the Company shall designate, all outstanding Options shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 6(c) hereof or the provisions of such Option; (c) For purposes of the Plan, the term "Corporate Transaction" shall mean any of the following stockholder-approved transactions to which the Company is a party:   (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the State in which the Company is incorporated, form a holding company or effect a similar reorganization as to form whereupon this Plan and all Options are assumed by the successor entity; (ii) the sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, in complete liquidation or dissolution of the Company in a transaction not covered by the exceptions to clause (i) above; or (iii) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred or issued to a person or persons different from those who held such securities immediately prior to such merger.   (d) No adjustment or action described in this Section 7 shall be authorized or occur to the extent such adjustment or action would result in short-swing profits liability under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or violate the exemptive conditions of Rule 16b-3 of the Exchange Act unless the Committee determines that the Option is not to comply with such exemptive conditions. 8. TAX WITHHOLDING.             The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Optionee of any sums required by federal, state or local tax laws to be withheld with respect to the issuance, vesting or exercise of any Option. The Committee may in its discretion and in satisfaction of the foregoing requirement allow such Optionee to elect to have the Company withhold shares of Common Stock otherwise issuable under such Option (or allow the return of shares of Common Stock) having an aggregate Fair Market Value equal to the sums required to be withheld. 9. LOANS.             The Committee may, in its absolute discretion, extend one or more loans to Optionees in connection with the exercise of an Option. The terms and conditions of any such loan shall be set by the Committee. 10. DURATION, TERMINATION AND AMENDMENT OF PLAN.             The Plan shall become effective upon its adoption by the Board. Unless sooner terminated, the Plan shall expire ten (10) years from the date the Plan is adopted by the Board, so that no Option may be granted hereunder after that date although any option outstanding on that date may thereafter be exercised in accordance with its terms. The Board may alter, amend, suspend or terminate this Plan, provided that no such action shall deprive an Optionee, without his or her consent, of any Option previously granted pursuant to the Plan or of any of the Optionee's rights under such Option. 11. COMPLIANCE WITH LAWS.             This Plan, the granting and vesting of Options under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Options granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restriction, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Options granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules or regulations. 12. TITLES.             Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan. 13. GOVERNING LAW.             This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Nevada without regard to the conflicts of laws rules thereof.
EXHIBIT 10.3   PURCHASE AND SALE AGREEMENT               This Purchase and Sale Agreement is made and entered into on this the 30th day of August, 2000, between Gladstone Energy, Inc., a Delaware corporation, ("Seller"), and Humphrey Children's Trust, Sheila Irons, Trustee, ("Buyer"). The purpose of this Agreement is to set out the terms and condition by which Buyer will acquire 1.175% working interest, being 9.59183% of Seller's interest, in those certain properties known as the Right Hand Creek Field located in Allen and Beauregard Parishes, Louisiana, (the "Properties") such properties being further described on Exhibit "A."               1. Sale and Purchase of the Properties. Subject to the terms and conditions herein set forth, Seller agrees to sell, assign, convey and deliver to Buyer and Buyer agrees to purchase and acquire from Seller at the Closing (as hereinafter defined), but effective as of August 1, 2000, (the "Effective Date"), 9.59183% of Seller's 12.25% right, title and interest, it being the intent to convey 1.175% working interest to Buyer. The net revenues being acquired are set out on Exhibit "B" attached hereto and made a part hereof.                  2. Prior Agreement. The acquisition of the Properties are subject in full to that certain Purchase and Sale Agreement dated the 24th day of May, 1999, by and between EXCO Resources, Inc., as Seller, and Humphrey Oil Interests, L.P., as buyer (the "EXCO Agreement"), which shall be attached hereto as Exhibit "C" and made a part hereof.                3. Purchase Price. The purchase price for the Properties shall be $64,265.31 (the "Purchase Price").                4. Representations of Seller. Seller represents to Buyer that:                4.1 Organization. Gladstone Energy, Inc. is a Delaware corporation, validly existing and in good standing under the laws of the State of Texas and is qualified to do business in the States of Texas and Louisiana.                4.2 Authority. Subject to applicable preferential purchase rights and restrictions of assignment as may be contained in any Joint Operating Agreement or other agreement affecting the properties, and to rights to consent by, required notices to, and filing with or action by other governmental entities, Seller has full power and authority and has taken all requisite actions, corporate or otherwise, to authorize it to carry on its business as presently conducted, to enter into this Agreement, and to perform its obligations under this Agreement.                4.3 Enforceability. This Agreement has been duly executed and delivered on behalf of Seller and constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms. At the Closing, all documents required hereunder to be executed and delivered by Seller shall be duly authorized, executed and delivered and shall constitute legal, valid and binding obligations of Seller enforceable in accordance with their respective terms.               4.4 Encumbrances. The Properties are currently subject to a bank lien in favor of Compass Bank; however, said encumbrance is being paid in full on or before August 31, 2000; therefore Seller hereby agrees to use its best efforts to cause Compass Bank to release said security interest in and to the Properties. To the best of Seller's knowledge, no other claim, demand, filing, cause of action, administrative proceeding, lawsuit or other litigation is pending or threatened that could now or hereafter materially affect the ownership, operation or value of any of the Properties.               4.5 Assignment with Special Warranty. Assignment of said Properties will cover 9.59183% of the original interest acquired by Seller from EXCO, and will be made without warranty, express or implied, except as by, through, and under Seller.               5. Representations of Buyer. Buyer represents to Seller that:               5.1 Organization. Buyer is a trust, validly existing and in good standing under the laws of the State of Texas.               5.2 Authority and Conflicts. Buyer has full power and authority to carry on its business as presently conducted, to enter into this Agreement, to purchase the Properties on the terms described in this Agreement and to perform its other obligations under this Agreement.               5.3 Authorization. The execution and delivery of this Agreement have been and the performance of this Agreement and the transactions contemplated hereby shall be at the time required to be performed hereunder, duly and validly authorized by all requisite corporation action on the part of Buyer.               5.4 Enforceability. This Agreement has been duly executed and delivered on behalf of Buyer, and constitutes a legal, valid and binding obligation of Buyer enforceable in accordance with its terms. At the Closing all documents required hereunder to be executed and delivered by Buyer shall be duly authorized, executed and delivered and shall constitute legal, valid and binding obligations of Buyer enforceable in accordance with their respective terms.               6. Expenses, Fees and Taxes. Each of the parties hereto shall pay its own fees and expenses incident to the negotiation and preparation of this Agreement and consummation of the transactions contemplated hereby. Buyer shall be responsible for the cost of all fees for the recording of transfer documents and any and all transfer fees, as well as the costs of providing Seller with a copy of all recorded documents. All other costs shall be borne by the party incurring such costs. If a determination is ever made that a sales tax or other tax arising from the sale of the Properties applies, Buyer shall be liable for such tax as well as any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on any transfer of property pursuant to this Agreement. Buyer shall indemnify and hold Seller harmless with respect to the payment of any of such taxes, including any interest or penalties assessed thereon.                 7. Closing. Closing shall occur on or before August 31, 2000, unless otherwise extending in writing by both parties hereto. Buyer shall tender the Purchase Price and Seller shall tender an assignment of the purchased interests. Both parties hereto agree to execute any and all other documents as may be required to consummate this transaction.               8. Exhibits. The following Exhibits are incorporated herein.   Exhibit A -    Schedule of Interests Acquired by Gladstone Energy, Inc. from Humphrey Oil Interests, L. P. Exhibit B -    Schedule of Interests Being Acquired by Buyer Exhibit C -    Purchase and Sale Agreement by and between EXCO Resources, Inc. and Humphrey Oil Interests, L. P.               9. Entire Agreement; Amendments; Waivers. Should the Seller and Buyer fail to close this transaction, this Agreement shall become null and void. However, should the Seller and Buyer consummate this transaction, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, superseding all prior negotiations, discussions, agreements and understandings, whether oral or written, relating to such subject matter.               Executed as of the date set forth above.   SELLER:       GLADSTONE ENERGY, INC.       By:          /s/ J. M. Hill                                                                      J. M. Hill, President       BUYER:       HUMPHREY CHILDREN'S TRUST       By:           /s/ Sheila Irons                                                       Title:   Sheila Irons, Trustee                                                        EXHIBIT "A" RIGHTHAND CREEK FIELD Schedule of Interest Acquired by Gladstone Energy, Inc. from Humphrey Oil Interests, L. P. Working Net Revenue Interest Interest U WX RB SU Reservoirwide Unit Ragley #2 .12250000 .08924932 BPO Shut-In .11690768 .07511215 APO-I .10732790 .07227683 APO-II Ragley #3 .12250000 .08931754 BPO Producing .11690768 .07511215 APO-I .10732790 .07227683 APO-II U WX RD SU Reservoirwide Unit Cavenham #1 .12250000 .08931754 Producing Cavenham #2 .12250000 .08931754 Producing Cavenham #3 .12250000 .08931754 Injection Well Crosby Land & Resour. #1 .12250000 .08931754 Producing Powell Lumber #1 .12250000 .08931754 Producing Ragley Lumber Co. #1 .12250000 .08931754 Shut-In* Ragley Lumber Co. #4 .12250000 .08931754 Producing All wells located in Allen/Beauregard Parish, Louisiana     EXHIBIT "B" RIGHTHAND CREEK FIELD Schedule of Interest Acquired by Humphrey Children's Trust from Gladstone Energy, Inc. Working Net Revenue Interest Interest U WX RB SU Reservoirwide Unit Ragley #2 .01175000 .00856065 BPO Shut-In .01121359 .00720463 APO-I .01029472 .00693268 APO-II Ragley #3 .01175000 .00856719 BPO Producing .01121359 .00720463 APO-I .01029472 .00693268 APO-II U WX RD SU Reservoirwide Unit Cavenham #1 .01175000 .00856719 Producing Cavenham #2 .01175000 .00856719 Producing Cavenham #3 .01175000 .00856719 Injection Well Crosby Land & Resources #1 .01175000 .00856719 Producing Powell Lumber #1 .01175000 .00856719 Producing Ragley Lumber Co. #1 .01175000 .00856719 Shut-In Ragley Lumber Co. #4 .01175000 .00856719 Producing All wells located in Allen/Beauregard Parish, Louisiana     EXHIBIT "C" Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 30, 1999.      
Exhibit 10.66 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CREDIT AGREEMENT among ADOBE SYSTEMS INCORPORATED and LENDERS NAMED HEREIN and ABN AMRO BANK N.V., as Administrative Agent for Lenders (364-Day Revolving Credit/Term Loan Facility) August 9, 2000 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- TABLE OF CONTENTS Page SECTION I.         INTERPRETATION 1      1.01.   Definitions 1      1.02.   GAAP 18      1.03.   Headings 18      1.04.   Plural Terms 18      1.05.   Time 19      1.06.   Governing Law 19      1.07.   Construction 19      1.08.   Entire Agreement 19      1.09.   Calculation of Interest and Fees 19      1.10.   References. 19      1.11.   Other Interpretive Provisions 20   SECTION II.         CREDIT FACILITIES 20      2.01.   Revolving Loans 20      2.02.   Extension of Revolving Loan Maturity Date 21      2.03.   Term Loans 23      2.04.   Interest 24      2.05.   Purpose 26      2.06.   Increases in Total Commitment, Commitment Reductions, Etc 27      2.07.   Fees 29      2.08.   Prepayments 29      2.09.   Other Payment Terms 30      2.10.   Loan Accounts; Notes 31      2.11.   Loan Funding 32      2.12.   Pro Rata Treatment 33      2.13.   Change of Circumstances 34      2.14.   Taxes on Payments 36   i -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page    2.15.   Funding Loss Indemnification 38      2.16.   Replacement of Lenders 38   SECTION III.         CONDITIONS PRECEDENT 39      3.01.   Initial Conditions Precedent 39      3.02.   Conditions Precedent to Term Loan Borrowing 39      3.03.   Conditions Precedent to Each Credit Event 39      3.04.   Covenant to Deliver 40   SECTION IV.          REPRESENTATIONS AND WARRANTIES 40      4.01.   Borrower’s Representations and Warranties 40      4.02.   Reaffirmation 44   SECTION V.         COVENANTS 45      5.01.   Affirmative Covenants 45      5.02.   Negative Covenants 48      5.03.   Financial Covenants 56   SECTION VI.          DEFAULT 56      6.01.   Events of Default 56      6.02.   Remedies 58   SECTION VII.          AGENTS AND RELATIONS AMONG LENDERS 59      7.01.   Appointment, Powers and Immunities of Administrative Agent 59      7.02.   Reliance by Administrative Agent 59      7.03.   Defaults 60      7.04.   Indemnification 60      7.05.   Non-Reliance 60      7.06.   Resignation or Removal of Administrative Agent 61      7.07.   Administrative Agent in its Individual Capacity 61   SECTION VIII.          MISCELLANEOUS 62      8.01.   Notices 62   ii -------------------------------------------------------------------------------- TABLE OF CONTENTS (continued) Page 8.02.   Expenses 63   8.03. Indemnification 63 8.04.   Waivers; Amendments 64   8.05. Successors and Assigns 64 8.06.   Setoff 68   8.07.   No Third Party Rights 68   8.08.   Partial Invalidity 68   8.09.   Jury Trial 68   8.10.   Confidentiality 69   8.11.   Counterparts 70   SCHEDULES           I Lenders     II Pricing Grid     3.01 Initial Conditions Precedent     4.01(q) Subsidiaries     5.02(a) Existing Indebtedness     5.02(b) Existing Liens     5.02(e) Existing Investments             EXHIBITS             A Notice of Revolving Loan Borrowing (2.01(b))     B Extension Request (2.02(a))     C Notice of Term Loan Borrowing (2.03(b))     D Notice of Interest Period Selection (2.04(b))     E Notice of Term Loan Conversion (2.04(c))     F New Lender Joinder (2.06(a))     G Consent to Increase Commitment (2.06(a))     H Revolving Loan Note (2.10(b))     I Term Loan Note (2.10(c))     J Assignment Agreement (8.05(c))     iii  -------------------------------------------------------------------------------- An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities.   -------------------------------------------------------------------------------- CREDIT AGREEMENT           THIS CREDIT AGREEMENT, dated as of August 9, 2000, is entered into by and among:           (1)  ADOBE SYSTEMS INCORPORATED, a Delaware corporation (“Borrower”);           (2)  Each of the financial institutions from time to time listed in Schedule I hereto, as amended from time to time (such financial institutions to be referred to herein collectively as “Lenders”); and           (3)  ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). RECITALS A.  Borrower has requested Lenders to provide certain credit facilities to Borrower. B.  Lenders are willing to provide such credit facilities upon the terms and subject to the conditions set forth herein. AGREEMENT           NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION I.     INTERPRETATION.           1.01.  Definitions. Unless otherwise indicated in this Agreement or any other Credit Document, each term set forth below, when used in this Agreement or any other Credit Document, shall have the respective meaning given to that term below or in the provision of this Agreement or other document, instrument or agreement referenced below.           “ABN AMRO” shall mean ABN AMRO Bank N.V.           “Administrative Agent” shall have the meaning given to that term in clause (3) of the introductory paragraph hereof.           “Administrative Agent’s Fee Letter” shall mean the letter agreement dated as of August 9, 2000, between Borrower and Administrative Agent regarding certain fees payable by Borrower to Administrative Agent. 1 --------------------------------------------------------------------------------           “Adobe Incentive Partners” shall mean Adobe Incentive Partners, L.P., a California limited partnership, in which Borrower is the general partner and all of the limited partners are Borrower or Affiliates of Borrower.           “Adobe Incentive Partners Distributions” shall mean distributions of cash or securities owned by Adobe Incentive Partners, repurchases of unvested partnership interests in Adobe Incentive Partners, and issuances of partnership interests in Adobe Incentive Partners.           “Affiliate” shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, ten percent (10%) or more of any class of Equity Securities of such Person, (b) each Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person or (c) each of such Person’s officers, directors, general partners and, if such Person is a joint venture organized as a separate legal entity, joint venturers having powers comparable to a general partner; provided, however, that in no case shall any of the following Persons be deemed to be an Affiliate of Borrower or any of its Subsidiaries for purposes of this Agreement: (i) Administrative Agent or any Lender or (ii) the general partner of any VC Partnership which would otherwise be deemed an Affiliate solely because it acts as general partner and controls such VC Partnership. For the purpose of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies.           “Agreement” shall mean this Credit Agreement.           “Applicable Lending Office” shall mean, with respect to any Lender, (a) in the case of its Base Rate Loans and Base Rate Portions, its Domestic Lending Office, and (b) in the case of its LIBOR Loans and LIBOR Portions, its Euro-Dollar Lending Office. “Applicable Margin” shall mean, with respect to any Loan or Portion at any time, the per annum margin which is determined pursuant to the Pricing Grid and added to the Base Rate or LIBO Rate, as the case may be, for such Loan or Portion; provided, however, that each Applicable Margin determined pursuant to the Pricing Grid shall be increased by two percent (2.00%) per annum on the date an Event of Default occurs and shall continue at such increased rate unless and until such Event of Default is waived or cured in accordance with this Agreement. The Applicable Margins shall be determined as provided in the Pricing Grid and may change for each Pricing Period.           “Assignee Lender” shall have the meaning given to that term in Subparagraph 8.05(c).           “Assignment” shall have the meaning given to that term in Subparagraph 8.05(c).           “Assignment Agreement” shall have the meaning given to that term in Subparagraph 8.05(c). 2 --------------------------------------------------------------------------------           “Assignment Effective Date” shall have, with respect to each Assignment Agreement, the meaning set forth therein.           “Assignor Lender” shall have the meaning given to that term in Subparagraph 8.05(c).           “Base Rate” shall mean, on any day, the greater of (a) the Prime Rate in effect on such date and (b) the Federal Funds Rate for such day plus one-half percent (0.50%).           “Base Rate Loan” shall mean, at any time, a Revolving Loan which then bears interest as provided in clause (i) of Subparagraph 2.04(a).           “Base Rate Portion” shall mean, at any time, a Portion of the Term Loan Borrowing or a Term Loan, as the case may be, which then bears interest as provided in clause (i) of Subparagraph 2.04(a).           “Borrower” shall have the meaning given to that term in clause (1) of the introductory paragraph hereof.           “Borrowing” shall mean a Revolving Loan Borrowing or the Term Loan Borrowing.           “Business Day” shall mean any day on which (a) commercial banks are not authorized or required to close in San Francisco, California, New York, New York or Chicago, Illinois, and (b) if such Business Day is related to a LIBOR Loan or a LIBOR Portion, dealings in Dollar deposits are carried out in the London interbank market.           “Capital Adequacy Requirement” shall have the meaning given to that term in Subparagraph 2.13(d).           “Capital Asset” shall mean, with respect to any Person, any tangible fixed or capital asset owned or leased (in the case of a Capital Lease) by such Person, or any expense incurred by such Person that is required by GAAP to be reported as a non-current asset on such Person’s balance sheet.           “Capital Leases” shall mean any and all lease obligations that, in accordance with GAAP, are required to be capitalized on the books of a lessee.           “Change of Control” shall mean           (a) With respect to Borrower, (i) the acquisition after the date hereof by any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”)) of (A) beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of fifty percent (50%) or more of the outstanding Equity Securities of Borrower entitled to vote for members of the board of directors, or (B) all or substantially all of the assets of 3 -------------------------------------------------------------------------------- Borrower; or (ii) during any period of twelve (12) consecutive calendar months, individuals who are directors of Borrower on the first day of such period (“Initial Directors”) and any directors of Borrower who are specifically approved by two-thirds of the Initial Directors and previously-approved Directors shall cease to constitute a majority of the Board of Directors of Borrower before the end of such period; or           (b) With respect to any Material Subsidiary, Borrower shall cease to own, directly or indirectly, one hundred percent (100%) of the Equity Securities of such Subsidiary except for nominal amounts of stock necessary to do business in certain jurisdictions outside the United States.           “Change of Law” shall have the meaning given to that term in Subparagraph 2.13(b).           “Commitment Effective Date” shall have the meaning given to that term in Subparagraph 2.06(a).           “Commitment Fee Percentage” shall mean, at any time, the per annum percentage which is used to calculate Commitment Fees. The Commitment Fee Percentages shall be determined as provided in the Pricing Grid and may change for each Pricing Period.           “Commitment Fees” shall have the meaning given to that term in Subparagraph 2.07(b).           “Commitment” shall mean, with respect to each Lender, the Dollar amount set forth under the caption “Commitment” opposite such Lender’s name on Part A of Schedule I, or, if changed, such Dollar amount as may be set forth for such Lender in the Register.           “Compliance Certificate” shall have the meaning given to that term in Subparagraph 5.01(a).           “Consent to Increase Commitment” shall have the meaning given to that term in Subparagraph 2.06(a).           “Contingent Obligation” shall mean, with respect to any Person, (a) any Guaranty Obligation of that Person; and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person (i) in respect of any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments, (ii) as a partner or joint venturer in any partnership or joint venture, (iii) to purchase any materials, supplies or other property from, or to obtain the services of, another Person 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, or such services are ever performed or tendered, (iv) in respect to any Rate Contract that is not entered into in connection with a bona fide hedging 4 -------------------------------------------------------------------------------- operation that provides offsetting benefits to such Person, or (v) to purchase or sell Equity Securities or other securities of any Person. 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; provided, that (A) in the case of item (b)(v) of this definition, the amount of the Contingent Obligation with respect to the purchase or sale of such Equity Securities or other securities shall be the net settlement amount to be paid in cash or securities, and (B) in the case of item (b)(iv) of this definition, the Contingent Obligation with respect to such Rate Contracts shall be marked to market on a current basis.           “Contractual Obligation” of any Person shall mean, any indenture, note, lease, loan agreement, security, deed of trust, mortgage, security agreement, guaranty, instrument, contract, agreement or other form of contractual obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound.           “Credit Documents” shall mean and include this Agreement, the Notes and the Administrative Agent’s Fee Letter; all other documents, instruments and agreements delivered to Administrative Agent or any Lender pursuant to Paragraph 3.01; and all other documents, instruments and agreements pursuant to the terms of this Agreement required to be delivered by Borrower or any of its Subsidiaries to Administrative Agent or any Lender in connection with this Agreement on or after the date of this Agreement.           “Credit Event” shall mean the making of any Loan (other than the making of a Base Rate Loan solely to repay an existing Loan); the conversion of any Portion into a LIBOR Portion; or the selection of a new Interest Period for any LIBOR Loan or LIBOR Portion.           “Debt/EBITDA Ratio” shall mean, with respect to Borrower for any consecutive four-quarter period, the ratio, determined on a consolidated basis in accordance with GAAP, of:           (a) The total Indebtedness of Borrower and its Subsidiaries on the last day of such period, excluding any Indebtedness under or with respect to currency exchange Rate Contracts; to           (b) The EBITDA of Borrower and its Subsidiaries for such period.           “Default” shall mean an Event of Default or any event or circumstance not yet constituting an Event of Default which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default.           “Defaulting Lender” shall mean a Lender which has failed to fund its portion of any Borrowing which it is required to fund under this Agreement and has continued in such failure for five (5) Business Days. 5 --------------------------------------------------------------------------------           “Document Delivery Date” shall have the meaning given to that term in Subparagraph 3.01.           “Dollars” and “$” shall mean the lawful currency of the United States of America and, in relation to any payment under this Agreement, same day or immediately available funds.           “Domestic Lending Office” shall mean, with respect to any Lender, (a) initially, its office designated as such in Schedule I (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Subparagraph 8.05(c), its office designated as such in the applicable Assignment Agreement) and (b) subsequently, such other office or offices as such Lender may designate to Administrative Agent as the office at which such Lender’s Base Rate Loans and Base Rate Portions will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender’s Base Rate Loans and Base Rate Portions will thereafter be made.           “EBITDA” shall mean, with respect to Borrower for any period, the sum, determined on a consolidated basis in accordance with GAAP, of the following:           (a) The net income or net loss of Borrower and its Subsidiaries for such period before provision for income taxes; plus           (b) The sum (to the extent deducted in calculating net income or loss in clause (a) above) of (i) all Interest Expenses of Borrower and its Subsidiaries for such period, (ii) all depreciation and amortization expenses of Borrower and its Subsidiaries for such period, and (iii) all non-cash charges taken by Borrower and its Subsidiaries during such period for in-process research and development.             “Eligible Assignee” shall mean a Person that is a commercial bank or another financial institution which is a qualified institutional buyer as defined in Rule 144A under the Securities Act of 1933, as amended; provided that (i) such Person has a combined capital and surplus of at least $100,000,000 and (ii) such Person is acting through a branch, agency or office located in the United States.           “Employee Benefit Plan” shall mean any employee benefit plan within the meaning of section 3(3) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate, other than a Multiemployer Plan.           “Environmental Laws” shall mean the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980 (including the Superfund Amendments and Reauthorization Act of 1986, “CERCLA”), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651; the 6 -------------------------------------------------------------------------------- Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all other Governmental Rules relating to the protection of human health and the environment, including all Governmental Rules pertaining to the reporting, licensing, permitting, transportation, storage, disposal, investigation or remediation of emissions, discharges, releases, or threatened releases of Hazardous Materials into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation or handling of Hazardous Materials.           “Equity Securities” of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire or sell any of the foregoing.           “ERISA” shall mean the Employee Retirement Income Security Act of 1974. “ERISA Affiliate” shall mean any Person which is treated as a single employer with Borrower under Section 414 of the IRC.           “Extension Request” shall have the meaning given to that term in Subparagraph 2.02(a).           “Euro-Dollar Lending Office” shall mean, with respect to any Lender, (a) initially, its office designated as such in Schedule I (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Subparagraph 8.05(c), its office designated as such in the applicable Assignment Agreement) and (b) subsequently, such other office or offices as such Lender may designate to Administrative Agent as the office at which such Lender’s LIBOR Loans and LIBOR Portions will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender’s LIBOR Loans and LIBOR Portions will thereafter be made.           “Event of Default” shall have the meaning given to that term in Paragraph 6.01.           “Federal Funds Rate” shall mean, for any day, the rate per annum set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor publication, “H.15 (519)”) for such day opposite the caption “Federal Funds (Effective)”. If on any relevant day, such rate is not yet published in H.15 (519), the rate for such day shall be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the “Composite 3:30 p.m. Quotations”) for such day under the caption “Federal Funds Effective Rate”. If on any relevant day, such rate is not yet published in either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day shall be the arithmetic mean, as determined by Administrative Agent, of the rates quoted to Administrative Agent for such day by three 7 -------------------------------------------------------------------------------- (3) Federal funds brokers of recognized standing selected by Administrative Agent, and Administrative Agent shall promptly provide written evidence of such calculation to Borrower.           “Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve System.           “Financial Statements” shall mean, with respect to any accounting period for any Person, statements of income, shareholders’ equity and cash flows of such Person for such period, and a balance sheet of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding annual audit, all prepared in reasonable detail and in accordance with GAAP.           “Fixed Charge Coverage Ratio” shall mean, with respect to Borrower for any consecutive four-quarter period, the ratio, determined on a consolidated basis in accordance with GAAP, of:           (a) The sum of (i) the net income of Borrower and its Subsidiaries for such period, plus (ii) to the extent deducted in calculating such net income, (A) all Interest Expenses of Borrower and its Subsidiaries for such period, (B) all income tax expenses of Borrower and its Subsidiaries for such period, (C) all rental expenses of Borrower and its Subsidiaries for such period, (D) all non-cash charges taken by Borrower and its Subsidiaries during such period for in-process research and development, and (E) all amortization charges for goodwill taken by Borrower and its Subsidiaries during such period; to           (b) The sum of (i) all Interest Expenses of Borrower and its Subsidiaries for such period, plus (ii) all rental expenses of Borrower and its Subsidiaries for such period, plus (iii) the current portion of all long-term Indebtedness of Borrower and its Subsidiaries appearing on the consolidated balance sheet of Borrower and its Subsidiaries on the last day of such period, plus without duplication, (iv) twenty percent (20%) of all off-balance sheet Indebtedness of Borrower and its Subsidiaries on the last day of such period; provided, however, that any Indebtedness under or with respect to currency exchange Rate Contracts shall be excluded for purposes of the calculation under this subparagraph (b).           “Foreign Plan” shall mean any employee benefit plan maintained by Borrower or any of its Subsidiaries which is mandated or governed by any Governmental Rule of any Governmental Authority other than the United States. 8 --------------------------------------------------------------------------------           “GAAP” shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time, consistently applied.           “Governmental Authority” shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller of the Currency, any central bank or any comparable authority.           “Governmental Charges” shall mean, with respect to any Person, all levies, assessments, fees, claims or other charges imposed by any Governmental Authority upon such Person or any of its property or otherwise payable by such Person.           “Governmental Rule” shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority which is made publicly available.           “Granting Lender” shall have the meaning given to that term in Subparagraph 8.05(d).           “Guaranty Obligation” shall mean, with respect to any Person, any direct or indirect liability of that Person with respect to any indebtedness, lease, dividend, letter of credit or other obligation (the “primary obligations”) of another Person (the “primary obligor”), including any obligation of that Person, 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 primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof.           “Hazardous Materials” shall mean all pollutants, contaminants and other materials, substances and wastes which are hazardous, toxic, caustic, harmful or dangerous to human health or the environment, including petroleum and petroleum products and byproducts, radioactive materials, asbestos, polychlorinated biphenyls and all materials, substances and wastes which are classified or regulated as “hazardous,” “toxic” or similar descriptions under any Environmental Law.           “Indebtedness” of any Person shall mean, without duplication: 9 --------------------------------------------------------------------------------           (a) All obligations of such Person evidenced by notes, bonds, debentures or other similar instruments and all other obligations of such Person for borrowed money (including obligations to repurchase receivables and other assets sold with recourse);           (b) All obligations of such Person for the deferred purchase price of property or services (including obligations under letters of credit and other credit facilities which secure or finance such purchase price and obligations under “synthetic” leases);           (c) All obligations of such Person under conditional sale or other title retention agreements with respect to property acquired by such Person (to the extent of the value of such property if the rights and remedies of the seller or lender under such agreement in the event of default are limited solely to repossession or sale of such property);           (d) All obligations of such Person as lessee under or with respect to Capital Leases;           (e) All non-contingent payment or reimbursement obligations of such Person under or with respect to Surety Instruments;           (f) All net obligations of such Person, contingent or otherwise, under or with respect to Rate Contracts;           (g) All Guaranty Obligations of such Person with respect to the obligations of other Persons of the types described in clauses (a) - (f) above and all other Contingent Obligations of such Person; and           (h) All obligations of other Persons of the types described in clauses (a) - (f) above to the extent secured by (or for which any holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien in any property (including accounts and contract rights) of such Person, even though such Person has not assumed or become liable for the payment of such obligations.           “Interest Expenses” shall mean, with respect to any Person for any period, the sum, determined on a consolidated basis in accordance with GAAP, of (a) all interest on the Indebtedness of such Person paid or accrued during such period (including interest attributable to Capital Leases) plus (b) all fees in respect of outstanding letters of credit paid or accrued by such Person during such period.           “Interest Period” shall mean, with respect to any LIBOR Loan or LIBOR Portion, the time period selected by Borrower pursuant to Subparagraph 2.01(b), Subparagraph 2.03(b) or Subparagraph 2.04(c) which commences on the first day of such Loan or Portion or the effective date of any conversion and ends on the last day of such time period, and thereafter, each subsequent time period selected by Borrower pursuant to 10 -------------------------------------------------------------------------------- Subparagraph 2.04(b) which commences on the last day of the immediately preceding time period and ends on the last day of that time period.           “Investment” of any Person shall mean any loan or advance of funds by such Person to any other Person (other than advances to employees of such Person for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business), any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person, any capital contribution by such Person to or any other investment by such Person in any other Person (including any Guaranty Obligations of such Person and any indebtedness of such Person of the type described in clause (h) of the definition of “Indebtedness” on behalf of any other Person); provided, however, that Investments shall not include (a) accounts receivable or other indebtedness owed by customers of such Person which are current assets and arose from sales of inventory in the ordinary course of such Person’s business, (b) prepaid expenses of such Person incurred and prepaid in the ordinary course of business, or (c) acquisitions of Equity Securities subject to Subparagraph 5.02(d).           “IRC” shall mean the Internal Revenue Code of 1986.           “Lenders” shall have the meaning given to that term in clause (2) of the introductory paragraph hereof.           “LIBO Rate” shall mean, with respect to any Interest Period for the LIBOR Loans in any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of the Term Loan Borrowing, a rate per annum equal to the quotient (rounded upward if necessary to the nearest 1/100 of one percent) of:           (a) As elected by Borrower, either:           (i) The arithmetic mean (rounded upward if necessary to the nearest 1/16 of one percent) of the rates per annum appearing on Telerate Page 3750 (or any successor publication) on the second Business Day prior to the first day of such Interest Period at or about 11:00 A.M. (London time) (for delivery on the first day of such Interest Period) for a term comparable to such Interest Period (the “Telerate Page Rate”); or           (ii) The arithmetic mean (rounded upward if necessary to the nearest 1/16 of one percent) of the rates per annum at which Dollar deposits are offered to each of the Reference Banks in the London interbank market on the second Business Day prior to the first day of such Interest Period at or about 11:00 A.M. (London time) (for delivery on the first day of such Interest Period) in an amount substantially equal to such Reference Bank’s LIBOR Loan or LIBOR Portion in such Borrowing and for a term comparable to such Interest Period (the “Reference Bank Rate”); 11 -------------------------------------------------------------------------------- divided by           (b) One minus the Reserve Requirement for such Loans or Portion in effect from time to time. If, for any reason, any Reference Banks do not provide Administrative Agent with rates pursuant to clause (a)(ii) after Borrower elects the Reference Bank Rate to determine the LIBO Rate for any Interest Period, Administrative Agent shall calculate the Reference Bank Rate for such Interest Period based upon the rate or rates provided by the other Reference Banks or Reference Bank; provided, however, that, if no Reference Bank provides Administrative Agent with such a rate, Administrative Agent shall determine the LIBO Rate for such Interest Period based upon the Telerate Page Rate. If, for any reason, the Telerate Page Rate is not available after Borrower elects the Telerate Page Rate to determine the LIBO Rate for any Interest Period, Administrative Agent shall determine the LIBO Rate for such Interest Period based upon the Reference Bank Rate. The LIBO Rate shall be adjusted automatically as to all LIBOR Loans and LIBOR Portions then outstanding as of the effective date of any change in the Reserve Requirement.           “LIBOR Loan” shall mean, at any time, a Revolving Loan which then bears interest as provided in clause (ii) of Subparagraph 2.04(a). “LIBOR Portion” shall mean, at any time, a Portion of the Term Loan Borrowing or a Term Loan, as the case may be, which then bears interest as provided in clause (ii) of Subparagraph 2.04(a).           “Lien” shall mean, with respect to any property, any security interest, mortgage, pledge, lien, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, Capital Lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction other than filings made for notice purposes only in connection with true leases (which would not include “synthetic” leases).           “Loan” shall mean a Revolving Loan or a Term Loan.           “Loan Account” shall have the meaning given to that term in Subparagraph 2.10(a).           “Majority Lenders” shall mean at any time, Lenders whose Proportionate Shares then exceed fifty percent (50%), except at any time any Lender is a Defaulting Lender. (For the purposes of determining “Majority Lenders” at any time any Lender is a Defaulting Lender, the “Proportionate Shares” of non-defaulting Lenders shall be determined excluding from the Total Commitment and the aggregate principal amount of all Term Loans the aggregate amounts of the Defaulting Lenders’ Commitments and 12 -------------------------------------------------------------------------------- Term Loans; and “Majority Lenders” shall mean non-defaulting Lenders whose Proportionate Shares as so determined then exceed fifty percent (50%).)           “Margin Stock” shall have the meaning given to that term in Regulation U issued by the Federal Reserve Board.           “Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, operations or financial condition of Borrower and its Subsidiaries, taken as a whole; (b) the ability of Borrower to pay or perform the Obligations in accordance with the terms of this Agreement and the other Credit Documents; or (c) practical realization of the material rights and remedies of Administrative Agent or any Lender intended to be provided under this Agreement and the other Credit Documents.           “Material Subsidiary” shall mean any Subsidiary that had revenues during the immediately preceding fiscal year equal to or greater than five percent (5%) of the consolidated gross revenues of Borrower and its Subsidiaries during such year.           “Maturity” shall mean, with respect to any Loan, interest, fee or other amount payable by Borrower under this Agreement or the other Credit Documents, the date such Loan, interest, fee or other amount becomes due, whether upon the stated maturity or due date, upon acceleration or otherwise.           “Maturity Date” shall mean (a) with respect to the Revolving Loans, the Revolving Loan Maturity Date and (b) with respect to the Term Loans, the Term Loan Maturity Date.           “Multiemployer Plan” shall mean any multiemployer plan within the meaning of section 3(37) of ERISA maintained or contributed to by Borrower or any ERISA Affiliate.           “New Lender” shall have the meaning given to that term in Subparagraph 2.06(a).           “New Lender Joinder” shall have the meaning given to that term in Subparagraph 2.06(a).           “Net Proceeds” shall mean, with respect to any sale or issuance of any Equity Security or any other security by any Person, the aggregate consideration received by such Person from such sale or issuance less the sum of the actual amount of the reasonable fees and commissions payable to Persons other than such Person or any Affiliate of such Person, the reasonable legal expenses and the other reasonable costs and expenses directly related to such sale or issuance that are to be paid by such Person.           “Net Share Repurchases” shall mean, with respect to Borrower for any period, the remainder, calculated on a consolidated basis, of (a) the aggregate consideration paid by Borrower and its Subsidiaries during such period (including Indebtedness incurred) to purchase, redeem, retire, defease or otherwise acquire Equity Securities of Borrower and its Subsidiaries minus (b) the aggregate Net Proceeds received by Borrower and its 13 -------------------------------------------------------------------------------- Subsidiaries during such period for Equity Securities issued by Borrower and its Subsidiaries; provided, that (i) capital stock of Borrower and its Subsidiaries issued in exchange for other capital stock of Borrower and its Subsidiaries as permitted by clause (i) of Subparagraph 5.02(f) shall be excluded for purposes of calculating clauses (a) and (b) above, (ii) repurchases of capital stock from employees of Borrower or its Subsidiaries as permitted by clause (iv) of Subparagraph 5.02(f) shall be excluded for purposes of calculating clause (a) above, and (iii) Equity Securities issued in connection with acquisitions permitted by Subparagraph 5.02(d) shall be excluded for purposes of calculating clause (b) above.           “Net Worth” shall mean, with respect to Borrower at any time, the remainder at such time, determined on a consolidated basis in accordance with GAAP, of (a) the total assets of Borrower and its Subsidiaries at such time, minus (b) the sum (without limitation and without duplication of deductions) of the total liabilities of Borrower and its Subsidiaries at such time and all reserves of Borrower and its Subsidiaries at such time for anticipated losses and expenses (to the extent not deducted in calculating total assets in clause (a) above).           “Note” shall mean a Revolving Loan Note or a Term Loan Note.           “Notice of Borrowing” shall mean a Notice of Revolving Loan Borrowing or the Notice of Term Loan Borrowing.           “Notice of Term Loan Borrowing” shall have the meaning given to that term in Subparagraph 2.03(b).           “Notice of Interest Period Selection” shall have the meaning given to that term in Subparagraph 2.04(b).           “Notice of Revolving Loan Borrowing” shall have the meaning given to that term in Subparagraph 2.01(b).           “Notice of Term Loan Conversion” shall have the meaning given to that term in Subparagraph 2.04(c).           “Obligations” shall mean and include, with respect to Borrower, all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by Borrower to Administrative Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of this Agreement or any of the other Credit Documents, including without limitation all interest, fees, charges, expenses, attorneys’ fees and accountants’ fees chargeable to Borrower or payable by Borrower hereunder or thereunder.           “Participant” shall have the meaning given to that term in Subparagraph 8.05(b). 14 --------------------------------------------------------------------------------           “PBGC” shall mean the Pension Benefit Guaranty Corporation. “Permitted Indebtedness” shall have the meaning given to that term in Subparagraph 5.02(a).           “Permitted Liens” shall have the meaning given to that term in Subparagraph 5.02(b).           “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, an unincorporated association, a limited liability company, a joint venture, a trust or other entity or a Governmental Authority.           “Portion” shall mean a portion of the principal amount of the Term Loan Borrowing or a Term Loan. The Term Loan Borrowing shall consist of one or more Portions, and each Term Loan comprising the Term Loan Borrowing shall consist of the same number of Portions, with each such Term Loan Portion corresponding pro rata to a Term Loan Borrowing Portion. Any reference to a Portion of the Term Loan Borrowing shall include the corresponding Portion of each Term Loan comprising the Term Loan Borrowing.           “Pricing Grid” shall mean Schedule II.           “Pricing Period” shall mean (a) the period commencing on the date of this Agreement and ending on September 30, 2000, (b) the three-calendar month period commencing October 1, 2000 and ending December 31, 2000 and (c) each consecutive three-calendar month period thereafter which commences on the day following the last day of the immediately preceding three-calendar month period and ends on the last day of that time period.           “Prime Rate” shall mean the per annum rate publicly announced by ABN AMRO from time to time at its Chicago Office. The Prime Rate is determined by ABN AMRO from time to time as a means of pricing credit extensions to some customers and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by ABN AMRO at any given time for any particular class of customers or credit extensions. Any change in the Base Rate resulting from a change in the Prime Rate shall become effective on the Business Day on which each change in the Prime Rate occurs.           “Proportionate Share” shall mean:           (a) With respect to any Lender at any time prior to the termination of the Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) such Lender’s Commitment at such time to (ii) the Total Commitment at such time; and 15 --------------------------------------------------------------------------------           (b) With respect to any Lender at any time after the termination of the Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of all of such Lender’s Loans outstanding at such time to (ii) the aggregate principal amount of all Lenders’ Loans outstanding at such time.           “Quick Ratio” shall mean, with respect to Borrower and its Subsidiaries at any time, the ratio, determined on a consolidated basis in accordance with GAAP, of:           (a) The sum at such time, to the extent unencumbered and unrestricted, of all (i) cash of Borrower and its Subsidiaries; (ii) cash equivalents of Borrower and its Subsidiaries; (iii) short-term investments of Borrower and its Subsidiaries which comply with the investment policy of Borrower meeting the requirements of clause (i) of Subparagraph 5.02(e) and (iv) accounts receivable of Borrower and its Subsidiaries, net of appropriate loss and other reserves therefor; to           (b) The sum at such time of all (i) current liabilities of Borrower and its Subsidiaries (including the current portion of all Loans hereunder); and (ii) to the extent not included in such current liabilities under the preceding clause (i), the current portion of all Indebtedness of the types described in clauses (a) – (d) of the definition of “Indebtedness”.           “Rate Contracts” shall mean swap agreements (as that term is defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates.           “Reference Bank Rate” shall have the meaning given to that term in clause (a)(ii) of the definition of “LIBO Rate” in Paragraph 1.01.           “Reference Banks” shall mean ABN AMRO, Bank of Montreal and Fleet National Bank.           “Register” shall have the meaning given to that term in Subparagraph 8.05(e). “Reportable Event” shall have the meaning given to that term in ERISA and applicable regulations thereunder.           “Required Lenders” shall mean, at any time, Lenders whose Proportionate Shares then equal or exceed sixty-six and two-thirds percent (66 2/3%), except at any time any Lender is a Defaulting Lender. (For the purposes of determining “Required Lenders” at any time any Lender is a Defaulting Lender, the “Proportionate Shares” of non-defaulting Lenders shall be determined excluding from the Total Commitment and the aggregate principal amount of all Term Loans the aggregate amounts of the Defaulting Lenders’ Commitments and Term Loans; and “Required Lenders” shall mean non-defaulting 16 -------------------------------------------------------------------------------- Lenders whose Proportionate Shares as so determined then equal or exceed sixty-six and two-thirds percent (66 2/3%).)           “Requirement of Law” applicable to any Person shall mean (a) the Articles or Certificate of Incorporation and By-laws, Partnership Agreement or other organizational or governing documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person or (d) any judgment, decision or determination of any Governmental Authority or arbitrator, 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.           “Reserve Requirement” shall mean, with respect to any day in an Interest Period for a LIBOR Loan or LIBOR Portion, the aggregate of the reserve requirement rates (expressed as a decimal) in effect on such day for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D of the Federal Reserve Board) maintained by a member bank of the Federal Reserve System. As used herein, the term “reserve requirement” shall include, without limitation, any basic, supplemental or emergency reserve requirements imposed on any Lender by any Governmental Authority. “Revolving Loan” shall have the meaning given to that term in Subparagraph 2.01(a).           “Revolving Loan Borrowing” shall mean a borrowing by Borrower consisting of the Revolving Loans made by each of the Lenders on the same date and of the same Type pursuant to a single Notice of Revolving Loan Borrowing.           “Revolving Loan Maturity Date” shall mean the date 364 days after the date of this Agreement (or, if extended pursuant to Paragraph 2.02, the date to which so extended).           “Revolving Loan Note” shall have the meaning given to that term in Subparagraph 2.10(b).           “Solvent” shall mean, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including contingent, subordinated, matured and unliquidated liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature and (d) such Person is not engaged in or about to engage in business or transactions for which such Person’s property would constitute an unreasonably small capital.           “SPC” shall have the meaning given to that term in Subparagraph 8.05(d). 17 --------------------------------------------------------------------------------           “Subsidiary” of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person’s other Subsidiaries or (c) any other Person whose results of operations are included in the Financial Statements of such Person on a consolidated basis.           “Surety Instruments” shall mean all letters of credit (including standby and commercial), banker’s acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.           “Taxes” shall have the meaning given to such term in Subparagraph 2.14(a).           “Telerate Page Rate” shall have the meaning given to that term in clause (a)(i) of the definition of “LIBO Rate” in Paragraph 1.01.           “Term Loan” shall have the meaning given to that term in Subparagraph 2.03(a).           “Term Loan Borrowing” shall mean the borrowing by Borrower consisting of the Term Loans made by each of the Lenders on the Revolving Loan Maturity Date pursuant to the Notice of Term Loan Borrowing.           “Term Loan Maturity Date” shall mean the date two years after the Revolving Loan Maturity Date.           “Term Loan Note” shall have the meaning given to that term in Subparagraph 2.10(c).           “Total Commitment” shall mean, at any time, the sum at such time of the Lenders’ Commitments.           “Type” shall mean, with respect to any Loan, Borrowing or Portion at any time, the classification of such Loan, Borrowing or Portion by the type of interest rate it then bears, whether an interest rate based upon the Base Rate or the LIBO Rate.           “Unused” shall mean. with respect to the Commitments at any time, the remainder of (i) the Total Commitment at such time minus (ii) the aggregate principal amount of all Revolving Loans outstanding at such time. 18 --------------------------------------------------------------------------------           “VC Partnership” shall have the meaning given to that term in Subparagraph 5.02(e).           1.02. GAAP. Unless otherwise indicated in this Agreement or any other Credit Document, all accounting terms used in this Agreement or any other Credit Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrower, Lenders and Administrative Agent agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower’s financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrower, Lenders and Administrative Agent so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change.           1.03. Headings. Headings in this Agreement and each of the other Credit Documents are for convenience of reference only and are not part of the substance hereof or thereof.           1.04. Plural Terms. All terms defined in this Agreement or any other Credit Document in the singular form shall have comparable meanings when used in the plural form and vice versa.           1.05. Time. All references in this Agreement and each of the other Credit Documents to a time of day shall mean San Francisco, California time, unless otherwise indicated.           1.06. Governing Law. Unless otherwise expressly provided in any Credit Document, this Agreement and each of the other Credit Documents shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules.           1.07. Construction. This Agreement is the result of negotiations among, and has been reviewed by, Borrower, each Lender, Administrative Agent and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against Borrower, any Lender or Administrative Agent.           1.08. Entire Agreement. This Agreement and each of the other Credit Documents, taken together, constitute and contain the entire agreement of Borrower, Lenders and Administrative Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof (excluding the Administrative Agent’s Fee Letter).           1.09. Calculation of Interest and Fees. All calculations of interest and fees under this Agreement and the other Credit Documents for any period (a) shall include the first day of such period and exclude the last day of such period and (b) shall be calculated on the basis of a year of 360 days for actual days elapsed, except that during any period any Loan or Portion bears interest 19 -------------------------------------------------------------------------------- based upon the Prime Rate, such interest shall be calculated on the basis of a year of 365 or 366 days, as appropriate, for actual days elapsed.           1.10. References.           (a) References in this Agreement to “Recitals,” “Sections,” “Paragraphs,” “Subparagraphs,” “Exhibits” and “Schedules” are to recitals, sections, paragraphs, subparagraphs, exhibits and schedules therein and thereto unless otherwise indicated.           (b) References in this Agreement or any other Credit Document to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include all documents, instruments or agreements issued or executed in replacement thereof if such replacement is permitted hereby, and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time if such amendment, modification or supplement is permitted hereby.           (c) References in this Agreement or any other Credit Document to any Governmental Rule (i) shall include any successor Governmental Rule, (ii) shall include all rules and regulations promulgated under such Governmental Rule (or any successor Governmental Rule), and (iii) shall mean such Governmental Rule (or successor Governmental Rule) and such rules and regulations, as amended, modified, codified or reenacted from time to time and in effect at any given time.           (d) References in this Agreement or any other Credit Document to any Person in a particular capacity (i) shall include any permitted successors to and assigns of such Person in that capacity and (ii) shall exclude such Person individually or in any other capacity.           1.11. Other Interpretive Provisions. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement or any other Credit Document shall refer to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Credit Document, as the case may be. The words “include” and “including” and words of similar import when used in this Agreement or any other Credit Document shall not be construed to be limiting or exclusive. In the event of any inconsistency between the terms of this Agreement and the terms of any other Credit Document, the terms of this Agreement shall govern. SECTION II.     CREDIT FACILITIES.           2.01. Revolving Loans.           (a) Availability. Subject to the terms and conditions of this Agreement, each Lender severally agrees to advance to Borrower from time to time during the period beginning on the date of this Agreement and ending on the Revolving Loan Maturity Date 20 -------------------------------------------------------------------------------- such revolving loans as Borrower may request (individually, a “Revolving Loan”); provided, however, that:           (i) The aggregate principal amount of all Revolving Loans made by each Lender at any time outstanding shall not exceed such Lender’s Commitment at such time; and           (ii) The aggregate principal amount of all Revolving Loans made by all Lenders at any time outstanding shall not exceed the Total Commitment at such time. All Revolving Loans shall be made on a pro rata basis by Lenders in accordance with their respective Proportionate Shares, with each Revolving Loan Borrowing to be comprised of a Revolving Loan by each Lender equal to such Lender’s Proportionate Share of such Borrowing. Except as otherwise provided herein, Borrower may borrow, repay and reborrow Revolving Loans until the Revolving Loan Maturity Date.           (b) Notice of Revolving Loan Borrowing. Borrower shall request each Revolving Loan Borrowing by delivering to Administrative Agent an irrevocable written notice in the form of Exhibit A, appropriately completed (a “Notice of Revolving Loan Borrowing”), which specifies, among other things:           (i) The principal amount of the requested Revolving Loan Borrowing, which shall be in the amount of (A) $1,000,000 or an integral multiple of $100,000 in excess thereof in the case of a Borrowing consisting of Base Rate Loans; or (B) $2,500,000 or an integral multiple of $500,000 in excess thereof in the case of a Borrowing consisting of LIBOR Loans;           (ii) Whether the requested Revolving Loan Borrowing is to consist of Base Rate Loans or LIBOR Loans;           (iii) If the requested Revolving Loan Borrowing is to consist of LIBOR Loans, the initial Interest Period selected by Borrower for such LIBOR Loans in accordance with Subparagraph 2.04(b);           (iv) If the requested Revolving Loan Borrowing is to consist of LIBOR Loans, whether the initial LIBO Rate is to be based upon the Telerate Page Rate or the Reference Bank Rate; and           (v) The date of the requested Revolving Loan Borrowing, which shall be a Business Day;  Borrower shall give each Notice of Revolving Loan Borrowing to Administrative Agent at least three (3) Business Days before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing consisting of LIBOR Loans and at least one (1) Business Day before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing consisting of Base Rate Loans. Each Notice of 21 -------------------------------------------------------------------------------- Revolving Loan Borrowing shall be delivered by first-class mail or facsimile to Administrative Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that (A) Borrower shall promptly deliver to Administrative Agent the original of any Notice of Revolving Loan Borrowing initially delivered by facsimile and (B) in the case of any outstanding Revolving Loan Borrowing which is being rolled over in the same principal amount, Borrower may deliver such Notice of Revolving Loan Borrowing electronically, with a digital signature, to the email address of Administrative Agent. Administrative Agent shall promptly notify each Lender of the contents of each Notice of Revolving Loan Borrowing.           (c) Repayment. Unless Borrower converts all Revolving Loans outstanding on the Revolving Loan Maturity Date into term loans pursuant to Paragraph 2.03, Borrower shall repay the outstanding principal amount of all Revolving Loans on such date.           2.02. Extension of Revolving Loan Maturity Date.           (a) Extension Requests. Borrower may request Lenders to extend the Revolving Loan Maturity Date for additional 364-day periods. Borrower shall request each such extension by appropriately completing, executing and delivering to Administrative Agent a written request in the form of Exhibit B (an “Extension Request”) on or before the last Business Day which is sixty (60) days prior to the Revolving Loan Maturity Date. The Extension Request shall be given to Administrative Agent by first-class mail or facsimile to the office or the facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrower shall promptly deliver to Administrative Agent the original of the Extension Request if initially delivered by facsimile. Administrative Agent shall promptly deliver to each Lender three (3) copies of any Extension Request received by Administrative Agent.           (b) Lender Approval. Borrower understands that this Paragraph 2.02 is included in this Agreement for Borrower’s convenience in requesting extensions and acknowledges that neither Administrative Agent nor any Lender has promised (either expressly or implicitly), or has any obligation or commitment, to extend the Revolving Loan Maturity Date at any time. If a Lender, in its sole and absolute discretion, consents to an Extension Request, such Lender shall evidence such consent by executing and returning two (2) copies of the Extension Request to Administrative Agent not later than the last Business Day which is thirty (30) days prior to the Revolving Loan Maturity Date. Any such consent given by a Lender shall be deemed irrevocable on the date that occurs thirty (30) days prior to the existing Revolving Loan Maturity Date. Any failure by any Lender so to execute and return an Extension Request shall be deemed a denial thereof.           (c) Notice of Lender Action. If Borrower delivers an Extension Request to Administrative Agent pursuant to Subparagraph 2.02(a), then not later than the last Business Day which is twenty-five (25) days prior to the Revolving Loan Maturity Date, Administrative Agent shall notify Borrower and each Lender in writing of (i) the Lenders that have consented to such Extension Request by returning to Administrative Agent 22 -------------------------------------------------------------------------------- executed copies of such Extension Request and (ii) the Lenders that have not. Administrative Agent shall deliver to Borrower with any such notice, a copy of each executed Extension Request returned to Administrative Agent by a Lender. (d) Effect of Lender Action.            (i) If all Lenders consent to an Extension Request pursuant to Subparagraph 2.02(b), this Agreement shall be deemed amended as provided in clause (iv) below and each such Lender shall remain a Lender under this Agreement (as so amended).           (ii) If none of the Lenders consent to an Extension Request, the Revolving Loan Maturity Date shall remain unchanged.           (iii) If some but not all of the Lenders consent to an Extension Request,            (A) Borrower shall pay to each applicable non-consenting Lender, on the existing Revolving Loan Maturity Date, all amounts payable to such Lender on such date, and            (B) Subject to such payments, (1) each non-consenting Lender shall cease to be a Lender hereunder after such date, (2) this Agreement shall be deemed amended as provided in clause (iv) below, and (3) each consenting Lender shall remain a Lender under this Agreement (as so amended) after such date; Provided, however, that a non-consenting Lender may be replaced by an Assignee Lender as provided in Paragraph 2.16.           (iv) If all or some of Lenders consent to an Extension Request pursuant to Subparagraph 2.02(b), this Agreement shall be deemed amended on the existing Revolving Loan Maturity Date such that the date contained in the definition of “Revolving Maturity Date” shall be extended to a date 364 days from the existing Revolving Loan Maturity Date, effective as of the existing Revolving Loan Maturity Date.           2.03. Term Loans.           (a) Availability. Subject to the terms and conditions of this Agreement, each Lender severally agrees, if so requested by Borrower, to advance to Borrower on the Revolving Loan Maturity Date a term loan (individually, a “Term Loan”) by converting all Revolving Loans made by such Lender and outstanding on such date into a term loan; provided, however, that:            (i) The aggregate principal amount of the Term Loan made by each Lender shall not exceed such Lender’s Commitment on the Revolving Loan Maturity Date; and 23 --------------------------------------------------------------------------------           (ii) The aggregate principal amount of all Term Loans made by all Lenders shall not exceed the Total Commitment on the Revolving Loan Maturity Date. The Term Loans shall be made on a pro rata basis by Lenders in accordance with their respective Proportionate Shares, with the Term Loan Borrowing to be comprised of a Term Loan by each Lender equal to such Lender’s Proportionate Share of such Borrowing. Borrower may not reborrow the principal amount of a Term Loan after any prepayment or repayment thereof.           (b) Notice of Term Loan Borrowing. Borrower shall request the Term Loan Borrowing by delivering to Administrative Agent an irrevocable written notice in the form of Exhibit C, appropriately completed (the “Notice of Term Loan Borrowing”), which specifies, among other things:           (i) The principal amount of the Term Loan Borrowing;           (ii) (A) The principal portion of the Term Loan Borrowing which is to be a Base Rate Portion and (B) the principal portion(s) of the Term Loan Borrowing which is (are) to be a LIBOR Portion(s);           (iii) If any portion of the Term Loan Borrowing is initially to be a LIBOR Portion, the initial Interest Period selected by Borrower for each such LIBOR Portion in accordance with Subparagraph 2.04(b); and           (iv) If any portion of the Term Loan Borrowing is initially to be a LIBOR Portion, whether the initial LIBO Rate for such Portion is to be based upon the Telerate Page Rate or the Reference Bank Rate. Borrower shall give the Notice of Term Loan Borrowing to Administrative Agent at least five (5) Business Days before the Revolving Loan Maturity Date. The Notice of Term Loan Borrowing shall be delivered by first-class mail or facsimile to Administrative Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrower shall promptly deliver to Administrative Agent the original of the Notice of Term Loan Borrowing if initially delivered by facsimile. Administrative Agent shall promptly notify each Lender of the contents of the Notice of Term Loan Borrowing.           (c) Repayment. Borrower shall repay the principal amount of the Term Loans in full in a single installment payable on the Term Loan Maturity Date.           2.04. Interest.           (a) Interest Rates. Borrower shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until the Maturity thereof, at one of the following rates per annum: 24 --------------------------------------------------------------------------------           (i) During such periods as any Revolving Loan is a Base Rate Loan or any Portion of a Term Loan is a Base Rate Portion, at a rate per annum on such Loan or Portion equal to the Base Rate plus the Applicable Margin therefor, such rate to change from time to time as the Applicable Margin or Base Rate shall change; and           (ii) During such periods as any Revolving Loan is a LIBOR Loan or any Portion of a Term Loan is a LIBOR Portion, at a rate per annum on such Loan or Portion equal at all times during each Interest Period for such Loan or Portion to the LIBO Rate for such Interest Period plus the Applicable Margin therefor, such rate to change from time to time during such Interest Period as the Applicable Margin shall change. All Revolving Loans in each Revolving Loan Borrowing shall, at any given time prior to Maturity, bear interest at one, and only one, of the above rates. The number of Revolving Loan Borrowings consisting of LIBOR Loans shall not exceed five (5) at any time. Each Base Rate Portion of the Term Loan Borrowing shall be in a minimum amount of $1,000,000 or an integral multiple of $100,000 in excess thereof and each LIBOR Portion of the Term Loan Borrowing shall be in a minimum amount of $2,500,000 or an integral multiple of $500,000 in excess thereof. The number of LIBOR Portions of the Term Loan Borrowing shall not exceed five (5) at any time.           (b) LIBOR Loan and LIBOR Portion Interest Periods.            (i) The initial and each subsequent Interest Period selected by Borrower for a Revolving Loan Borrowing consisting of LIBOR Loans or a LIBOR Portion of the Term Loan Borrowing shall be one (1), two (2), three (3), six (6), nine (9) or twelve (12) months; provided, however, that (A) any Interest Period that would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such next Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (C) no Interest Period shall end after the applicable Maturity Date.           (ii) Borrower shall notify Administrative Agent by an irrevocable written notice in the form of Exhibit D, appropriately completed (a “Notice of Interest Period Selection”), at least three (3) Business Days prior to the last day of each Interest Period for a Revolving Loan Borrowing consisting of LIBOR Loans or a LIBOR Portion of the Term Loan Borrowing of the Interest Period selected by Borrower for the next succeeding Interest Period for such LIBOR Loans or LIBOR Portion and whether the LIBO Rate for such Interest Period is to be based upon the Telerate Page Rate or the Reference Bank Rate. Each Notice of Interest Period Selection shall be given by first-class mail or facsimile to the office or the 25 -------------------------------------------------------------------------------- facsimile number and during the hours specified in Paragraph 8.01; provided, however, that (A) Borrower shall promptly deliver to Administrative Agent the original of any Notice of Interest Period Selection initially delivered by facsimile and (B) in the case of any Notice of Interest Period Selection for any outstanding Revolving Loan Borrowing consisting of LIBOR Loans or any outstanding LIBOR Portion of the Term Loan Borrowing which is being rolled over in the same principal amount, Borrower may deliver such Notice of Interest Period Selection electronically, with a digital signature, to the email address of Administrative Agent. If Borrower fails to notify Administrative Agent of the next Interest Period for a Revolving Loan Borrowing consisting of LIBOR Loans or a LIBOR Portion of the Term Loan Borrowing in accordance with this Subparagraph 2.04(b), such LIBOR Loans or LIBOR Portion shall automatically convert to Base Rate Loans or a Base Rate Portion, as the case may be, on the last day of the current Interest Period therefor. If Borrower fails to notify Administrative Agent whether the LIBO Rate for any Interest Period is to be based upon the Telerate Page Rate or the Reference Bank Rate, the LIBO Rate for such Interest Period shall automatically be based upon the Telerate Page Rate.           (c) Conversion of Term Loan Portions. Borrower may convert any Portion of the Term Loan Borrowing from one Type of Portion into another Type; provided, however, that any conversion of a LIBOR Portion into a Base Rate Portion shall be made on, and only on, the last day of an Interest Period for such LIBOR Portion. Borrower shall request such a conversion by an irrevocable written notice to Administrative Agent in the form of Exhibit E, appropriately completed (a “Notice of Term Loan Conversion”), which specifies, among other things:           (i) The Portion of the Term Loan Borrowing which is to be converted;           (ii) The amount and Type of each Portion of the Term Loan Borrowing into which it is to be converted;           (iii) If any Portion of the Term Loan Borrowing is to be converted into a LIBOR Portion, the initial Interest Period selected by Borrower for such Portion in accordance with Subparagraph 2.04(b);           (iv) If any Portion of the Term Loan Borrowing is to be converted into a LIBOR Portion, whether the initial LIBO Rate for such Portion is to be based upon the Telerate Page Rate or the Reference Bank Rate; and           (v) The date of the requested conversion, which shall be a Business Day. Borrower shall give each Notice of Term Loan Conversion to Administrative Agent at least three (3) Business Days before the date of the requested conversion. Each Notice of Term Loan Conversion shall be delivered by first-class mail or facsimile to Administrative Agent at the office or to the facsimile number and during the hours 26 -------------------------------------------------------------------------------- specified in Paragraph 8.01; provided, however, that (A) Borrower shall promptly deliver to Administrative Agent the original of any Notice of Term Loan Conversion initially delivered by facsimile and (B) in the case of any Notice of Term Loan Conversion for any outstanding Portion of the Term Loan Borrowing which is being rolled over into another Type of Portion in the same principal amount, Borrower may deliver such Notice of Term Loan Conversion electronically, with a digital signature, to the email address of Administrative Agent. Administrative Agent shall promptly notify each Lender of the contents of each Notice of Term Loan Conversion.           (d) Scheduled Interest Payments. Borrower shall pay accrued interest on the unpaid principal amount of each Loan in arrears (i) in the case of a Base Rate Loan or Base Rate Portion, on the first day in each January, April, July and October (commencing October 1, 2000), (ii) in the case of a LIBOR Loan or LIBOR Portion, on the last day of each Interest Period therefor (and, if any such Interest Period is longer than three (3) months, every three (3) months); and (iii) in the case of all Loans, upon prepayment (to the extent thereof) and at Maturity.            2.05. Purpose. Borrower shall use the proceeds of the Revolving Loans to repurchase shares of its common stock to the extent permitted hereby and for Borrower’s general corporate purposes. Borrower shall use the proceeds of the Term Loans solely to repay the Revolving Loans on the Revolving Loan Maturity Date.           2.06. Increases in Total Commitment, Commitment Reductions, Etc.           (a) Increase in Total Commitment. If no Default has occurred and is continuing, upon the written request of Borrower and with the consent of Administrative Agent, the Total Commitment may be increased by adding an additional Lender (a “New Lender”) or increasing the Commitment of an existing Lender; provided, however, that:           (i) The Total Commitment shall not be increased above $100,000,000 without the consent of all Lenders;           (ii) Any New Lender shall satisfy the requirements of an Assignee Lender and shall execute a joinder instrument substantially in the form of Exhibit F (a “New Lender Joinder”) and any increase in the Commitment of an existing Lender shall be evidenced by the written consent of such Lender substantially in the form of Exhibit G (a “Consent to Increase Commitment”). Five (5) counterparts of each New Lender Joinder or Consent to Increase Commitment shall be executed by the New Lender or existing Lender whose Commitment is being increased and delivered to Administrative Agent for its acceptance and recording in the Register. Each New Lender Joinder or Consent to Increase Commitment shall specify the Commitment amount of such New Lender or existing Lender and the date on which such Commitment of the New Lender or such increase in the Commitment of an existing Lender becomes effective (a “Commitment Effective Date”), which date shall be at least five (5) Business Days after the date counterparts of the New Lender Joinder or Consent to Increase 27 -------------------------------------------------------------------------------- Commitment are delivered to Administrative Agent unless Administrative Agent shall otherwise consent;           (iii) Upon receipt of any New Lender Joinder or Consent to Increase Commitment which is accepted by Administrative Agent for recording, Administrative Agent will give notice to Borrower and all Lenders (including any New Lender) of (y) the applicable Commitment Effective Date, and (z) if any Revolving Loan Borrowing is outstanding on such Commitment Effective Date, the aggregate amount of all Revolving Loans to be funded by the New Lender or the existing Lender whose Commitment is being increased on the Commitment Effective Date. If any Revolving Loan Borrowing is outstanding on a Commitment Effective Date, the applicable New Lender or existing Lender whose Commitment is being increased shall before 12:00 noon (San Francisco time) on such Commitment Effective Date make available to Administrative Agent at Administrative Agent’s office specified in Paragraph 8.01, in same day or immediately available funds, such New Lender’s applicable Proportionate Share of such Revolving Loan Borrowing or the difference between the principal amount of such existing Lender’s Revolving Loan which is part of such Revolving Loan Borrowing and its applicable Proportionate Share of such Revolving Loan Borrowing and Administrative Agent shall disburse such funds to the other Lenders in the amount necessary so that each Lender’s Revolving Loan which is part of such Revolving Loan Borrowing is equal to such Lender’s Proportionate Share of such Revolving Loan Borrowing. If such outstanding Revolving Loan Borrowing consists of LIBOR Loans, Borrower shall pay to each Lender receiving any prepayment of such LIBOR Loans on a date other than the last day of an Interest Period for such LIBOR Loans all amounts payable to such Lender under Paragraph 2.15;           (iv) Upon the Commitment Effective Date for any New Lender, such New Lender shall be a Lender hereunder with a Commitment and Loans in the amount set forth in the notice given by Administrative Agent pursuant to clause (iii) above and shall have the rights, duties and obligations of such a Lender under this Agreement and the other Credit Documents. Upon the Commitment Effective Date for any existing Lender whose Commitment is being increased, such Lender shall be a Lender with a Commitment and Loans in the amount set forth in the notice given by Administrative Agent pursuant to clause (iii) above. Each New Lender Joinder and Consent to Increase Commitment which is accepted and recorded by Administrative Agent shall be deemed to amend Schedule I to the extent, and only to the extent, necessary to reflect the addition of each New Lender and its Commitment, any increase in the Commitment of an existing Lender and the resulting adjustment of the Proportionate Shares arising from such changes in the Commitments;           (v) On or prior to any Commitment Effective Date, Borrower, at its own expense, shall execute and deliver to Administrative Agent a new Revolving Loan Note to the order of any New Lender or existing Lender whose Commitment 28 -------------------------------------------------------------------------------- is being increased (in exchange for the surrendered Revolving Loan Note, if any, of such existing Lender) that requests such Revolving Loan Note. Each such Revolving Loan Note shall be in an amount equal to the Commitment of such New Lender or existing Lender on such Commitment Effective Date and shall be dated the date of this Agreement. Any Revolving Loan Note surrendered by an existing Lender shall be returned by Administrative Agent to Borrower marked “replaced”; and           (vi) Each New Lender which is not incorporated in the United States of America or a state thereof shall, within three (3) Business Days of becoming a Lender, deliver to Borrower and Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or successor applicable form), as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes.           (b) Reduction or Termination of Commitments. Borrower may, upon five (5) Business Days written notice to Administrative Agent, permanently reduce the Total Commitment by the amount of Five Million Dollars ($5,000,000) or an integral multiple thereof or terminate the Total Commitment in its entirety; provided, however, that:           (i) Borrower may not reduce the Total Commitment prior to the Revolving Loan Maturity Date, if, after giving effect to such reduction, the aggregate principal amount of all Revolving Loans then outstanding would exceed the Total Commitment; and           (ii) Borrower may not terminate the Total Commitment prior to the Revolving Loan Maturity Date, if, after giving effect to such termination, any Revolving Loan would then remain outstanding. Unless sooner terminated pursuant to this Agreement, the Commitments shall terminate on the Revolving Loan Maturity Date.           (c) Effect of Commitment Increases or Reductions. From the effective date of any increase or reduction of the Total Commitment, the Commitment Fees payable pursuant to Subparagraph 2.07(b) shall be computed on the basis of the Total Commitment as so increased or reduced. Once reduced or cancelled by Borrower pursuant to Subparagraph 2.06(b), the Total Commitment may not be increased or reinstated without the prior written consent of all applicable Lenders. Any reduction of the Total Commitment pursuant to Subparagraph 2.06(b) shall be applied ratably to reduce each Lender’s Commitment in accordance with clause (i) of Subparagraph 2.12(a). 29 --------------------------------------------------------------------------------           2.07. Fees.           (a) Administrative Agent’s Fee. Borrower shall pay to Administrative Agent, for its own account, agent’s fees and other compensation in the amounts and at the times set forth in the Administrative Agent’s Fee Letter.           (b) Commitment Fees. Borrower shall pay to Administrative Agent for the ratable benefit of the Lenders as provided in clause (iv) of Subparagraph 2.12(a), commitment fees (the “Commitment Fees”) equal to the Commitment Fee Percentage of the daily average Unused amount of the Total Commitment for the period beginning on the date of this Agreement and ending on the Revolving Loan Maturity Date. Borrower shall pay the Commitment Fees in arrears on the first day in each January, April, July and October (commencing October 1, 2000) and on the Revolving Loan Maturity Date (or if the Total Commitment is cancelled on a date prior to the Revolving Loan Maturity, as the case may be, on such prior date).           2.08. Prepayments.           (a) Terms of all Prepayments. Upon the prepayment of any Loan (whether such prepayment is an optional prepayment under Subparagraph 2.08(b), a mandatory prepayment required by Subparagraph 2.08(c) or a mandatory prepayment required by any other provision of this Agreement or the other Credit Documents, including a prepayment upon acceleration), Borrower shall pay to the Lender that made such Loan (i) all accrued interest to the date of such prepayment on the amount prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan or of a LIBOR Portion on a day other than the last day of an Interest Period for such LIBOR Loan or such LIBOR Portion, all amounts payable to such Lender pursuant to Paragraph 2.15.           (b) Optional Prepayments. At its option, Borrower may, upon one (1) Business Day notice to Administrative Agent in the case of Base Rate Loans or Base Rate Portions or three (3) Business Days notice to Administrative Agent in the case of LIBOR Loans or LIBOR Portions, prepay the Loans in any Borrowing in part, in an aggregate principal amount of $2,500,000 or more, or in whole.           (c) Mandatory Prepayments. If, at any time, the aggregate principal amount of all Revolving Loans then outstanding exceeds the Total Commitment at such time, Borrower shall immediately prepay Revolving Loans in an aggregate principal amount equal to such excess.           (d) Application of Term Loan Prepayments. All Term Loan prepayments shall, to the extent possible, be first applied to prepay Base Rate Portions and then if any funds remain, to prepay LIBOR Portions.            2.09. Other Payment Terms.           (a) Place and Manner. Borrower shall make all payments due to each Lender or Administrative Agent hereunder by payments to Administrative Agent at 30 -------------------------------------------------------------------------------- Administrative Agent’s office located at the address specified in Paragraph 8.01, with each payment due to a Lender to be for the account of such Lender and such Lender’s Applicable Lending Office. Borrower shall make all payments hereunder in lawful money of the United States and in same day or immediately available funds not later than 12:00 noon (San Francisco time) on the date due. Administrative Agent shall promptly disburse to each Lender each payment received by Administrative Agent for the account of such Lender.           (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be.           (c) Late Payments. If any amount required to be paid by Borrower under this Agreement or the other Credit Documents (including principal or interest payable on any Loan, any fee or other amount) remains unpaid after such amount is due, Borrower shall pay interest on the aggregate, outstanding balance of such amount from the date due until such amount is paid in full at a per annum rate equal to the Base Rate plus two percent (2.00%) per annum, such rate to change from time to time as the Base Rate shall change.           (d) Application of Payments. All payments hereunder shall be applied first to unpaid fees, costs and expenses then due and payable under this Agreement or the other Credit Documents, second to accrued interest then due and payable under this Agreement or the other Credit Documents and finally to reduce the principal amount of outstanding Loans.           (e) Failure to Pay Administrative Agent. Unless Administrative Agent shall have received notice from Borrower at least one (1) Business Day prior to the date on which any payment is due to Lenders hereunder that Borrower will not make such payment in full, Administrative Agent shall be entitled to assume that Borrower has made or will make such payment in full to Administrative Agent on such date and Administrative Agent may, in reliance upon such assumption, cause to be paid to Lenders on such due date an amount equal to the amount then due such Lenders. If and to the extent Borrower shall not have so made such payment in full to Administrative Agent, each such Lender shall repay to Administrative Agent forthwith on demand such portion of the amount distributed to such Lender as was not received from Borrower together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays the amount required to be returned to Administrative Agent, at a per annum rate equal to (i) the Federal Funds Rate for the first three (3) days and (ii) the rate applicable to Base Rate Loans thereafter. A certificate of Administrative Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.09(e) shall constitute prima facie evidence of such amount.           2.10. Loan Accounts; Notes. 31 --------------------------------------------------------------------------------           (a) Loan Accounts. The obligation of Borrower to repay the Loans made to it by each Lender and to pay interest thereon at the rates provided herein shall be evidenced by an account or accounts maintained by such Lender on its books (individually, a “Loan Account”), except that any Lender may request that its Loans be evidenced by a note or notes pursuant to Subparagraph 2.10(b) and Subparagraph 2.10(c). Each Lender shall record in its Loan Accounts (i) the date and amount of each Loan made by such Lender, (ii) the interest rates applicable to each such Loan and each Portion thereof and the effective dates of all changes thereto, (iii) the Interest Period for each LIBOR Loan and LIBOR Portion, (iv) the date and amount of each principal and interest payment on each Loan and Portion and (v) such other information as such Lender may determine is necessary for the computation of principal and interest payable to it by Borrower hereunder; provided, however, that any failure by a Lender to make, or any error by any Lender in making, any such notation shall not affect Borrower’s Obligations. The Loan Accounts shall constitute prima facie evidence of the matters noted therein.           (b) Revolving Loan Notes. If any Lender so requests, such Lender’s Revolving Loans shall be evidenced by promissory notes in the form of Exhibit H (individually, a “Revolving Loan Note”) which notes shall be (i) payable to the order of such Lender, (ii) in the amount of such Lender’s Commitment, (iii) dated the date of this Agreement and (iv) otherwise appropriately completed. Borrower authorizes each Lender to record on the schedule annexed to such Lender’s applicable Revolving Loan Note the date and amount of each Revolving Loan made by such Lender and of each payment or prepayment of principal thereon made by Borrower, and agrees that all such notations shall constitute prima facie evidence of the matters noted; provided, however, that any failure by a Lender to make, or any error by any Lender in making, any such notation shall not affect Borrower’s Obligations. Borrower further authorizes each Lender to attach to and make a part of such Lender’s Revolving Loan Notes continuations of the schedule attached thereto as necessary.           (c) Term Loan Notes. If any Lender so requests, such Lender’s Term Loan shall be evidenced by a promissory note in the form of Exhibit I (individually, a “Term Loan Note”) which note shall be (i) payable to the order of such Lender, (ii) in the amount of such Lender’s Term Loan, (iii) dated the Revolving Loan Maturity Date and (iv) otherwise appropriately completed. 32 --------------------------------------------------------------------------------           2.11. Loan Funding.           (a) Lender Funding and Disbursement to Borrower. Each Lender shall, before 12:00 noon (San Francisco time) on the date of each Borrowing, make available to Administrative Agent at Administrative Agent’s office specified in Paragraph 8.01, in same day or immediately available funds, such Lender’s applicable Proportionate Share of such Borrowing. After Administrative Agent’s receipt of such funds and upon satisfaction of the applicable conditions set forth in Section III, Administrative Agent shall promptly disburse such funds to Borrower in same day or immediately available funds. Administrative Agent shall disburse the proceeds of each Revolving Loan Borrowing by disbursement to the account or accounts specified in the applicable Notice of Borrowing. The proceeds of the Term Loan Borrowing shall be applied to repay the Revolving Loans and shall be disbursed directly to Lenders.           (b) Lender Failure to Fund. Unless Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to Administrative Agent such Lender’s applicable Proportionate Share of such Borrowing, Administrative Agent shall be entitled to assume that such Lender has made or will make such portion available to Administrative Agent on the date of such Borrowing in accordance with Subparagraph 2.11(a), and Administrative Agent may on such date, in reliance upon such assumption, disburse or otherwise credit to Borrower a corresponding amount. If any Lender does not make the amount of its applicable Proportionate Share of any Borrowing available to Administrative Agent on or prior to the date of such Borrowing, such Lender shall pay to Administrative Agent, on demand, interest which shall accrue on such amount from the date of such Borrowing until such amount is paid to Administrative Agent at rates equal to (i) the daily Federal Funds Rate during the period from the date of such Borrowing through the third Business Day thereafter and (ii) the rate applicable to Base Rate Loans thereafter. A certificate of Administrative Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.11(b) shall constitute prima facie evidence of such amount. If the amount of any Lender’s applicable Proportionate Share of any Borrowing is not paid to Administrative Agent by such Lender within three (3) Business Days after the date of such Borrowing, Borrower shall repay such amount to Administrative Agent, on demand, together with interest thereon, for each day from the date such amount was disbursed to Borrower until the date such amount is repaid to Administrative Agent, at the interest rate applicable at the time to the Loans comprising such Borrowing.           (c) Lenders’ Obligations Several. The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation hereunder to make its Loan as part of such Borrowing, but no Lender shall be obligated in any way to make any Loan which another Lender has failed or refused to make or otherwise be in any way responsible for the failure or refusal of any other Lender to make any Loan required to be made by such other Lender on the date of any Borrowing. 33 --------------------------------------------------------------------------------           2.12. Pro Rata Treatment.           (a) Borrowings, Commitment Reductions, Etc. Except as otherwise provided herein:           (i) Each Borrowing and reduction of the Total Commitment shall be made or shared among Lenders pro rata according to their respective Proportionate Shares;           (ii) Each payment of principal on Loans in any Borrowing shall be shared among Lenders pro rata according to the respective unpaid principal amounts of such Loans then owed to such Lenders;           (iii) Each payment of interest on Loans in any Borrowing shall be shared among Lenders pro rata according to (A) the respective unpaid principal amounts of such Loans made or funded by such Lenders and (B) the dates on which such Lenders so made or funded such Loans;           (iv) Each payment of Commitment Fees shall be shared among Lenders (except for Defaulting Lenders) pro rata according to (A) their respective Proportionate Shares and (B) in the case of each Lender which becomes a Lender hereunder after the date hereof, the date upon which such Lender so became a Lender;           (v) Each payment of interest (other than interest on Loans) shall be shared among Lenders and Administrative Agent owed the amount upon which such interest accrues pro rata according to (A) the respective amounts so owed such Lenders and Administrative Agent and (B) the dates on which such amounts became owing to such Lenders and Administrative Agent; and           (vi) All other payments under this Agreement and the other Credit Documents shall be for the benefit of the Person or Persons specified.           (b) Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of Loans owed to it in excess of its ratable share of payments on account of such Loans obtained by all Lenders entitled to such payments, such Lender shall forthwith purchase from the other Lenders such participations in the Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase shall be rescinded and each other Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such other Lender’s ratable share (according to the proportion of (i) the amount of such other Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Borrower 34 -------------------------------------------------------------------------------- agrees that any Lender so purchasing a participation from another Lender pursuant to this Subparagraph 2.12(b) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation.           2.13. Change of Circumstances.           (a) Inability to Determine Rates. If, on or before the first day of any Interest Period for any LIBOR Loan or LIBOR Portion, (i) any Lender shall advise Administrative Agent that the LIBO Rate for such Interest Period cannot be adequately and reasonably determined due to the unavailability of funds in or other circumstances affecting the London interbank market or (ii) Majority Lenders shall advise Administrative Agent that the rate of interest for such Loan or Portion, as the case may be, does not adequately and fairly reflect the cost to such Lenders of making or maintaining such LIBOR Loan or LIBOR Portion, Administrative Agent shall immediately give notice of such condition to Borrower and the other Lenders. After the giving of any such notice and until Administrative Agent shall otherwise notify Borrower that the circumstances giving rise to such condition no longer exist, Borrower’s right to request the making of, conversion to or a new Interest Period for LIBOR Loans or LIBOR Portions shall be suspended. Any LIBOR Loans or LIBOR Portions outstanding at the commencement of any such suspension shall be converted at the end of the then current Interest Period for such LIBOR Loans or LIBOR Portions into Base Rate Loans or Base Rate Portions, as the case may be, unless such suspension has then ended.           (b) Illegality. If, after the date of this Agreement, the adoption of any Governmental Rule, any change in any Governmental Rule or the application or requirements thereof (whether such change occurs in accordance with the terms of such Governmental Rule as enacted, as a result of amendment or otherwise), any change in the interpretation or administration of any Governmental Rule by any Governmental Authority, or compliance by any Lender with any request or directive (whether or not having the force of law) of any Governmental Authority (a “Change of Law”) shall make it unlawful or impossible for any Lender to make or maintain any LIBOR Loan or LIBOR Portion, such Lender shall immediately notify Administrative Agent and Borrower of such Change of Law. Upon receipt of such notice, (i) Borrower’s right to request the making of, conversion to or a new Interest Period for LIBOR Loans or LIBOR Portions shall be terminated, and Borrower shall, at the request of such Lender, (A) repay any outstanding LIBOR Loans or convert any outstanding LIBOR Portions into Base Rate Loans at the end of the current Interest Period for such LIBOR Loans or LIBOR Portions or (B) immediately repay or convert any such LIBOR Loans or LIBOR Portions if such Lender shall notify Borrower that such Lender may not lawfully continue to fund and maintain such LIBOR Loans or LIBOR Portions. Any conversion or prepayment of LIBOR Loans or LIBOR Portions made pursuant to the preceding sentence prior to the last day of an Interest Period for such LIBOR Loans or LIBOR Portions shall be deemed a prepayment thereof for purposes of Paragraph 2.15. After any Lender notifies Administrative Agent and Borrower of such a Change of Law and until such Lender notifies Administrative Agent and Borrower that it is no longer unlawful or impossible 35 -------------------------------------------------------------------------------- for such Lender to make or maintain a LIBOR Loan or LIBOR Portion, all Revolving Loans and all Portions of the Term Loan of such Lender shall be Base Rate Loans and Base Rate Portions, respectively.           (c) Increased Costs. If, after the date of this Agreement, any Change of Law:            (i) Shall subject any Lender to any tax, duty or other charge with respect to any LIBOR Loan or LIBOR Portion, or shall change the basis of taxation of payments by Borrower to any Lender on such a LIBOR Loan or LIBOR Portion or in respect to such a LIBOR Loan or LIBOR Portion under this Agreement (except for changes in the rate of taxation on the overall net income of any Lender imposed by its jurisdiction of incorporation or the jurisdiction in which its principal executive office is located); or           (ii) Shall impose, modify or hold applicable any reserve (excluding any Reserve Requirement or other reserve to the extent included in the calculation of the LIBO Rate for any Loans or Portions), special deposit or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances or loans by, or any other acquisition of funds by any Lender for any LIBOR Loan or LIBOR Portion; or           (iii) Shall impose on any Lender any other condition related to any LIBOR Loan or LIBOR Portion or such Lender’s Commitments; And the effect of any of the foregoing is to increase the cost to such Lender of making, renewing, or maintaining any such LIBOR Loan or LIBOR Portion or its Commitments or to reduce any amount receivable by such Lender hereunder; then Borrower shall from time to time, within five (5) Business Days after demand by such Lender, pay to such Lender additional amounts sufficient to reimburse such Lender for such increased costs or to compensate such Lender for such reduced amounts; provided, however, that Borrower shall have no obligation to make any payment to any demanding party under this Subparagraph 2.13(c) on account of any such increased costs or reduced amounts unless Borrower receives notice of such increased costs or reduced amounts from the demanding party within six (6) months after they are incurred or realized. A certificate setting forth in reasonable detail the amount of such increased costs or reduced amounts, submitted by such Lender to Borrower shall constitute prima facie evidence of such costs or amounts. The obligations of Borrower under this Subparagraph 2.13(c) shall survive the payment and performance of the Obligations and the termination of this Agreement.           (d) Capital Requirements. If, after the date of this Agreement, any Lender determines that (i) any Change of Law affects the amount of capital required or expected to be maintained by such Lender or any Person controlling such Lender (a “Capital Adequacy Requirement”) and (ii) the amount of capital maintained by such Lender or such Person which is attributable to or based upon the Loans, the Commitments or this Agreement must be increased as a result of such Capital Adequacy Requirement (taking into account such Lender’s or such Person’s policies with respect to capital adequacy), 36 -------------------------------------------------------------------------------- Borrower shall pay to such Lender or such Person, within five (5) Business Days after demand of such Lender, such amounts as such Lender or such Person shall determine are necessary to compensate such Lender or such Person for the increased costs to such Lender or such Person of such increased capital; provided, however, that Borrower shall have no obligation to make any payment to any demanding party under this Subparagraph 2.13(d) on account of any such increased costs unless Borrower receives notice of such increased costs from the demanding party within six (6) months after they are incurred or realized. A certificate setting forth in reasonable detail the amount of such increased costs, submitted by any Lender to Borrower shall constitute prima facie evidence of such costs. The obligations of Borrower under this Subparagraph 2.13(d) shall survive the payment and performance of the Obligations and the termination of this Agreement.           (e) Mitigation. Any Lender which becomes aware of (i) any Change of Law which will make it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or (ii) any Change of Law or other event or condition which will obligate Borrower to pay any amount pursuant to Subparagraph 2.13(c) or Subparagraph 2.13(d) shall notify Borrower and Administrative Agent thereof as promptly as practical. If any Lender has given notice of any such Change of Law or other event or condition and thereafter becomes aware that such Change of Law or other event or condition has ceased to exist, such Lender shall notify Borrower and Administrative Agent thereof as promptly as practical. Each Lender affected by any Change of Law which makes it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or to which Borrower is obligated to pay any amount pursuant to Subparagraph 2.13(c) or Subparagraph 2.13(d) shall use reasonable commercial efforts (including changing the jurisdiction of its Applicable Lending Office) to avoid the effect of such Change of Law or to avoid or materially reduce any amounts which Borrower is obligated to pay pursuant to Subparagraph 2.13(c) or Subparagraph 2.13(d) if, in the reasonable opinion of such Lender, such efforts would not be disadvantageous to such Lender or contrary to such Lender’s normal banking practices.           2.14. Taxes on Payments.           (a) Payments Free of Taxes. All payments made by Borrower under this Agreement and the other Credit Documents shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp, documentary or other taxes, any duties, or any other levies, imposts, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (except net income taxes and franchise taxes in lieu of net income taxes imposed on Administrative Agent or any Lender by its jurisdiction of incorporation or the jurisdiction in which its Applicable Lending Office is located) (all such non-excluded taxes, duties, levies, imposts, charges, fees, deductions and withholdings being hereinafter called “Taxes”). If any Taxes are required to be withheld from any amounts payable to Administrative Agent or any Lender hereunder or under the other Credit Documents, the amounts so payable to Administrative Agent or such Lender shall be increased to the extent necessary to yield to Administrative Agent or such Lender (after payment of all Taxes) interest or any such other amounts payable 37 -------------------------------------------------------------------------------- hereunder at the rates or in the amounts specified in this Agreement and the other Credit Documents. Whenever any Taxes are payable by Borrower, as promptly as possible thereafter, Borrower shall send to Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by Borrower showing payment thereof. If Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to Administrative Agent the required receipts or other required documentary evidence, Borrower shall indemnify Administrative Agent and Lenders for any taxes, interest or penalties that may become payable by Administrative Agent or any Lender as a result of any such failure. The obligations of Borrower under this Subparagraph 2.14(a) shall survive the payment and performance of the Obligations and the termination of this Agreement.           (b) Withholding Exemption Certificates. On or prior to the date of the initial Borrowing or, if such date does not occur within thirty (30) days after the date of this Agreement, by the end of such 30-day period, each Lender which is not organized under the laws of the United States of America or a state thereof shall deliver to Borrower and Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI (or successor applicable form), as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement without deduction or withholding or with reduced deduction or withholding of any United States federal income taxes. Each such Lender further agrees (i) promptly to notify Borrower and Administrative Agent of any change of circumstances (including any change in any treaty, law or regulation) which would prevent such Lender from receiving payments hereunder without any deduction or withholding or with reduced deduction or withholding of such taxes as indicated on the most recent such certificate or other form previously delivered by such Lender and (ii) if such Lender has not so notified Borrower and Administrative Agent of any change of circumstances which would prevent such Lender from receiving payments hereunder without any deduction or withholding or with reduced deduction or withholding of taxes as indicated on the most recent such certificate or other form previously delivered by such Lender, then on or before the date that any certificate or other form delivered by such Lender under this Subparagraph 2.14(b) expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent such certificate or form previously delivered by such Lender, to deliver to Borrower and Administrative Agent a new certificate or form, certifying that such Lender is entitled to receive payments under this Agreement without deduction or withholding or with reduced deduction or withholding of such taxes. If any Lender fails to provide to Borrower or Administrative Agent pursuant to this Subparagraph 2.14(b) (or, in the case of a New Lender, Subparagraph 2.06(a), or, in the case of an Assignee Lender, Subparagraph 8.05(c)) any certificates or other evidence required by such provision to establish that such Lender is, at the time it becomes a Lender hereunder, entitled to receive payments under this Agreement without deduction or withholding or with reduced deduction or withholding of any United States federal income taxes, such Lender shall not be entitled to any indemnification under Subparagraph 2.14(a) for any Taxes imposed on such Lender primarily as a result of such failure. 38 --------------------------------------------------------------------------------           (c) Mitigation. If Administrative Agent or any Lender claims any additional amounts to be payable to it pursuant to this Paragraph 2.14, such Person shall use reasonable commercial efforts to file any certificate or document requested in writing by Borrower (including copies of Internal Revenue Service Form W-8BEN (or successor forms) reflecting a reduced rate of withholding or to change the jurisdiction of its Applicable Lending Office if the making of such a filing or such change in the jurisdiction of its Applicable Lending Office would avoid the need for or materially reduce the amount of any such additional amounts which may thereafter accrue and if, in the reasonable opinion of such Person, in the case of a change in the jurisdiction of its Applicable Lending Office, such change would not be disadvantageous to such Person or contrary to such Person’s normal banking practices.           (d) Tax Returns. Nothing contained in this Paragraph 2.14 shall require Administrative Agent or any Lender to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential).           2.15. Funding Loss Indemnification. If Borrower shall (a) repay, prepay or convert any LIBOR Loan or LIBOR Portion on any day other than the last day of an Interest Period therefor (whether a scheduled payment, an optional prepayment or conversion, a mandatory prepayment or conversion, a payment upon acceleration or otherwise), (b) fail to borrow any LIBOR Loan or LIBOR Portion for which a Notice of Borrowing has been delivered to Administrative Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise) or (c) fail to convert any Portion of the Term Loan Borrowing into a LIBOR Portion in accordance with a Notice of Term Loan Conversion delivered to Administrative Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise), Borrower shall, within five (5) Business Days after demand by any Lender, reimburse such Lender for and hold such Lender harmless from all costs and losses incurred by such Lender as a result of such repayment, prepayment, conversion or failure; provided, however, that Borrower shall have no obligation to make any payment to any demanding party under this Paragraph 2.15 on account of any such costs or losses unless Borrower receives notice of such costs or losses from the demanding party within six (6) months after they are incurred or realized. Borrower understands that such costs and losses may include, without limitation, losses incurred by a Lender as a result of funding and other contracts entered into by such Lender to fund a LIBOR Loan or LIBOR Portion. Each Lender demanding payment under this Paragraph 2.15 shall deliver to Borrower, with a copy to Administrative Agent, a certificate setting forth the amount of costs and losses for which demand is made, which certificate shall set forth in reasonable detail the calculation of the amount demanded. Such a certificate so delivered to Borrower shall constitute prima facie evidence of such costs and losses. The obligations of Borrower under this Paragraph 2.15 shall survive the payment and performance of the Obligations and the termination of this Agreement.           2.16. Replacement of Lenders. If any Lender shall (a) become a Defaulting Lender more than one (1) time in a period of twelve (12) consecutive months, (b) continue as a Defaulting Lender for more than five (5) Business Days at any time, (c) not consent to an Extension Request given pursuant to Subparagraph 2.02(a), (d) suspend its obligation to make or maintain LIBOR Loans or LIBOR Portions pursuant to Subparagraph 2.13(b) for a reason which is not applicable to any other Lender or (e) demand any payment under Subparagraph 2.13(c), 39 -------------------------------------------------------------------------------- 2.13(d) or 2.14(a) for a reason which is not applicable to any other Lender, then Administrative Agent may, with the written consent of Borrower, or shall, upon the written request of Borrower, replace such Lender (the “affected Lender”), or cause such affected Lender to be replaced with another lender (the “replacement Lender”) satisfying the requirements of an Assignee Lender, by having the affected Lender sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to Subparagraph 8.05(c); provided, however, that if Borrower seeks to exercise such right, it must do so within sixty (60) days after it first knows or should have known of the occurrence of the event or events giving rise to such right, and neither Administrative Agent nor any Lender shall have any obligation to identify or locate a replacement Lender for Borrower. Upon receipt by any affected Lender of a written notice from Administrative Agent stating that Administrative Agent is exercising the replacement right set forth in this Paragraph 2.16, such affected Lender shall sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to an Assignment Agreement and Subparagraph 8.05(c) for a purchase price equal to the sum of the principal amount of the affected Lender’s Loans so sold and assigned, all accrued and unpaid interest thereon and its ratable share of all fees to which it is entitled. SECTION III.      CONDITIONS PRECEDENT.           3.01. Initial Conditions Precedent. The obligations of Lenders to make the Loans are subject to receipt by Administrative Agent, not more than thirty (30) days after the date of this Agreement (the “Document Delivery Date”), of each item listed in Schedule 3.01, each in form and substance satisfactory to Administrative Agent and each Lender, and with sufficient copies for, Administrative Agent and each Lender.           3.02. Conditions Precedent to Term Loan Borrowing. The obligations of Lenders to make the Term Loans comprising the Term Loan Borrowing also are subject to receipt by Administrative Agent, on or prior to the Revolving Loan Maturity Date, of a Term Loan Note for each Lender so requesting such a note, duly executed by Borrower.           3.03. Conditions Precedent to Each Credit Event.           (a) The occurrence of each Credit Event (including the initial Borrowing and the Term Loan Borrowing) is subject to the further condition that Borrower shall have delivered to Administrative Agent the Notice of Borrowing, Notice of Term Loan Conversion or Notice of Interest Period Selection, as the case may be, for such Credit Event in accordance with this Agreement.           (b) On the date each Borrowing is to occur and after giving effect to such Borrowing, the following shall be true and correct:           (i) The representations and warranties of Borrower set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and 40 -------------------------------------------------------------------------------- warranties expressly made as of a specified date, which shall be true as of such date); and           (ii) No Default has occurred and is continuing or will result from such Borrowing. The submission by Borrower to Administrative Agent of each Notice of Borrowing (other than a Notice of Borrowing for a Revolving Loan Borrowing consisting of Base Rate Loans to be used solely to repay an existing Borrowing) shall be deemed to be a representation and warranty by Borrower that each of the statements set forth above in this Subparagraph 3.03(b) is true and correct as of the date of such notice.           3.04. Covenant to Deliver. Borrower agrees (not as a condition but as a covenant) to deliver to Administrative Agent each item required to be delivered to Administrative Agent as a condition to the occurrence of any Credit Event if such Credit Event occurs. Borrower expressly agrees that the occurrence of any such Credit Event prior to the receipt by Administrative Agent of any such item shall not constitute a waiver by Administrative Agent or any Lender of Borrower’s obligation to deliver such item. SECTION IV.      REPRESENTATIONS AND WARRANTIES.           4.01. Borrower’s Representations and Warranties. In order to induce Administrative Agent and Lenders to enter into this Agreement, Borrower hereby represents and warrants to Administrative Agent and Lenders as follows:           (a) Due Incorporation, Qualification, etc. Each of Borrower and Borrower’s Material Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed is reasonably likely to have a Material Adverse Effect.           (b) Authority. The execution, delivery and performance by Borrower of each Credit Document executed, or to be executed, by Borrower and the consummation of the transactions contemplated thereby (i) are within the power of Borrower and (ii) have been duly authorized by all necessary actions on the part of Borrower.           (c) Enforceability. Each Credit Document executed, or to be executed, by Borrower has been, or will be, duly executed and delivered by Borrower and constitutes, or will constitute, a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. 41 --------------------------------------------------------------------------------           (d) Non-Contravention. The execution and delivery by Borrower of the Credit Documents executed by Borrower and the performance and consummation of the transactions contemplated thereby do not (i) violate any Requirement of Law applicable to Borrower; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any Contractual Obligation of Borrower required by Regulation S-K to be made part of Borrower’s public filings; or (iii) result in the creation or imposition of any Lien (or the obligation to create or impose any Lien) upon any property, asset or revenue of Borrower (except such Liens as may be created in favor of Administrative Agent pursuant to this Agreement or the other Credit Documents).           (e) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required in connection with the execution and delivery of the Credit Documents executed by Borrower or the performance or consummation of the transactions contemplated thereby, except for those which have been made or obtained and are in full force and effect.           (f) No Violation or Default. Neither Borrower nor any of its Subsidiaries is in violation of or in default with respect to (i) any Requirement of Law applicable to such Person or (ii) any Contractual Obligation of such Person (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), where, in each case, such violation or default is reasonably likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, neither Borrower nor any of its Subsidiaries (A) has violated any Environmental Laws, (B) has any liability under any Environmental Laws or (C) has received notice or other communication of an investigation or is under investigation by any Governmental Authority having authority to enforce Environmental Laws, where such violation, liability or investigation is reasonably likely to have a Material Adverse Effect. No Default has occurred and is continuing.           (g) Litigation. Except as disclosed in the 10-Q report filed by Borrower with the Securities and Exchange Commission for the fiscal quarter ended June 4, 1999, no actions (including derivative actions), suits, proceedings or investigations are pending or, to the knowledge of Borrower, threatened against Borrower or any of its Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) is reasonably likely (alone or in the aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by Borrower of the Credit Documents or the transactions contemplated thereby.           (h) Title; Possession Under Leases. Borrower and its Material Subsidiaries own and have good and marketable title, or a valid leasehold interest in, or licenses with respect to, all their respective properties and assets as reflected in the most recent Financial Statements delivered to Administrative Agent (except those assets and properties disposed of in the ordinary course of business or otherwise in compliance with this Agreement since the date of such Financial Statements) and all respective assets and properties acquired by Borrower and its Material Subsidiaries since such date (except those disposed of in the ordinary course of business or otherwise in compliance with this   42 -------------------------------------------------------------------------------- Agreement). Such assets and properties are subject to no Lien, except for Permitted Liens. Each of Borrower and its Material Subsidiaries has complied with all material obligations under all material leases to which it is a party and enjoys peaceful and undisturbed possession under such leases subject only to rights of sublessees of Borrower or its Material Subsidiaries.           (i) Financial Statements. The Financial Statements of Borrower and its Subsidiaries which have been delivered to Administrative Agent, (i) are in accordance with the books and records of Borrower and its Subsidiaries, which have been maintained in accordance with good business practice; (ii) have been prepared in conformity with GAAP; and (iii) fairly present in all material respects the financial conditions and results of operations of Borrower and its Subsidiaries as of the date thereof and for the period covered thereby. Neither Borrower nor any of its Subsidiaries has any Contingent Obligations, liability for taxes or other outstanding obligations which are material in the aggregate, except as disclosed in the audited Financial Statements dated December 3, 1999, or unaudited Financial Statements for the fiscal quarter ended June 2, 2000, furnished by Borrower to Administrative Agent prior to the date hereof, or in the Financial Statements delivered to Administrative Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a).           (j) Equity Securities. All Equity Securities of Borrower have been offered and sold in compliance with all federal and state securities laws and all other Requirements of Law, except where any failure to comply is not reasonably likely to have a Material Adverse Effect.           (k) No Agreements to Sell Assets; Etc. Neither Borrower nor any of its Subsidiaries has any legal obligation, absolute or contingent, to any Person to sell the assets of Borrower or any of its Subsidiaries (except as permitted by Subparagraph 5.02(c)), or to effect any merger, consolidation or other reorganization of Borrower or any of its Subsidiaries (except as permitted by Subparagraph 5.02(d)) or to enter into any agreement with respect thereto. 43 --------------------------------------------------------------------------------           (l) Employee Benefit Plans.           (i) Based upon the latest valuation of each Employee Benefit Plan that either Borrower or any ERISA Affiliate maintains or contributes to, or has any obligation under (which occurred within twelve months of the date of this representation), the aggregate benefit liabilities of such plan within the meaning of § 4001 of ERISA did not exceed the aggregate value of the assets of such plan. Neither Borrower nor any ERISA Affiliate has any liability with respect to any post-retirement benefit under any Employee Benefit Plan which is a welfare plan (as defined in section 3(1) of ERISA), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, which liability for health plan contribution coverage is not reasonably likely to have a Material Adverse Effect.           (ii) Each Employee Benefit Plan complies, in both form and operation, in all material respects, with its terms, ERISA and the IRC, and no condition exists or event has occurred with respect to any such plan which would result in the incurrence by either Borrower or any ERISA Affiliate of any material liability, fine or penalty. Each Employee Benefit Plan, related trust agreement, arrangement and commitment of Borrower or any ERISA Affiliate is legally valid and binding and in full force and effect. No Employee Benefit Plan is being audited or investigated by any government agency or is subject to any pending or threatened claim or suit. Neither Borrower nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction under section 406 of ERISA or section 4975 of the IRC.           (iii) Neither Borrower nor any ERISA Affiliate contributes to or has any material contingent obligations to any Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA.           (m) Other Regulations. Borrower is not subject to regulation under the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or to any other Governmental Rule limiting its ability to incur indebtedness.           (n) Patent and Other Rights. Except as disclosed in the 10-Q report filed by Borrower with the Securities and Exchange Commission for the fiscal quarter ended June 4, 1999, Borrower and its Material Subsidiaries own, license or otherwise have the full right to use, under validly existing agreements, all material patents, licenses, trademarks, 44 -------------------------------------------------------------------------------- trade names, trade secrets, service marks, copyrights and all rights with respect thereto, which are required to conduct their businesses as now conducted.           (o) Governmental Charges. Borrower and its Subsidiaries have filed or caused to be filed all tax returns or requests for extension which are required to be filed by them. Borrower and its Subsidiaries have paid, or made provision for the payment of, all taxes and other Governmental Charges which have or may have become due pursuant to said returns or otherwise and all other indebtedness, except such Governmental Charges or indebtedness, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided or which are not reasonably likely to have a Material Adverse Effect if unpaid.           (p) Margin Stock. Borrower owns no Margin Stock which, in the aggregate, would constitute a substantial part of the assets of Borrower, and no proceeds of any Loan will be used to purchase or carry, directly or indirectly, any Margin Stock or to extend credit, directly or indirectly, to any Person for the purpose of purchasing or carrying any Margin Stock.           (q) Subsidiaries, Etc. Schedule 4.01(q) (as supplemented by Borrower from time to time in a written notice to Administrative Agent pursuant to Subparagraph 5.01(a)(iii)) sets forth each of Borrower’s Subsidiaries, its jurisdiction of organization, the classes of its Equity Securities and the percentages of shares of each such class owned directly or indirectly by Borrower.           (r) Solvency, Etc. Borrower is Solvent and, after the execution and delivery of the Credit Documents and the consummation of the transactions contemplated thereby, will be Solvent.           (s) Catastrophic Events. Neither Borrower nor any of its Subsidiaries and none of their properties is or has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or other casualty that is reasonably likely to have a Material Adverse Effect. There are no disputes presently subject to grievance procedure, arbitration or litigation under any of the collective bargaining agreements, employment contracts or employee welfare or incentive plans to which Borrower or any of its Subsidiaries is a party, and there are no strikes, lockouts, work stoppages or slowdowns, or, to the best knowledge of Borrower, jurisdictional disputes or organizing activities occurring or threatened which alone or in the aggregate are reasonably likely to have a Material Adverse Effect.           (t) No Material Adverse Effect. No event has occurred and no condition exists which is reasonably likely to have a Material Adverse Effect.           (u) Year 2000 Compatibility. The 10-Q report filed by Borrower with the Securities and Exchange Commission for the fiscal quarter ended June 4, 1999, describes the actions which Borrower and its Subsidiaries have taken, are planning to take or are taking to address the “Year 2000 Problem” (that is, the risk that computer applications 45 -------------------------------------------------------------------------------- used by Borrower and its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date on or after December 31, 1999). Based upon the matters described in such report, Borrower believes that the “Year 2000 Problem” will not have a Material Adverse Effect.           (v) Accuracy of Information Furnished. The Credit Documents and the other certificates and written statements and information (excluding projections and analyst reports) prepared by and furnished by Borrower and its Subsidiaries to Administrative Agent and the Lenders in connection with the Credit Documents and the transactions contemplated thereby, taken as a whole, do not contain any untrue statement of a material fact and do not omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All projections furnished by Borrower and its Subsidiaries to Administrative Agent and the Lenders in connection with the Credit Documents and the transactions contemplated thereby have been based upon reasonable assumptions and represent, as of their respective dates of presentations, Borrower’s and its Subsidiaries’ reasonable estimates of the future performance of Borrower and its Subsidiaries.           4.02. Reaffirmation. Borrower shall be deemed to have reaffirmed, for the benefit of Lenders and Administrative Agent, each representation and warranty contained in Paragraph 4.01 on and as of the date of each Borrowing (except for representations and warranties expressly made as of a specified date, which shall be true as of such date). SECTION V.      COVENANTS.           5.01. Affirmative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower will comply, and will cause compliance, with the following affirmative covenants, unless Required Lenders shall otherwise consent in writing:           (a) Financial Statements, Reports, etc. Borrower shall furnish to Administrative Agent, with sufficient copies for each Lender, the following, each in such form and such detail as Administrative Agent or the Required Lenders shall reasonably request:           (i) As soon as available and in no event later than forty-five (45) days after the last day of each fiscal quarter of Borrower, a copy of the Financial Statements of Borrower and its Subsidiaries (prepared on a consolidated basis) for such quarter and for the fiscal year to date, certified by the chief executive officer or chief financial officer of Borrower to present fairly in all material respects the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit adjustments); 46 --------------------------------------------------------------------------------           (ii) As soon as available and in no event later than ninety (90) days after the close of each fiscal year of Borrower, (A) copies of the audited Financial Statements of Borrower and its Subsidiaries (prepared on a consolidated basis) for such year, audited by KPMG LLP or other independent certified public accountants of recognized national standing acceptable to Administrative Agent, and (B) copies of the unqualified opinions (or qualified opinions reasonably acceptable to Administrative Agent) and, to the extent delivered and within ten (10) days after delivery, final management letters delivered by such accountants to the Audit Committee of the Board of Directors in connection with all such Financial Statements;           (iii) Contemporaneously with the quarterly and year-end Financial Statements required by the foregoing clauses (i) and (ii), a compliance certificate of the chief executive officer, chief financial officer or treasurer of Borrower (a “Compliance Certificate”) which (A) states that the representations and warranties of Borrower set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date) and no Default has occurred and is continuing, or, if any such Default has occurred and is continuing, a statement as to the nature thereof and what action Borrower proposes to take with respect thereto; (B) sets forth, for the quarter, year or other applicable period covered by such Financial Statements or as of the last day of such quarter or year (as the case may be), the calculation of the financial ratios and tests provided in Subparagraph 5.02(f) and Paragraph 5.03; (C) upon Administrative Agent’s request, attaches copies of any letters being provided routinely to requesting vendors or customers at such time describing the Year 2000 remediation efforts of Borrower and its Subsidiaries and (D) lists all Subsidiaries of Borrower and identifies each such Subsidiary which is a Material Subsidiary;           (iv) As soon as available and in no event later than forty-five (45) days after the last day of each fiscal quarter of Borrower, a certificate of the chief financial officer or treasurer of Borrower which sets forth the calculation of Borrower’s Debt/EBITDA Ratio for the consecutive four-quarter period ending as of such date;           (v) As soon as possible and in no event later than five (5) Business Days after any officer of Borrower knows of the occurrence or existence of (A) any Reportable Event under any Employee Benefit Plan or Multiemployer Plan; (B) any actual litigation, suits or claims against Borrower or any of its Subsidiaries which individually asserts a claim for monetary damages payable by Borrower or its Subsidiaries of $10,000,000 or more; (C) any other event or condition which is reasonably likely to have a Material Adverse Effect; or (D) any Default; the statement of the chief executive officer, chief financial officer or treasurer of Borrower setting forth details of such event, condition or Default and the action which Borrower proposes to take with respect thereto; 47 --------------------------------------------------------------------------------           (vi) As soon as available and in no event later than five (5) Business Days after they are sent, made available or filed, copies of (A) all registration statements and reports filed by Borrower or any of its Subsidiaries with any securities exchange or the United States Securities and Exchange Commission (including, without limitation, all 10-Q, 10-K and 8-K reports); (B) all reports, proxy statements and financial statements sent or made available by Borrower to its security holders; and (C) all press releases concerning any material developments in the business of Borrower made available by Borrower to the public generally; and           (vii) Such other instruments, agreements, certificates, opinions, statements, documents and information relating to the operations or condition (financial or otherwise) of Borrower or its Subsidiaries, and compliance by Borrower with the terms of this Agreement and the other Credit Documents as Administrative Agent may from time to time reasonably request.           (b) Books and Records. Borrower and its Subsidiaries shall at all times keep proper books of record and account in which full, true and correct entries will be made of their transactions in accordance with GAAP.           (c) Inspections. Borrower and its Subsidiaries shall permit Administrative Agent and each Lender, or any agent or representative thereof, upon reasonable notice and during normal business hours and to the extent reasonably necessary for the administration of the Obligations, to visit and inspect any of the properties and offices of Borrower and its Material Subsidiaries, to examine the books and records of Borrower and its Subsidiaries and make copies thereof, and to discuss the affairs, finances and business of Borrower and its Subsidiaries with, and to be advised as to the same by, their officers and, after prior written notice to Borrower, their auditors and accountants, all at such times and intervals as Administrative Agent or any Lender may reasonably request; provided, however, (i) unless an Event of Default shall have occurred and be continuing, any such visit and inspection shall be made at the sole expense of Administrative Agent or the Lender whose agent or representative is making such visit and inspection and (ii) when an Event of Default exists, any such visit and inspection shall be made at the sole expense of Borrower.           (d) Insurance. Borrower and its Material Subsidiaries shall:           (i) Carry and maintain insurance of the types and in the amounts customarily carried from time to time during the term of this Agreement by others engaged in substantially the same business as such Person and operating in the same geographic area as such Person, including, but not limited to, fire, public liability, property damage and worker’s compensation;           (ii) Carry and maintain each policy for such insurance with (A) a company which is rated A or better by A.M. Best and Company at the time such 48 -------------------------------------------------------------------------------- policy is placed and at the time of each annual renewal thereof or (B) any other insurer which is reasonably satisfactory to Administrative Agent; and           (iii) Deliver to Administrative Agent upon request not more than once each year schedules setting forth all insurance then in effect.           (e) Governmental Charges and Other Indebtedness. Borrower and its Subsidiaries shall promptly pay and discharge when due (i) all taxes and other Governmental Charges prior to the date upon which penalties accrue thereon, (ii) all indebtedness which, if unpaid, could become a Lien upon the property of Borrower or its Material Subsidiaries and (iii) subject to any subordination provisions applicable thereto, all other Indebtedness which in each case, if unpaid, is reasonably likely to have a Material Adverse Effect, except such Indebtedness as may in good faith be contested or disputed, or for which arrangements for deferred payment have been made, provided that in each such case appropriate reserves are maintained to the reasonable satisfaction of Administrative Agent.           (f) Use of Proceeds. Borrower shall use the proceeds of the Loans only for the respective purposes set forth in Paragraph 2.05. Borrower shall not use any part of the proceeds of any Loan, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or for the purpose of purchasing or carrying or trading in any securities under such circumstances as to involve Borrower, any Lender or Administrative Agent in a violation of Regulations T, U or X issued by the Federal Reserve Board.           (g) General Business Operations. Other than as permitted by Subparagraphs 5.02(c) and 5.02(d), each of Borrower and its Subsidiaries shall (i) preserve and maintain its corporate existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities in compliance with all Requirements of Law and Contractual Obligations applicable to such Person and (iii) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except, in each case, where any failure is not reasonably likely to have a Material Adverse Effect. Borrower shall maintain its chief executive office and principal place of business in the United States.           (h) Year 2000 Compatibility. Borrower and its Subsidiaries shall take all acts reasonably necessary to ensure that all software, hardware, firmware, equipment, goods and systems utilized by or material to their business operations or financial condition will properly perform date sensitive functions before, during and after the year 2000 except where the failure to do so would not have a Material Adverse Effect.           (i) Pari Passu Ranking. Borrower shall take, or cause to be taken, all actions necessary to ensure that the Obligations of Borrower are and continue to rank at least pari passu in right of payment with all other unsecured Indebtedness of Borrower. 49 --------------------------------------------------------------------------------           5.02. Negative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower will comply, and will cause compliance, with the following negative covenants, unless Required Lenders shall otherwise consent in writing:           (a) Indebtedness. Neither Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Indebtedness except for the following (“Permitted Indebtedness”):           (i) The Obligations of Borrower under the Credit Documents;           (ii) Indebtedness of Borrower and its Subsidiaries listed in Schedule 5.02(a) and existing on the date of this Agreement which does not otherwise qualify as Permitted Indebtedness;           (iii) Indebtedness of Borrower and its Subsidiaries arising from the endorsement of instruments for collection in the ordinary course of their businesses;           (iv) Indebtedness of Borrower and its Subsidiaries for trade accounts payable, provided that (A) such accounts arise in the ordinary course of business and (B) no material part of any such account is more than ninety (90) days past due (unless subject to a bona fide dispute and for which adequate reserves have been established);           (v) Indebtedness of Borrower and its Subsidiaries under Rate Contracts, provided that, at the time each Rate Contract is entered into, such Rate Contract is for bona fide hedging operations and not for speculation;           (vi) Indebtedness of Borrower and its Subsidiaries under initial or successive refinancings of any Indebtedness permitted by clause (ii) above, provided that (A) the principal amount of any such refinancing does not exceed the principal amount of the Indebtedness being refinanced and (B) the material terms and provisions of any such refinancing (including maturity, redemption, prepayment, default and subordination provisions) are no less favorable to Lenders than the Indebtedness being refinanced;           (vii) Indebtedness of Borrower and its Subsidiaries with respect to surety, appeal, indemnity, performance or other similar bonds in the ordinary course of business (including surety or similar bonds issued in connection with the stay of a proceeding of the type described in Subparagraph 6.01(h));           (viii) Guaranty Obligations of Borrower in respect of Permitted Indebtedness of its Subsidiaries;           (ix) Indebtedness of Borrower to any of its Subsidiaries, Indebtedness of any of Borrower’s Subsidiaries to Borrower or Indebtedness of any of Borrower’s Subsidiaries to any of Borrower’s other Subsidiaries; 50 --------------------------------------------------------------------------------           (x) Other Indebtedness of Borrower and its Subsidiaries, provided that the aggregate principal amount of all such other Indebtedness outstanding at any time does not exceed the sum of $200,000,000 plus ten percent (10%) of Borrower’s Net Worth determined as of the last day of the immediately preceding fiscal quarter.           (b) Liens. Neither Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist any Lien on or with respect to any of its assets or property of any character, whether now owned or hereafter acquired, except for the following (“Permitted Liens”):           (i) Liens in favor of Administrative Agent or any Lender securing the Obligations;           (ii) Liens listed in Schedule 5.02(b) and existing on the date of this Agreement which do not otherwise qualify as Permitted Liens;           (iii) Liens for taxes or other Governmental Charges not at the time delinquent or thereafter payable without penalty or being contested in good faith, provided that adequate reserves for the payment thereof have been established in accordance with GAAP;           (iv) Liens of carriers, warehousemen, mechanics, materialmen, vendors, and landlords and other similar Liens imposed by law incurred in the ordinary course of business for sums not overdue more than 45 days or being contested in good faith, provided that adequate reserves for the payment thereof have been established in accordance with GAAP;           (v) Deposits under workers’ compensation, unemployment insurance and social security laws or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations of surety or appeal bonds or to secure indemnity, performance or other similar bonds in the ordinary course of business;           (vi) Zoning restrictions, easements, rights-of-way, title irregularities and other similar encumbrances, which alone or in the aggregate are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of Borrower or any of its Subsidiaries;           (vii) Banker’s Liens and similar Liens (including set-off rights) in respect of bank deposits;           (viii) Liens on any property or assets acquired, or on the property or assets of any Persons acquired, by Borrower or any of its Subsidiaries after the date of this Agreement pursuant to Subparagraph 5.02(d), provided that (A) such 51 -------------------------------------------------------------------------------- Liens exist at the time such property or assets or such Persons are so acquired and (B) such Liens were not created in contemplation of such acquisitions;           (ix) Judgement Liens, provided that such Liens do not constitute an Event of Default under Subparagraph 6.01(h);           (x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties and in connection with the importation of goods in the ordinary course of Borrower’s and its Subsidiaries’ businesses;           (xi) Liens securing purchase money loans and Capital Leases incurred by Borrower and its Subsidiaries to finance their acquisition of real property, fixtures or equipment provided that (A) in each case, the Indebtedness secured by such Liens (1) is incurred by such Person at the time of, or not later than ninety (90) days after, the acquisition by such Person of the property so financed, (2) does not exceed the purchase price of the property so financed; and (3) constitutes Permitted Indebtedness under Subparagraph 5.02(a); and (B) in each case, such Lien (1) covers only those assets, the acquisition of which was financed by such Permitted Indebtedness, and (2) secures only such Permitted Indebtedness; and provided, further, that this clause (xi) shall apply to Liens incurred to finance the costs incurred by Adobe Systems Europe, Ltd. to acquire real property in Scotland prior to the date of this Agreement, construct improvements thereon and install fixtures and equipment therein prior to completion so long as the Indebtedness secured thereby meets all of the foregoing requirements except clause (A)(1);           (xii) Liens on the property or assets of any Subsidiary of Borrower in favor of Borrower or any other Subsidiary of Borrower;           (xiii) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by the Liens described in clause (ii) or (xi) above, provided that any extension, renewal or replacement Lien (A) is limited to the property covered by the existing Lien and (B) secures Indebtedness which is no greater in amount and has material terms no less favorable to Lenders than the Indebtedness secured by the existing Lien; and           (xiv) Other Liens, provided that (A) the Indebtedness secured by such other Liens constitutes Permitted Indebtedness under Subparagraph 5.02(a) and (B) the aggregate principal amount of such Indebtedness outstanding at any time does not exceed ten percent (10%) of Borrower’s Net Worth determined as of the last day of the immediately preceding fiscal quarter.           (c) Asset Dispositions. Neither Borrower nor any of its Subsidiaries shall sell, lease, transfer or otherwise dispose of any of its assets or property, whether now owned or hereafter acquired, except for the following: 52 --------------------------------------------------------------------------------           (i) Sales by Borrower and its Subsidiaries of inventory in the ordinary course of their businesses;           (ii) Sales by Borrower and its Subsidiaries of surplus, damaged, worn or obsolete equipment or inventory in the ordinary course of their businesses;           (iii) Sales by Borrower and its Subsidiaries or other dispositions of Investments permitted by Subparagraph 5.02(e); (iv) Sales or assignments by Borrower and its Subsidiaries of defaulted receivables to a collection agency in the ordinary course of their businesses;           (v) Licenses by Borrower and its Subsidiaries of their products, patents, copyrights, trademarks, trade names, trade secrets, service marks and any other intellectual property in the ordinary course of their businesses;           (vi) Sales by Borrower and its Subsidiaries of closed facilities which are for cash and do not exceed $55,000,000 in the aggregate during the term of this Agreement;           (vii) Sales, licenses or other dispositions of assets and property by Borrower to any of Borrower’s Subsidiaries or by any of Borrower’s Subsidiaries to Borrower or any of its other Subsidiaries; and           (viii) Other sales, leases, transfers and disposals by Borrower and its Subsidiaries of assets and property, provided that(A) no Default has occurred and is continuing on the date of, or will result after giving effect to, any such sale, lease, transfer or disposal and (B) the aggregate book value of all such assets and property so sold, leased, transferred or otherwise disposed of in any fiscal year does not exceed ten percent (10%) of Borrower’s Net Worth determined as of the last day of the immediately preceding fiscal year.           (d) Mergers, Acquisitions, Etc. Neither Borrower nor any of its Subsidiaries shall consolidate with or merge into any other Person or permit any other Person to merge into it, establish any new Subsidiary, acquire any Person as a new Subsidiary or acquire all or substantially all of the assets of any other Person, except as follows:           (i) Borrower and its Subsidiaries may merge with each other, provided that (A) no Default has occurred and is continuing on the date of, or will result after giving effect to, any such merger and (B) in any such merger involving Borrower, Borrower is the surviving corporation;           (ii) Any Subsidiary of Borrower may dissolve after transferring or distributing its assets to Borrower or any of its Subsidiaries, provided that no Default has occurred and is continuing on the date of, or will result after giving effect to, any such dissolution; and 53 --------------------------------------------------------------------------------           (iii) Borrower and its Subsidiaries may establish any new Subsidiary or acquire any Person as a new Subsidiary or all or substantially all of the assets of any other Person, provided that no Default has occurred and is continuing on the date of, or will result after giving effect to, any such acquisition.           (e) Investments. Neither Borrower nor any of its Subsidiaries shall make any Investment except for Investments in the following:           (i) Investments permitted by the investment policy of Borrower set forth in Schedule 5.02(e) or, if any changes to the investment policy of Borrower are hereafter duly approved by the Board of Directors of Borrower or designated committee thereof, in any subsequent investment policy which is the most recent investment policy delivered by Borrower to Administrative Agent with a certificate of Borrower’s chief financial officer to the effect that such investment policy has been duly approved by Borrower’s Board of Directors and is then in effect;           (ii) Investments listed in Schedule 5.02(e) existing on the date of this Agreement which are not otherwise permitted by the investment policy of Borrower set forth in Schedule 5.02(e);           (iii) Investments received by Borrower and its Subsidiaries in connection with the bankruptcy or reorganization of customers and suppliers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;           (iv) Investments arising from rights received by Borrower and its Subsidiaries upon the required payment of any permitted Indebtedness of Borrower and its Subsidiaries;           (v) Investments consisting of loans to employees, officers and directors of Borrower or its Subsidiaries;           (vi) Investments by Borrower and its Subsidiaries in Rate Contracts, provided that, at the time each Rate Contract is entered into, such Rate Contract is for bona fide hedging operations and not for speculation;           (vii) Deposit accounts;           (viii) Investments permitted by Subparagraph 5.02(d);           (ix) Investments by Borrower and its Subsidiaries in each other;           (x) Venture capital Investments made by Borrower and/or its Subsidiaries and Adobe Ventures, L.P., Adobe Ventures II, L.P. and any other venture capital partnership in which all of the limited partners are Borrower, its Subsidiaries, its Affiliates or employees of Borrower or its Subsidiaries 54 -------------------------------------------------------------------------------- (individually, a “VC Partnership”), provided that (A) at the time a venture capital Investment is made in any Person, such Person either operates or is expected to operate in an industry related to the business operations of Borrower or its Subsidiaries (including Persons which possess or may possess technologies, sales and services capabilities, operations or content related to any product of Borrower or its Subsidiaries) or has been identified by Borrower as a candidate for a strategic relationship with Borrower or its Subsidiaries, (B) the aggregate consideration paid (including Indebtedness incurred) by Borrower or its Subsidiaries for all such venture capital Investments (less any return of capital received in cash on the sale of such venture capital Investments and any gain or other income realized on such venture capital Investments which is reinvested in new venture capital Investments) does not exceed $175,000,000 at any time, and (C) no Default has occurred and is continuing on the date of, or will result after giving effect to, any such venture capital Investment;           (xi) Investments consisting of purchase money financing provided by Borrower and its Subsidiaries to their customers; and           (xii) Other Investments, provided that:           (A) No Default has occurred and is continuing on the date of, or will result after giving effect to, any such Investment; and           (B) The aggregate consideration paid (including Indebtedness incurred) by Borrower and its Subsidiaries for all such Investments in any fiscal year does not exceed ten percent (10%) of Borrower’s Net Worth determined as of the last day of the immediately preceding fiscal year.           (f) Dividends, Redemptions, Etc. Neither Borrower nor any of its Subsidiaries shall pay any dividends or make any distributions on its Equity Securities; purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities; return any capital to any holder of its Equity Securities as such; make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or set apart any sum for any such purpose; except as follows:           (i) Borrower or any of its Subsidiaries may pay dividends on its capital stock payable solely in such Person’s own capital stock and Borrower may purchase, redeem, retire, defease or otherwise acquire for value capital stock of Borrower issued to employees of Borrower or its Subsidiaries in exchange for other capital stock of Borrower;           (ii) Any Subsidiary of Borrower may pay dividends to or repurchase its capital stock from Borrower;           (iii) Adobe Incentive Partners may make Adobe Incentive Partners Distributions and any VC Partnership may make distributions to its partners; 55 --------------------------------------------------------------------------------           (iv) Borrower may repurchase its capital stock from an employee of Borrower or its Subsidiaries (A) in an amount equal to any taxes payable by such employee upon the exercise of options to purchase capital stock of Borrower, or (B) upon termination of such employee’s employment; and           (v) Borrower may pay other dividends on its capital stock in cash or repurchase its capital stock for cash, provided that:           (A) In each case, no Event of Default has occurred and is continuing on the date of, or will result after giving effect to, any such payment or repurchase; and           (B) If the Debt/EBITDA Ratio of Borrower for any consecutive four-quarter period is equal to or greater than 1.25:1.00, the sum of Borrower’s Net Share Repurchases and cash dividends (excluding dividends payable pursuant to clauses (ii) and (iii) above) for the next succeeding quarter shall not exceed forty percent (40%) of Borrower’s EBITDA for such consecutive four-quarter period.           (g) Change in Business. Neither Borrower nor any of its Subsidiaries shall engage in any business substantially different from its present business, as described in the 10-K report filed by Borrower with the Securities and Exchange Commission for the fiscal year ended November 27, 1998, and other internet-related services for its customers. 56 --------------------------------------------------------------------------------           (h) Employee Benefit Plans.            (i) Neither Borrower nor any ERISA Affiliate shall (A) adopt or institute any Employee Benefit Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA, (B) take any action which will result in the partial or complete withdrawal, within the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer Plan, (C) engage or permit any Person to engage in any transaction prohibited by section 406 of ERISA or section 4975 of the IRC involving any Employee Benefit Plan or Multiemployer Plan which would subject Borrower or any ERISA Affiliate to any tax, penalty or other liability including a liability to indemnify, (D) incur or allow to exist any accumulated funding deficiency (within the meaning of section 412 of the IRC or section 302 of ERISA), (E) fail to make full payment when due of all amounts due as contributions to any Employee Benefit Plan or Multiemployer Plan, (F) fail to comply with the requirements of section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (G) adopt any amendment to any Employee Benefit Plan which would require the posting of security pursuant to section 401(a)(29) of the IRC, where singly or cumulatively, the above would be reasonably likely to have a Material Adverse Effect.           (ii) Neither Borrower nor any of its Subsidiaries shall (A) engage in any transaction prohibited by any Governmental Rule applicable to any Foreign Plan, (B) fail to make full payment when due of all amounts due as contributions to any Foreign Plan or (C) otherwise fail to comply with the requirements of any Governmental Rule applicable to any Foreign Plan, where singly or cumulatively, the above would be reasonably likely to have a Material Adverse Effect.           (i) Transactions With Affiliates. Neither Borrower nor any of its Subsidiaries shall enter into any Contractual Obligation with any Affiliate (other than Borrower or one of its Subsidiaries) or engage in any other transaction with any Affiliate except (i) for agreements with officers and directors of Borrower or its Subsidiaries for indemnification or participation under Borrower’s equity plans and loans to or retention or severance agreements with officers and directors of Borrower or its Subsidiaries, each as approved by the Board of Directors of Borrower; (ii) upon terms at least as favorable to Borrower or such Subsidiary as an arms-length transaction with unaffiliated Persons; or (iii) for transactions with Affiliates in which Borrower or its Subsidiaries have venture capital Investments permitted by Subparagraph 5.02(e)(x).           (k) Accounting Changes. Neither Borrower nor any of its Subsidiaries shall change (i) its fiscal year (currently ending the Friday closest to November 30) or (ii) its accounting practices except as required by GAAP. 57 --------------------------------------------------------------------------------           5.03. Financial Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower will comply, and will cause compliance, with the following financial covenants, unless Required Lenders shall otherwise consent in writing:           (a) Quick Ratio. Borrower shall not permit its Quick Ratio to be less than 1.00 on the last day of any fiscal quarter.           (b) Debt/EBITDA Ratio. Borrower shall not permit its Debt/EBITDA Ratio for any consecutive four-quarter period to be greater than 2.50.           (c) Fixed Charge Coverage Ratio. Borrower shall not permit its Fixed Charge Coverage Ratio for any consecutive four-quarter period to be less than 2.25. SECTION VI.     DEFAULT.           6.01. Events of Default. The occurrence or existence of any one or more of the following shall constitute an “Event of Default” hereunder:           (a) Non-Payment. Borrower shall (i) fail to pay when due any principal of any Loan, (ii) fail to pay on the Maturity Date for any Loans any interest, fees or other amounts payable with respect to such Loans on such Maturity Date, or (iii) fail to pay within five (5) days after the same becomes due, any other interest, fees or amounts required under the terms of this Agreement or any of the other Credit Documents; or           (b) Specific Defaults. Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, obligation, condition or agreement set forth in Paragraph 5.02 or Paragraph 5.03; or           (c) Other Defaults. Borrower or any of its Subsidiaries shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Agreement or the other Credit Documents and such failure shall continue for fifteen (15) Business Days after the earlier of (i) Borrower’s written acknowledgement of such failure and (ii) Administrative Agent’s or any Lender’s written notice to Borrower of such failure; or           (d) Representations and Warranties. Any written representation, warranty, certificate, information or other statement (financial or otherwise) made or furnished by Borrower or any of its Subsidiaries to Administrative Agent or any Lender in or in connection with this Agreement or any of the other Credit Documents shall be false, incorrect, incomplete or misleading in any material respect when made or furnished and either:           (i) Borrower has acknowledged that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect or Administrative Agent or any Lender has 58 -------------------------------------------------------------------------------- delivered to Borrower written notice to such effect and such representation, warranty, certificate, information or other statement cannot be remedied; or           (ii) Such representation, warranty, certificate, information or other statement continues to be false, incorrect, incomplete or misleading in any material respect thirty (30) days after the earlier of (A) Borrower’s written acknowledgement that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect and (B) Administrative Agent’s or any Lender’s written notice to Borrower to such effect; or           (e) Cross-Default. (i) Borrower or any of its Subsidiaries shall fail to make any payment on account of any Indebtedness of such Person (other than the Obligations) when due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise) and such failure shall continue beyond any period of grace provided with respect thereto, if the amount of such Indebtedness exceeds $5,000,000 or the effect of such failure is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrower and its Subsidiaries (other than the Obligations) in an aggregate amount exceeding $5,000,000 to become redeemable, due or otherwise payable (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise) and/or to be secured by cash collateral or (ii) Borrower or any of its Subsidiaries shall otherwise fail to observe or perform any agreement, term or condition contained in any agreement or instrument relating to any Indebtedness of such Person (other than the Obligations), or any other event shall occur or condition shall exist, if the effect of such failure, event or condition is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrower and its Subsidiaries (other than the Obligations) in an aggregate amount exceeding $5,000,000 to become redeemable, due or otherwise payable (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise) and/or to be secured by cash collateral; or           (f) Insolvency, Voluntary Proceedings. Borrower or any of its Material Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part except as otherwise permitted by Subparagraph 5.02(d)(ii), (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or           (g) Involuntary Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Borrower or any of its Material Subsidiaries or of all or 59 -------------------------------------------------------------------------------- a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Borrower or any of its Material Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or           (h) Judgments. (i) One or more judgments, orders, decrees or arbitration awards requiring Borrower and/or its Subsidiaries to pay an aggregate amount of $10,000,000 or more (exclusive of amounts covered by insurance issued by an insurer not an Affiliate of Borrower and otherwise satisfying the requirements set forth in Subparagraph 5.01(d)) shall be rendered against Borrower and/or any of its Subsidiaries in connection with any single or related series of transactions, incidents or circumstances and the same shall not be satisfied, vacated or stayed for a period of ten (10) consecutive days; (ii) any judgment, writ, assessment, warrant of attachment, tax lien or execution or similar process shall be issued or levied against a substantial part of the property of Borrower and its Subsidiaries taken as a whole and the same shall not be released, stayed, vacated or otherwise dismissed within ten (10) days after issue or levy; or (iii) any other judgments, orders, decrees, arbitration awards, writs, assessments, warrants of attachment, tax liens or executions or similar processes which, alone or in the aggregate, are reasonably likely to have a Material Adverse Effect are rendered, issued or levied; or           (i) Credit Documents. The Credit Documents, taken as a whole, shall cease to provide Administrative Agent or any Lender the practical realization of the material rights and remedies intended to be provided thereunder or be asserted by Borrower or any of its Subsidiaries not to be a legal, valid and binding obligation of Borrower or any of its Subsidiaries enforceable in accordance with its terms; or           (j) Employee Benefit Plans. Any Reportable Event which constitutes grounds for the termination of any Employee Benefit Plan by the PBGC or for the appointment of a trustee by the PBGC to administer any Employee Benefit Plan shall occur, or any Employee Benefit Plan shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by the PBGC to administer any Employee Benefit Plan; or           (k) Change of Control. Any Change of Control shall occur; or           (l) Material Adverse Effect. Any event(s) or condition(s) which is (are) reasonably likely to have a Material Adverse Effect shall occur or exist.           6.02. Remedies. At any time after the occurrence and during the continuance of any Event of Default (other than an Event of Default referred to in Subparagraph 6.01(f) or 6.01(g)), Administrative Agent may, with the consent of the Required Lenders, or shall, upon instructions from the Required Lenders, by written notice to Borrower, (a) terminate the Commitments and the obligations of Lenders to make Loans and/or (b) declare all outstanding Obligations payable by Borrower to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or 60 -------------------------------------------------------------------------------- in the Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Subparagraph 6.01(f) or 6.01(g), immediately and without notice, (1) the Commitments and the obligations of Lenders to make Loans shall automatically terminate and (2) all outstanding Obligations payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Administrative Agent may exercise any other right, power or remedy available to it under any of the Credit Documents or otherwise by law, either by suit in equity or by action at law, or both. SECTION VII.     AGENTS AND RELATIONS AMONG LENDERS.           7.01. Appointment, Powers and Immunities of Administrative Agent. Each Lender hereby appoints and authorizes Administrative Agent to act as its agent hereunder and under the other Credit Documents with such powers as are expressly delegated to Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement or in any other Credit Document, be a trustee for any Lender or have any fiduciary duty to any Lender. Notwithstanding anything to the contrary contained herein, Administrative Agent shall not be required to take any action which is contrary to this Agreement or any other Credit Document or any applicable Governmental Rule. Neither Administrative Agent nor any Lender shall be responsible to any other Lender for any recitals, statements, representations or warranties made by Borrower or any of its Subsidiaries contained in this Agreement or in any other Credit Document, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure by Borrower or any of its Subsidiaries to perform their respective obligations hereunder or thereunder. Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible to any Lender for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither Administrative Agent nor any of its directors, officers, employees, agents or advisors shall be responsible to any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Credit Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. Except as otherwise provided under this Agreement, Administrative Agent shall take such action with respect to the Credit Documents as shall be directed by the Required Lenders. Administrative Agent shall provide each Lender with copies of such documents received from Borrower pursuant to the Credit Documents as such Lender may reasonably request.           7.02. Reliance by Administrative Agent. Administrative Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, facsimile or telex) believed by it in good faith to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Administrative Agent with reasonable care. As to any other matters not expressly provided for by this Agreement, Administrative 61 -------------------------------------------------------------------------------- Agent shall not be required to take any action or exercise any discretion, but shall be required to act or to refrain from acting upon instructions of the Required Lenders and shall in all cases be fully protected by Lenders in acting, or in refraining from acting, hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of Lenders.           7.03. Defaults. Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default unless Borrower has failed to make a payment required to be made to Administrative Agent hereunder or Administrative Agent has received a written notice from a Lender or Borrower, referring to this Agreement and describing the provision under which such Default occurred. If Administrative Agent receives such a notice of the occurrence of a Default, Administrative Agent shall give prompt notice thereof to Lenders. Administrative Agent shall take such action with respect to such Default as shall be reasonably directed by the Required Lenders; provided, however, that until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders.           7.04. Indemnification. Without limiting the Obligations of Borrower hereunder, each Lender agrees to indemnify Administrative Agent (to the extent not reimbursed by Borrower), ratably in accordance with their Proportionate Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Administrative Agent (other than in its capacity as a Lender) in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof subject to reimbursement on a pro rata basis if any such payment is subsequently recovered from Borrower; provided, however, that no Lender shall be liable for any of the foregoing to the extent they arise from Administrative Agent’s gross negligence or willful misconduct. Administrative Agent shall be fully justified in refusing to take or in continuing to take any action hereunder unless it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The obligations of each Lender under this Paragraph 7.04 shall survive the payment and performance of the Obligations, the termination of this Agreement and any Lender ceasing to be a party to this Agreement (with respect to events which occurred prior to the time such Lender ceased to be a Lender hereunder).           7.05. Non-Reliance. Each Lender represents that it has, independently and without reliance on Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the business, prospects, management, financial condition and affairs of Borrower and the Subsidiaries and its own decision to enter into this Agreement and agrees that it will, independently and without reliance upon Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Agreement. Neither Administrative Agent nor any of its 62 -------------------------------------------------------------------------------- affiliates nor any of their respective directors, officers, employees, agents or advisors shall (a) be required to keep any Lender informed as to the performance or observance by Borrower or any of its Subsidiaries of the obligations under this Agreement or any other document referred to or provided for herein or to make inquiry of, or to inspect the properties or books of Borrower or any of its Subsidiaries; (b) have any duty or responsibility to provide any Lender with any credit or other information concerning Borrower or any of its Subsidiaries which may come into the possession of Administrative Agent, except for notices, reports and other documents and information expressly required to be furnished to Lenders by Administrative Agent hereunder; or (c) be responsible to any Lender for (i) any recital, statement, representation or warranty made by Borrower or any officer, employee or agent of Borrower in this Agreement or in any of the other Credit Documents, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any Credit Document, (iii) the value or sufficiency of any collateral or the validity or perfection of any of the liens or security interests intended to be created by the Credit Documents, or (iv) any failure by Borrower to perform its obligations under this Agreement or any other Credit Document.           7.06. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, Administrative Agent may resign at any time by giving thirty (30) days prior written notice thereof to Borrower and Lenders, and Administrative Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent, which Administrative Agent, if not a Lender, shall be reasonably acceptable to Borrower; provided, however, that Borrower shall have no right to approve a successor Administrative Agent if a Default has occurred and is continuing. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from the duties and obligations thereafter arising hereunder. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Section VII 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.           7.07. Administrative Agent in its Individual Capacity. Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of banking or other business with Borrower and its Subsidiaries and affiliates as though Administrative Agent were not Administrative Agent hereunder. With respect to Loans, if any, made by Administrative Agent in its capacity as a Lender, Administrative Agent in its capacity as a Lender shall have the same rights and powers under this Agreement and the other Credit Documents as any other Lender and may exercise the same as though it were not Administrative Agent, and the terms “Lender” or “Lenders” shall include Administrative Agent in its capacity as a Lender. 63 -------------------------------------------------------------------------------- SECTION VIII.      MISCELLANEOUS.      8.01.      Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon Borrower, any Lender or Administrative Agent under this Agreement or the other Credit Documents shall be in writing and faxed, mailed, delivered or, where permitted, electronically mailed, if to Borrower or Administrative Agent, at its respective facsimile number or address set forth below or, if to any Lender, at the address or facsimile number specified beneath the heading “Address for Notices” under the name of such Lender in Part B of Schedule I (or to such other facsimile number or address for any party as indicated in any notice given by that party to the other parties or in any applicable Assignment Agreement). All such notices and communications shall be effective (a) when sent by an overnight courier service of recognized standing, upon delivery; (b) when mailed, first class postage prepaid and addressed as aforesaid through the United States Postal Service, upon receipt; (c) when delivered by hand, upon delivery; (d) when faxed, upon confirmation of receipt and (e) when electronically mailed, upon return confirmation of receipt; provided, however, that any notice delivered to Administrative Agent under Section II shall not be effective until received by Administrative Agent. Administrative Agent:   ABN AMRO Bank N.V.      208 South LaSalle Street, Suite 1500      Chicago, IL 60604-1003      Attn: Agency Services, Joycelyn Gay      Tel. No: (312) 992-5094      Fax. No: (312) 992-5157      Email: [email protected]                With a copy to:                ABN AMRO Bank N.V.       101 California Street, Suite 4550      San Francisco, CA 94111-5812      Attn: Jamie Dillon      Tel: (415) 984-3750      Fax: (415) 362-3524      Email: [email protected]         Borrower:   Adobe Systems Incorporated      345 Park Avenue      San Jose, CA 95110-2704      Attn: Barbara Hill, Treasurer      Tel. No: (408) 536-3272      Fax No. (408) 537-4035      Email: [email protected]         64 -------------------------------------------------------------------------------- Each Notice of Borrowing, Extension Request, Notice of Term Loan Conversion and Notice of Interest Period Selection shall be given by Borrower to Administrative Agent’s office located at the address referred to above during Administrative Agent’s normal business hours; provided, however, that any such notice received by Administrative Agent after 11:00 a.m. (San Francisco time) on any Business Day shall be deemed received by Administrative Agent on the next Business Day. In any case where this Agreement authorizes notices, requests, demands or other communications by Borrower to Administrative Agent or any Lender to be made by telephone or facsimile, Administrative Agent or any Lender may conclusively presume that anyone purporting to be a person designated in any incumbency certificate or other similar document received by Administrative Agent or a Lender is such a person.      8.02.      Expenses. Borrower shall pay on demand, whether or not any Loan is made hereunder, (a) all reasonable fees and expenses, including reasonable attorneys’ fees and expenses, incurred by Administrative Agent in connection with the syndication of the facilities provided hereunder, the preparation, negotiation, execution and delivery of, and the exercise of its duties under, this Agreement and the other Credit Documents, and the preparation, negotiation, execution and delivery of amendments and waivers hereunder and thereunder and (b) all reasonable fees and expenses, including reasonable attorneys’ fees and expenses, incurred by Administrative Agent and Lenders in the enforcement or attempted enforcement of any of the Obligations or in preserving any of Administrative Agent’s or Lenders’ rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any “workout” or restructuring affecting the Credit Documents or the Obligations or any bankruptcy or similar proceeding involving Borrower or any of its Subsidiaries). As used herein, the term “reasonable attorneys’ fees and expenses” shall include, without limitation, allocable costs and expenses of Administrative Agent’s and Lenders’ in-house legal counsel and staff. The obligations of Borrower under this Paragraph 8.02 shall survive the payment and performance of the Obligations and the termination of this Agreement.      8.03.      Indemnification. To the fullest extent permitted by law, Borrower agrees to protect, indemnify, defend and hold harmless Administrative Agent, Lenders and their Affiliates and their respective directors, officers, employees, agents and advisors (“Indemnitees”) from and against any and all liabilities, losses, damages or expenses of any kind or nature and from any suits, claims or demands (including in respect of or for reasonable attorney’s fees and other expenses) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to the Credit Documents or any transaction contemplated thereby, including without limitation any use by Borrower of any proceeds of the Loans, except to the extent such liability arises from the willful misconduct or gross negligence of such Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Administrative Agent or any Lender believes is covered by this indemnity, Administrative Agent or such Lender shall give Borrower notice of the matter and an opportunity to defend it, at Borrower’s sole cost and expense, with legal counsel reasonably satisfactory to Administrative Agent or such Lender, as the case may be. Administrative Agent or such Lender may also require Borrower to defend the matter. Any failure or delay of Administrative Agent or any Lender to notify Borrower of any such suit, claim or demand shall not relieve Borrower of its obligations under this Paragraph 8.03 but shall reduce such obligations to the extent of any increase in those obligations caused solely by any such failure or 65 -------------------------------------------------------------------------------- delay which is unreasonable. The obligations of Borrower under this Paragraph 8.03 shall survive the payment and performance of the Obligations and the termination of this Agreement.      8.04.      Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement or any other Credit Document may be amended or waived, and any consent under this Agreement or any other Credit Document may be given, if such amendment, waiver or consent is in writing and is signed by Borrower and the Required Lenders (or Administrative Agent on behalf of the Required Lenders with the written approval of the Required Lenders); provided, however that:                 (a)      Any amendment, waiver or consent which would (i) increase the Total Commitment other than as provided in Subparagraph 2.06(a), (ii) postpone, delay or extend the Revolving Loan Maturity Date (except for extensions as provided in Paragraph 2.02) or the Term Loan Maturity Date, (iii) reduce the principal of or interest on the Loans, the Commitment Fees or any other fees or amounts payable for the account of all Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such principal, interest, fees or amounts, (iv) amend this Paragraph 8.04, (v) amend the definition of Required Lenders, or (vi) waive any Default based on Borrower’s failure to pay any sum due to all Lenders hereunder, must be in writing and signed or approved in writing by all Lenders;                      (b)      Any amendment, waiver or consent which would increase or decrease the Commitment of any Lender (except for a pro rata decrease in the Commitments of all Lenders) must be in writing and signed by such Lender; and                      (c)      Any amendment, waiver or consent which affects the rights or obligations of Administrative Agent must be in writing and signed by Administrative Agent.  No failure or delay by Administrative Agent or any Lender in exercising any right under this Agreement or any other Credit Document shall operate as a waiver thereof or of any other right hereunder or thereunder nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right hereunder or thereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given.   8.05.      Successors and Assigns.                     (a)      Binding Effect. This Agreement and the other Credit Documents shall be binding upon and inure to the benefit of Borrower, Lenders, Administrative Agent, all future holders of the Notes and their respective successors and permitted assigns, except that Borrower may not assign or transfer any of its rights or obligations under any Credit Document without the prior written consent of Administrative Agent and each Lender.                     (b)      Participations. Any Lender may at any time sell to one or more banks or other financial institutions (“Participants”) participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other 66 --------------------------------------------------------------------------------   interest of such Lender under this Agreement and the other Credit Documents. In the event of any such sale by a Lender of participating interests, such Lender’s obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of its Notes for all purposes under this Agreement and Borrower and Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement pursuant to which any such sale is effected may require the selling Lender to obtain the consent of the Participant in order for such Lender to agree in writing to any amendment, waiver or consent of a type specified in Subparagraph 8.04(a), Subparagraph 8.04(b), Subparagraph 8.04(c) or Subparagraph 8.04(d) to the extent applicable but may not otherwise require the selling Lender to obtain the consent of such Participant to any other amendment, waiver or consent hereunder. Borrower also agrees that any Lender which has transferred any participating interest in its Commitments or Loans shall, notwithstanding any suchtransfer, be entitled to the full benefits accorded such Lender under Paragraph 2.13, Paragraph 2.14, and Paragraph 2.15, as if such Lender had not made such transfer.                     (c)      Assignments. Any Lender may, at any time, sell and assign to any Lender or any Eligible Assignee (individually, an “Assignee Lender”) all or a portion of its rights and obligations under this Agreement and the other Credit Documents (such a sale and assignment to be referred to herein as an “Assignment”) pursuant to an assignment agreement substantially in the form of Exhibit J (an “Assignment Agreement”), executed by each Assignee Lender and such assignor Lender (an “Assignor Lender”) and delivered to Administrative Agent for its acceptance and recording in the Register; provided, however, that:        (i)      Without the written consent of Administrative Agent and, if no Default has occurred and is continuing, Borrower (which consent of Administrative Agent and Borrower shall not be unreasonably withheld), no Lender may make any Assignment to any Assignee Lender which is not, immediately prior to such Assignment, a Lender hereunder or an Affiliate thereof; or       (ii)      Without the written consent of Administrative Agent and, if no Default has occurred and is continuing, Borrower (which consent of Administrative Agent and Borrower shall not be unreasonably withheld), no Lender may make any Assignment of its Commitment and Loans to any Assignee Lender if, after giving effect to such Assignment, the Commitment (or, after the termination of the Commitments, the Loans) of such Lender or such Assignee Lender would be less than Five Million Dollars ($5,000,000), except that a Lender may make an Assignment which reduces its Commitment (or, after the termination of the Commitments, its Loans) to zero without the written consent of Borrower and Administrative Agent; or       (iii)      Without the written consent of Administrative Agent and, if no Default has occurred and is continuing, Borrower (which consent of 67 --------------------------------------------------------------------------------   Administrative Agent and Borrower shall not be unreasonably withheld), no Lender may make any Assignment of its Commitment and Loans which does not assign and delegate an equal pro rata interest in such Lender’s Commitment, Loans and all other rights, duties and obligations of such Lender under this Agreement and the other Credit Documents.        Upon such execution, delivery, acceptance and recording of each Assignment Agreement, from and after the Assignment Effective Date determined pursuant to such Assignment Agreement, (A) each Assignee Lender thereunder shall be a Lender hereunder with Commitments and Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption “Commitment or Loans After Assignment”) and shall have the rights, duties and obligations of such a Lender under this Agreement and the other Credit Documents, and (B) the Assignor Lender thereunder shall be a Lender with Commitment and Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption “Commitments or Loans After Assignment”), or, if the Commitment and Loans of the Assignor Lender has been reduced to 0% and $0, the Assignor Lender shall cease to be a Lender and to have any obligation to make any Loan; provided, however, that any such Assignor Lender which ceases to be a Lender shall continue to be entitled to the benefits of any provision of this Agreement which by its terms survives the termination of this Agreement. Each Assignment Agreement shall be deemed to amend Schedule I to the extent, and only to the extent, necessary to reflect the addition of each Assignee Lender, the deletion of each Assignor Lender which reduces its Commitment and Loans to 0% and $0 and the resulting adjustment of Proportionate Shares arising from the purchase by each Assignee Lender of all or a portion of the rights and obligations of an Assignor Lender under this Agreement and the other Credit Documents. On or prior to the Assignment Effective Date determined pursuant to each Assignment Agreement, Borrower, at its own expense, shall execute and deliver to Administrative Agent, in exchange for the surrendered Notes, if any, of the Assignor Lender thereunder, a new Note to the order of each Assignee Lender thereunder that requests such Note (with each new Revolving Loan Note to be in amounts equal to the applicable Commitments assumed by such Assignee Lender and each new Term Loan Note to be in the original principal amount of the Term Loan then held by such Assignee Lender) and, if the Assignor Lender is continuing as a Lender hereunder, new Revolving Loan Notes and a Term Loan Note to the order of the Assignor Lender if so requested by such Assignor Lender (with the new Revolving Loan Notes to be in amounts equal to the applicable Commitments retained by it and the new Term Loan Note to be in the original principal amount of the Term Loan retained by it). Each such new Revolving Loan Note shall be dated the date of this Agreement, each such new Term Loan Note shall be dated the Revolving Loan Maturity Date, and each such new Note shall otherwise be in the form of the Note replaced thereby. The Notes surrendered by the Assignor Lender shall be returned by Administrative Agent to Borrower marked “replaced”. Each Assignee Lender which was not previously a Lender hereunder and which is not incorporated under the laws of the United States of America or a state thereof shall, within three (3) Business Days of becoming a Lender, deliver to Borrower and Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI   68 --------------------------------------------------------------------------------   (or successor applicable form), as the case may be, certifying in each case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes.                   (d)      Grant of Option by Lender to SPC. Notwithstanding anything to the contrary herein, any Lender (a “Granting Lender”) may grant to a special purpose funding entity (such entity being an “SPC”) the option to provide to Borrower all or part of any Loan that such Granting Lender would otherwise be obligated to make to Borrower pursuant to Paragraph 2.01 or 2.02, provided that (i) nothing herein shall constitute a Commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, such Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the respective Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender, but shall not release such Granting Lender from any other liability under the Credit Documents. Each party hereto agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the respective Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees, which agreement shall survive the termination of this Agreement, that, prior to the date that is one year and one day after the payment in full of all outstanding senior Indebtedness of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States of America or any state thereof. In addition, notwithstanding anything to the contrary contained in this Paragraph 8.05, any SPC may (x) with notice, but without prior written consent of Administrative Agent or Borrower and without paying any registration and processing fee, assign all or part of its interests in any Loans to its respective Granting Lender and (y) subject to Paragraph 8.10, disclose any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC. In no event shall Borrower be obligated to pay to an SPC that has made a Loan any greater amount than Borrower would have been obligated to pay under this Agreement if the respective Granting Lender had made such Loan. Borrower, Agents and each other Lender shall continue to deal solely and directly with, and send notices solely to, the respective Granting Lender with respect to any Loan made by its SPC and such Granting Lender shall not transfer or grant to its SPC the right to approve any amendment, waiver or consent hereunder. This Subparagraph 8.05(d) may not be amended without the written consent of each Granting Lender.                     (e)      Register. Administrative Agent shall maintain at its address referred to in Paragraph 8.01 a copy of each Assignment Agreement delivered to it and a register (the “Register”) for the recordation of the names and addresses of Lenders and the Commitments or Loans of each Lender from time to time. The entries in the Register shall be conclusive in the absence of manifest error, and Borrower, Administrative Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Register shall be 69 --------------------------------------------------------------------------------   available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.                     (f)      Registration. Upon its receipt of an Assignment Agreement executed by an Assignor Lender and an Assignee Lender (and, to the extent required by Subparagraph 8.05(c), by Borrower and Administrative Agent) together with payment to Administrative Agent by Assignor Lender or Assignee Lender of a registration and processing fee of $3,000, Administrative Agent shall (i) promptly accept such Assignment Agreement and (ii) on the Assignment Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to Lenders and Borrower. Administrative Agent may, from time to time at its election, prepare and deliver to Lenders and Borrower a revised Schedule I reflecting the names, addresses and respective the Commitments or Loans of all Lenders then parties hereto.                      (g)      Confidentiality. Subject to Paragraph 8.10, Administrative Agent and Lenders may disclose the Credit Documents and any financial or other information relating to Borrower or any Subsidiary to each other or to any potential Participant or Assignee Lender.                       (h)      Pledges to Federal Reserve Banks. Notwithstanding any other provision of this Agreement, any Lender may at any time assign all or a portion of its rights under this Agreement and the other Credit Documents to a Federal Reserve Bank. No such assignment shall relieve the assigning Lender from its obligations under this Agreement and the other Credit Documents.      8.06.      Setoff. In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Administrative Agent but without prior notice to or consent of Borrower, any such notice and consent being expressly waived by Borrower to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against the Obligations any amount owing from such Lender to Borrower. The aforesaid right of set-off may be exercised by such Lender against Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of Borrower or against anyone else claiming through or against Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off may not have been exercised by such Lender at any prior time. Each Lender agrees promptly to notify Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.      8.07.      No Third Party Rights. Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person, other than the parties hereto and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein. 70 --------------------------------------------------------------------------------      8.08.      Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.      8.09.      Jury Trial. EACH OF BORROWER, LENDERS AND ADMINISTRATIVE AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.   8.10.      Confidentiality.                     (a)      Neither any Lender nor Administrative Agent shall make use of, disseminate, or in any way disclose confidential information with respect to Borrower or any of its Subsidiaries which is furnished pursuant to this Agreement or under the other Credit Documents except as authorized by this Agreement. As used in this Paragraph 8.10, “confidential information” shall mean any and all technical and non-technical information including patent, trade secret, and proprietary information, techniques, sketches, drawings, models, inventions, know-how, processes, apparatus, equipment, algorithms, software programs, software source documents, and formulae related to the current, future and proposed products and services of Borrower and its Subsidiaries, and includes, without limitation, their respective information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing, manufacturing, customer lists, business forecasts, sales and merchandising, and marketing plans and information. Neither Borrower nor any of its Subsidiaries licenses any intellectual property to any Lender or Administrative Agent under this Agreement.                     (b)      Each Lender and Administrative Agent is authorized to disclose confidential information with respect to Borrower or any of their Subsidiaries: (i) to its own directors, officers, employees, auditors, counsel and other advisors and to its Affiliates who need to know such information; (ii) to any other Lender or Administrative Agent; (iii) which is in the public domain at or subsequent to the time it was received by such Lender or Administrative Agent through no fault of such recipient, was rightfully in the possession of such Lender or Administrative Agent free of any obligation of confidence at or subsequent to the time it was communicated to such recipient by Borrower or any of its Subsidiaries, or was developed by employees or agents of such Lender or Administrative Agent independently of and without reference to any information communicated to such recipient by Borrower or any of its Subsidiaries; (iv) if required or appropriate in any report, statement or testimony submitted to any Governmental Authority having or claiming to have jurisdiction over such Lender or Administrative Agent; (v) if required in response to any valid order by a court or Governmental Authority; (vi) as necessary to establish the rights of any party under this Agreement or the other Credit Documents; (vii) to comply with any Requirement of Law 71 -------------------------------------------------------------------------------- applicable to such Lender or Administrative Agent; (viii) to any New Lender, Assignee Lender or Participant or any prospective New Lender, Assignee Lender or Participant, provided that such New Lender, Assignee Lender or Participant or prospective New Lender, Assignee Lender or Participant agrees to be bound by this Paragraph 8.10; or (ix) otherwise with the prior consent of Borrower; provided, however, that (A) any Lender or Administrative Agent served with any court order demanding the disclosure of any such confidential information shall use reasonable efforts to notify Borrower promptly of such court order if not prohibited by any Requirement of Law and, if requested by Borrower and not disadvantageous to such Lender or Administrative Agent, to cooperate with Borrower in obtaining a protective order restricting such disclosure, and (B) any disclosure made in violation of this Agreement shall not affect the obligations of Borrower and their Subsidiaries under this Agreement and the other Credit Documents. Each Lender and Administrative Agent (x) shall treat all confidential information with respect to Borrower and its Subsidiaries which is furnished pursuant to this Agreement or under the other Credit Documents with the same degree of care as it accords its own confidential information and (y) represents to Borrower that it exercises reasonable care with respect to its own confidential information and has policies in place regarding the handling of confidential information by its employees.      8.11.      Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. [The first signature page follows.] 72 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, Borrower, Lenders and Administrative Agent have caused this Agreement to be executed as of the day and year first above written. BORROWER: ADOBE SYSTEMS INCORPORATED             By:  /s/ MURRAY J. DEMO       --------------------------------------------------------------------------------       Name:      Murray J. Demo         --------------------------------------------------------------------------------       Title:        Sr. Vice President, CFO         --------------------------------------------------------------------------------             By:  /s/ JOHN E. WARNOCK       --------------------------------------------------------------------------------       Name:      John E. Warnock         --------------------------------------------------------------------------------       Title:        Chairman, CEO         --------------------------------------------------------------------------------           ADMINISTRATIVE     AGENT: ABN AMRO BANK N.V.             By:  /s/ JAMIE DILLON       --------------------------------------------------------------------------------       Name:      Jamie Dillon         --------------------------------------------------------------------------------       Title:        Senior Vice President         --------------------------------------------------------------------------------             By:  /s/ NIA MILLER       --------------------------------------------------------------------------------       Name:      Nia Miller         --------------------------------------------------------------------------------       Title:        Vice President         --------------------------------------------------------------------------------           LENDERS: ABN AMRO BANK N.V.             By:  /s/ JAMIE DILLON       --------------------------------------------------------------------------------       Name:      Jamie Dillon         --------------------------------------------------------------------------------       Title:        Senior Vice President         --------------------------------------------------------------------------------             By:  /s/ NIA MILLER       --------------------------------------------------------------------------------       Name:     Nia Miller         --------------------------------------------------------------------------------       Title:        Vice President         --------------------------------------------------------------------------------           S-1 --------------------------------------------------------------------------------   BANK OF AMERICA, N.A.             By:  /s/ JOUNI KORHONEN       --------------------------------------------------------------------------------       Name:     Jouni Korhonen         --------------------------------------------------------------------------------       Title:        Managing Director         --------------------------------------------------------------------------------             BANK HAPOALIM B.M.             By:  /s/ CONRAD WAGNER                       /s/ LEWROY HACKETT       --------------------------------------------------------------------------------       Name:     Conrad Wagner                        Lewroy Hackett         --------------------------------------------------------------------------------       Title:        First Vice President                 Vice President         --------------------------------------------------------------------------------             BANK OF MONTREAL             By:  /s/ KANU MODI       --------------------------------------------------------------------------------       Name:     Kanu Modi         --------------------------------------------------------------------------------       Title:        Director         --------------------------------------------------------------------------------             BNP PARIBAS             By:  /s/ C. BETTLES                                 /s/ TJALLING TERPSTRA       --------------------------------------------------------------------------------       Name:     C. Bettles                                  Tjalling Terpstra         --------------------------------------------------------------------------------       Title:        Sr. Vice President                  Vice President         --------------------------------------------------------------------------------             FIRST UNION NATIONAL BANK             By:  /s/ JORGE A. GONZALEZ       --------------------------------------------------------------------------------       Name:     Jorge A. Gonzalez         --------------------------------------------------------------------------------       Title:        Senior Vice President         --------------------------------------------------------------------------------       FLEET NATIONAL BANK             By:  /s/ WILLIAM S. ROWE       --------------------------------------------------------------------------------       Name:     William S. Rowe         --------------------------------------------------------------------------------       Title:        Assistant Vice President         --------------------------------------------------------------------------------            S-2 --------------------------------------------------------------------------------           THE INDUSTRIAL BANK OF JAPAN, LIMITED             By:  /s/ YOSHIHIKO SUGITA       --------------------------------------------------------------------------------       Name:     Yoshihiko Sugita         --------------------------------------------------------------------------------       Title:       Senior Vice President &   Deputy General Manager       --------------------------------------------------------------------------------             KEYBANK NATIONAL ASSOCIATION             By:  /s/ MARY K. YOUNG       --------------------------------------------------------------------------------       Name:     Mary K. Young         --------------------------------------------------------------------------------       Title:        Vice President         --------------------------------------------------------------------------------             MELLON BANK, N.A.             By:  /s/ LAWRENCE C. IVEY       --------------------------------------------------------------------------------       Name:     Lawrence C. Ivey         --------------------------------------------------------------------------------       Title:        Vice President         --------------------------------------------------------------------------------             THE NORTHERN TRUST COMPANY             By:  /s/ ASHISH S. BHAGWAT       --------------------------------------------------------------------------------       Name:     Ashish S. Bhagwat         --------------------------------------------------------------------------------       Title:        2nd Vice President         --------------------------------------------------------------------------------       THE ROYAL BANK OF SCOTLAND PLC             By:  /s/ KAREN L. STEFANCIO       --------------------------------------------------------------------------------       Name:     Karen L. Stefancio         --------------------------------------------------------------------------------       Title:        Vice President         --------------------------------------------------------------------------------              THE SUMITOMO BANK, LIMITED             By:  /s/ AZAR SHAKERI       --------------------------------------------------------------------------------       Name:     Azar Shakeri         --------------------------------------------------------------------------------       Title:        Vice President and Manager         --------------------------------------------------------------------------------   S-3 --------------------------------------------------------------------------------           UBS AG      Stamford Branch              By:  /s/ ROBERT H. RILEY III       --------------------------------------------------------------------------------       Name:     Robert H. Riley III         --------------------------------------------------------------------------------       Title:        Executive Director         --------------------------------------------------------------------------------             By:  /s/ WILFRED SAINT       --------------------------------------------------------------------------------       Name:     Wilfred Saint         --------------------------------------------------------------------------------   Title: Associate Director Loan Portfolio Support, US       --------------------------------------------------------------------------------           S-4 -------------------------------------------------------------------------------- SCHEDULE I LENDERS PART A – COMMITMENTS Lender Commitment   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ABN AMRO Bank N.V. $ 9,288,321.21   Bank of Montreal   8,467,153.28   First Union National Bank   8,467,153.28   KeyBank National Association   8,467,153.28   Fleet National Bank   8,467,153.28   The Sumitomo Bank, Limited   7,500,000.00   The Northern Trust Company   7,299,270.07   Bank of America, N.A.   5,255,474.45   BNP Paribas   5,255,474.45   The Industrial Bank of Japan,   5,255,474.45   Limited       Mellon Bank, N.A.   5,255,474.45   The Royal Bank of Scotland   5,255,474.45   plc       UBS AG   4,379,562.04   Stamford Branch       Bank Hapoalim B.M.   2,919,708.03         Total $ 91,532,846.72   I-1 -------------------------------------------------------------------------------- PART B - ADDRESSES, ETC. ABN AMRO BANK N.V.   Domestic Lending Office and Euro-Dollar Lending Office:               ABN AMRO Bank N.V.             208 South LaSalle Street, Suite 1500             Chicago, IL 60604-1003   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               ABN AMRO Bank N.V.             208 South LaSalle Street, Suite 1500             Chicago, IL 60604-1003             Attn: Loan Administration             Tel. No.: (312) 992-5153             Fax No.: (312) 992-5158   Address for all other notices:               ABN AMRO Bank N.V.             208 South LaSalle Street, Suite 1500             Chicago, IL 60604-1003             Attn: Credit Administration             Tel. No.: (312) 992-5110             Fax No.: (312) 992-5111   With a copy of all notices to:               ABN AMRO Bank N.V.             101 California Street, Suite 4550             San Francisco, CA 94111             Attn: Jamie Dillon             Tel. No: (415) 984-3750             Fax No: (415) 362-3524             Email: [email protected]   I-2   -------------------------------------------------------------------------------- Wiring Instructions:               ABN AMRO Bank N.V.             New York, New York             ABA No.: 026009580             F/O ABN AMRO Bank N.V.             Chicago Branch CPU             Account No.: 650-001-1789-41             Reference: CPU 00457353 Adobe Systems   I-3   -------------------------------------------------------------------------------- BANK OF AMERICA, N.A.   Domestic Lending Office and Euro-Dollar Lending Office:               Bank of America, N.A.             901 Main Street             Dallas, TX 75202   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               Bank of America, N.A.             901 Main Street             Dallas, TX 75202             Attn: Brandi Baker             Tel. No.: (214) 209-0592             Fax No.: (214) 290-9417             Email: [___________________]   Address for all other notices:               Bank of America, N.A.             555 California Street             San Francisco, CA 94104             Attn: Jouni Korhonen             Tel. No.: (415) 622-7293             Fax No.: (415) 622-0632             Email: [email protected]   Wiring Instructions:               Bank of America, N.A.             Dallas, TX             ABA No.: 111000012             For further credit to: Credit Services             Account No.: 1292000883             Reference: Adobe Systems Inc.   I-4   -------------------------------------------------------------------------------- BANK HAPOALIM B.M.   Domestic Lending Office and Euro-Dollar Lending Office:             Bank Hapoalim B.M.             San Francisco Branch             250 Montgomery Street, Suite 700             San Francisco, CA 94104   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               Bank Hapoalim B.M.             San Francisco Branch             250 Montgomery Street, Suite 700             San Francisco, CA 94104             Attn: Fe Ona             Tel. No.: (415) 989-9940 Ext. 130             Fax No.: (415) 989-9948 or (415) 989-9036             Email: [____________________]   Address for all other notices:               Bank Hapoalim B.M.             San Francisco Branch             250 Montgomery Street, Suite 700             San Francisco, CA 94104             Attn: Chris Hillard             Tel. No.: (415) 989-9940 Ext. 124             Fax No.: (415) 989-9948             Email: [email protected]   Wiring Instructions:               Bank Hapoalim B.M.             New York Branch             ABA No.: 0260-0886-6             For further credit to: BHSF             Reference: Adobe Systems   I-5   -------------------------------------------------------------------------------- BANK OF MONTREAL   Domestic Lending Office and Euro-Dollar Lending Office:               Bank of Montreal             115 South LaSalle Street, 12th Floor             Chicago, IL 60603   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               Bank of Montreal             115 South LaSalle Street, 12th Floor             Chicago, IL 60603             Attn: Phyllis Lee             Tel. No.: (312) 750-5947             Fax No.: (312) 750-6061 or (312) 750-4345             Email: [email protected]   Address for all other notices:               Bank of Montreal             115 South LaSalle Street, 12th Floor             Chicago, IL 60603             Attn: Craig Ingram             Tel. No.: (312) 750-3750             Fax No.: (312) 845-2199             Email: [email protected]   Wiring Instructions:               Harris Trust and Savings Bank             111West Monroe Street             Chicago, IL 60603             ABA No.: 071000288             Account Name: Bank of Montreal             Account No.: 124-856-6             Reference: Adobe Systems Incorporated   I-6   -------------------------------------------------------------------------------- BNP PARIBAS   Domestic Lending Office and Euro-Dollar Lending Office:               BNP Paribas             725 South Figueroa Street, Suite 2090             Los Angeles, CA 90017   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               BNP Paribas             Treasury Department             180 Montgomery Street             San Francisco, CA 94104             Attn: Donald A. Hart             Tel. No.: (415) 956-2511             Fax No.: (415) 989-9041             Email: [____________________]               with a copy to:               BNP Paribas             725 S. Figueroa Street             Los Angeles, CA 90017             Attn: Tjalling Terpstra             Tel. No.: (213) 688-6425             Fax No.: (213) 488-9602             Email: [email protected]               BNP Paribas             Loan Operations             180 Montgomery Street             San Francisco, CA 94104             Attn: Nancy Mak             Tel. No.: (415) 956-0707             Fax No.: (415) 956-4230             Email: [____________________]   I-7   -------------------------------------------------------------------------------- Address for all other notices:               BNP Paribas             725 S. Figueroa Street             Los Angeles, CA 90017             Attn: Tjalling Terpstra             Tel. No.: (213) 688-6425             Fax No.: (213) 488-9602             Email: [email protected]   Wiring Instructions:               Federal Reserve Bank of New York             ABA No.: 026007689 BNP Paribas             Beneficiary: BNP Paribas, San Francisco             ACA 14334000176             For further credit to BNP Paribas Los Angeles             Reference: Adobe Systems, Inc.             Attention: Jenny Seow   I-8   -------------------------------------------------------------------------------- FIRST UNION NATIONAL BANK   Domestic Lending Office and Euro-Dollar Lending Office:               First Union National Bank             301 South College Street             Charlotte, NC 28288   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               First Union National Bank             301 South College Street, 4th Floor             Charlotte, NC 28288-1183             Attn: Todd Tucker             Tel. No.: (704) 383-0905             Fax No.: (704) 383-7999             Email: [email protected]   Address for all other notices:               First Union National Bank             301 South College Street, 5th Floor             Charlotte, NC 28288-0735             Attn: Trip Caldwell             Tel. No.: (704) 715-1041             Fax No.: (704) 383-7236             Email: [email protected]   Wiring Instructions:               First Union National Bank             Charlotte, NC             ABA No.: 053-000-219             Account No.: 465906-0004568   I-9   -------------------------------------------------------------------------------- FLEET NATIONAL BANK     Domestic Lending Office and Euro-Dollar Lending Office:                 Fleet National Bank               100 Federal Street               Boston, MA 02110       Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:                   Fleet National Bank               Mail Code: MA DE 10009G             100 Federal Street               Boston, MA 02110               Attn: Pauline Kowalczyk             Tel. No.: (617) 346-0622             Fax No.: (617) 346-0595             Email: [____________________]     Address for all other notices:                 Fleet National Bank               Mail Code: MA DE 10009G             100 Federal Street               Boston, MA 02110               Attn: William Rowe             Tel. No.: (617) 434-6396             Fax No.: (617) 434-0819             Email: [email protected]     Wiring Instructions:                   Fleet National Bank               Boston, MA               ABA No.: 011 000 138             For further credit to:  Adobe Systems, Inc.             Account No.: 1510351-03156             Attn: Commercial Loan Wire Suspense   I-10   -------------------------------------------------------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED   Domestic Lending Office and Euro-Dollar Lending Office:               The Industrial Bank of Japan, Limited             One Market Street             Spear Tower, Suite 1610             San Francisco, CA 94105   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               The Industrial Bank of Japan, Limited             1251 Avenue of the Americas             New York, NY 10020-1104             Attn: Richard Emmich or Michelle Fuimo             Tel. No.: (212) 282-4092 or (212) 282-4063             Fax No.: (212) 282-4478   Address for all other notices:               The Industrial Bank of Japan, Limited             One Market Street             Spear Tower, Suite 1610             San Francisco, CA 94105             Attn: Eric Maubert             Tel. No.: (415) 693-1805             Fax No.: (415) 982-1917             Email: [email protected]   Wiring Instructions:               The Industrial Bank of Japan, Limited             New York, NY             ABA No. 026-008-345             Attn: Richard Emmich, Credit Administration #1 Dept.   I-11   -------------------------------------------------------------------------------- KEYBANK NATIONAL ASSOCIATION   Domestic Lending Office and Euro-Dollar Lending Office:               KeyBank National Association             700 Fifth Avenue, 46th Floor             Seattle, WA 98104   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               KeyBank National Association             431 East Park Center Boulevard             Boise, ID 83706             Attn: Specialty Services Group             Tel. No.: (800) 297-5518             Fax No.: (800) 297-5495   Address for all other notices:               KeyBank National Association             700 Fifth Avenue, 46th Floor             Seattle, WA 98104             Attn: Mary K. Young             Tel. No.: (206) 684-6085             Fax No.: (206) 684-6035             Email: [email protected]   Wiring Instructions:               KeyBank National Association             Seattle, WA             ABA No.: 125000574             For further credit to: NW Region Specialty Services             Account No.: 01500163             Reference: Adobe Systems Incorporated   I-12   -------------------------------------------------------------------------------- MELLON BANK, N.A.   Domestic Lending Office and Euro-Dollar Lending Office:               Mellon Bank, N.A.             400 South Hope Street, 5th Floor             Los Angeles, CA 90071   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               Mellon Bank, N.A.             Three Mellon Bank Center, Room #1203             Pittsburgh, PA 15259             Attn: Lorrie J. Amadio             Tel. No.: (412) 234-4769             Fax No.: (412) 209-6122             Email: [email protected]   Address for all other notices:               Mellon Bank, N.A.             400 South Hope Street, 5th Floor             Los Angeles, CA 90071             Attn: Edwin Wiest             Tel. No.: (213) 553-9503             Fax No.: (213) 629-0492             Email: [email protected]   Wiring Instructions:               Mellon Bank, N.A.             Pittsburgh, PA             ABA No.: 0430-0026-1             For further credit to: Loan Administration             Account No.: 990873800             Reference: Adobe Systems Incorporated   I-13   -------------------------------------------------------------------------------- THE NORTHERN TRUST COMPANY   Domestic Lending Office and Euro-Dollar Lending Office:               The Northern Trust Company             50 South LaSalle Street             Chicago, IL 60675   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               The Northern Trust Company             50 South LaSalle Street             Chicago, IL 60675             Attn: Linda Honda             Tel. No.: (312) 444-3532             Fax No.: (312) 630-1566             Email: [____________________]   Address for all other notices:               The Northern Trust Company             50 South LaSalle Street             Chicago, IL 60603             Attn: John Brazzale             Tel. No.: (312) 444-7445             Fax No.: (312) 630-6062             Email: [email protected]   Wiring Instructions:               The Northern Trust Bank             ABA No.: 071000152             Account No.: 5186401000             For further credit to: Commercial Loan Dept.             Reference: Adobe   I-14   -------------------------------------------------------------------------------- THE ROYAL BANK OF SCOTLAND PLC   Domestic Lending Office and Euro-Dollar Lending Office:               The Royal Bank of Scotland plc             Wall Street Plaza             88 Pine Street, 26th Floor             New York, NY 10005   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               The Royal Bank of Scotland plc             Wall Street Plaza             88 Pine Street, 26th Floor             New York, NY 10005             Attn: Jeanne DeQuar             Tel. No.: (212) 269-1700 Ext. 260             Fax No.: (212) 344-4065             Email: [____________________]   Address for all other notices:               The Royal Bank of Scotland plc             Wall Street Plaza             88 Pine Street, 26th Floor             New York, NY 10005             Attn: Karen Stefancic             Tel. No.: (212) 269-3390             Fax No.: (212) 480-0791             Email: [email protected]   Wiring Instructions:               Citibank, N.A.             New York, NY             ABA No.: 0210-0008-9             For further credit to: The Royal Bank of Scotland             Account No.: 36023239             Reference: Adobe             Attn: DeQuar   I-15   -------------------------------------------------------------------------------- THE SUMITOMO BANK, LIMITED   Domestic Lending Office and Euro-Dollar Lending Office:               The Sumitomo Bank, Limited             777 South Figueroa Street, Suite 2600             Los Angeles, CA 90017   Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion:               The Sumitomo Bank, Limited             777 South Figueroa Street, Suite 2600             Los Angeles, CA 90017             Attn: Miriam Delgado             Tel. No.: (213) 955-0883             Fax No.: (213) 623-6832             Email: [____________________]   Address for all other notices:               The Sumitomo Bank, Limited             555 California Street, Suite 3350             San Francisco, CA 94104             Attn: Azar Shakeri             Tel. No.: (415) 616-3010             Fax No.: (415) 362-6527             Email: [email protected]   Wiring Instructions:               The Sumitomo Bank, Limited             Los Angeles Branch             ABA No.: 122041594             Reference: Adobe             Attn: Miriam Delgado   I-16   -------------------------------------------------------------------------------- UBS AG           Domestic Lending Office and Euro-Dollar Lending Office:                     UBS AG                 Stamford Branch                 677 Washington Boulevard               Stamford, CT 06912         Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term   Loan Conversion:                       UBS AG                 Stamford Branch                 677 Washington Boulevard               Stamford, CT 06912               Attn: Philip FitzGerald               Tel. No.: (203) 719-5993               Fax No.: (203) 719-4176               Email: [____________________]         Address for all other notices:                     UBS AG                 Stamford Branch                 677 Washington Boulevard               Stamford, CT 06912               Attn: Robert H. Riley, III               Tel. No.: (203) 719-4066               Fax No.: (203) 719-6354               Email: [email protected]         Wiring Instructions:                       UBS AG                 Stamford Branch                 ABA No.: 026007993               CHIPS ABA No.:  799               For further credit to:  Portfolio Management House Account No. 101-WA-894001-001               Reference: Adobe Systems     I-17   -------------------------------------------------------------------------------- SCHEDULE II PRICING GRID   Applicable Margin Debt/   Base     EBITDA Pricing Rate LIBOR Commitment Ratio* Level Loans Loans Fee Percentage -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                     < 0.45   1   0%   0.750%   0.175%     > 0.45,         < 0.75 2 0% 0.875% 0.175%   > 0.75,                   < 1.00   3   0%   1.000%   0.175%     > 1.00,         < 1.50 4 0% 1.125% 0.175%             >1.50   5   0%   1.375%   0.175%   *        For a consecutive four-quarter period. EXPLANATION 1. The Applicable Margin for each Loan and Portion and the Commitment Fee Percentage will be set for each Pricing Period and will vary depending upon whether such period is a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period or a Level 5 Period.         2.  The first Pricing Period will commence on the date of the Credit Agreement and end on September 30, 2000 and each Pricing Period thereafter will commence on the first day immediately following the preceding Pricing Period and end on the last day of the month three months thereafter.         3. Each Pricing Period will be a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period or a Level 5 Period depending upon Borrower’s Debt/EBITDA Ratio for the consecutive four-quarter period ending one quarter prior to the first day of such Pricing Period. 1.01-1 -------------------------------------------------------------------------------- 5.    Examples:   (a) Borrower’s Debt/EBITDA Ratio for the consecutive four-quarter period ending May 28, 2000 is 0.80. The Pricing Period of October 1, 2000 – December 31, 2000 will be a Level 3 period.           (b) Borrower’s Debt/EBITDA Ratio for the consecutive four-quarter period ending August 27, 2000 is 0.60. The Pricing Period of January 1, 2001 – March 31, 2001 will be a Level 2 period. 1.01-2 -------------------------------------------------------------------------------- SCHEDULE 3.01 INITIAL CONDITIONS PRECEDENT A.    Principal Credit Documents.      (1)     The Credit Agreement, duly executed by Borrower, each Lender and Administrative Agent; and            (2)     Revolving Loan Notes payable to each Lender requesting such notes, each duly executed by Borrower. B.    Borrower Corporate Documents.      (1)     The Certificate or Articles of Incorporation of Borrower, certified as of a recent date prior to the Document Delivery Date by the Secretary of State (or comparable official) of its jurisdiction of incorporation;            (2)     A Certificate of Good Standing (or comparable certificate) for Borrower, certified as of a recent date prior to the Document Delivery Date by the Secretary of State (or comparable official) of its jurisdiction of incorporation;            (3)     A certificate of the Secretary or an Assistant Secretary of Borrower, dated the Document Delivery Date, certifying (a) that attached thereto is a true and correct copy of the Bylaws of Borrower as in effect on the Document Delivery Date; (b) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of Borrower and continuing in effect, which authorize the execution, delivery and performance by Borrower of this Agreement and the other Credit Documents executed or to be executed by Borrower and the consummation of the transactions contemplated hereby and thereby; and (c) that there are no proceedings for the dissolution or liquidation of Borrower;             (4)     A certificate of the Secretary or an Assistant Secretary of Borrower, dated the Document Delivery Date, certifying the incumbency, signatures and authority of the officers of Borrower authorized to execute, deliver and perform this Agreement, the other Credit Documents and all other documents, instruments or agreements related thereto executed or to be executed by Borrower; and             (5)     Certificates of Good Standing (or comparable certificates) for Borrower, certified as of a recent date prior to the Document Delivery Date by the Secretary of State and Franchise Tax Board of California. C.    Opinions. Favorable written opinions from each of the following counsel for Borrower, each dated the Document Delivery Date, addressed to Administrative Agent for the benefit of 3.01-1 -------------------------------------------------------------------------------- Administrative Agent and Lenders, covering such legal matters as Administrative Agent may reasonably request and otherwise in form and substance satisfactory to Administrative Agent and each Lender:       (1)     Cooley Godward LLP, outside counsel for Borrower and its Subsidiaries; and             (2)     Colleen Pouliot, internal general counsel for Borrower and its Subsidiaries. D.    Other Items.      (1)     All fees and expenses payable to Administrative Agent and Lenders on or prior to the Document Delivery Date (including all fees payable to Administrative Agent pursuant to the Administrative Agent’s Fee Letter);            (2)     All fees and expenses of Administrative Agent’s counsels through the Document Delivery Date; and            (3)     Such other evidence as Administrative Agent or any Lender may reasonably request to establish the accuracy and completeness of the representations and warranties and the compliance with the terms and conditions contained in this Agreement and the other Credit Documents. 3.01-2 -------------------------------------------------------------------------------- SCHEDULES 4.01(q) SUBSIDIARIES [SEE ATTACHED] 4.01(q)-1 -------------------------------------------------------------------------------- SCHEDULES 5.02(a) EXISTING INDEBTEDNESS 1. Amended, restated and consolidated master lease agreement between Sumitomo Bank Leasing and Finance and Adobe Systems Incorporated, dated August 11, 1999 for $142,500,000       2. Note Payable to Robin Henson due 2006 for $604,800       3. Bank guarantee from ABN AMRO for the Hamburg office lease contract for DM92,300       4. Letter of comfort from Adobe Systems Incorporated for the Munich office lease contract       5. Bank guarantee for the Netherlands office of DFL139,460       6. Bank guarantee for Adobe Direct taxes in the Netherlands of DFL7,350       7. Bank guarantee for a car lease in Belgium of BEF88,860       8. Bank guarantee for the Italy office of ITL26,510,000       9. Guarantees of VAT reimbursement in Italy of ITL683,407,279       10. Bank guarantee for the Switzerland office of CHF66,000       11. Contingent liability regarding turnkey manufacturing inventory       12. Credit Agreement, dated August 11, 1999 among Adobe Systems Incorporated as borrower, the financial institutions from time to time parties thereto as lenders, and ABN AMRO Bank N.V. as administrative agent for such lenders, under which a revolving credit facility in the amount of $100,000,000 is available       13. Bank guarantee with for customs in India for clearance of consignment INR4.2 million       14. American Express Centurion Bank $200,000 facility to guarantee cash advances on the American Express T&E card       15. Adobe Systems Incorporated parent guarantee of Adobe International LP and all international subsidiaries with ABN AMRO Bank       16. Overdraft lines with ABN AMRO for various Adobe subsidiaries       17. Bankers Automated Clearing System (BACS) facility for Bank of Scotland transfers in U.K.         18. Letter of comfort for Post Girot Bank in Sweden for purchasing card program   5.02(a)-1 -------------------------------------------------------------------------------- 19. Guarantee in favor of Modus Media to cover outstanding obligations of Adobe International LP.   5.02(a)-2 -------------------------------------------------------------------------------- SCHEDULES 5.02(b) EXISTING LIENS 1. Rent deposit for Belgium office of DFL27,855       2. Rent deposit for France office of FRF255,862       3. Bill guarantees through Banco Bilbao Vizcaya for judicial requests due to antipiracy actions of ESP6,000,000       4. Rent deposit for Spain office of ESP1,160,000       5. Rent deposit for Italy office of ITL1,327,500       6. Rent deposit for Singapore office of SGD53,666       7. Rent deposit for Korea office of KRW75,091,500       8. Rent deposit for China office of US$34,026       9. Rent deposit for Argentina office of US$2,700       10. Rent deposit for Portugal office of EUR2,475   5.02(b)-1 -------------------------------------------------------------------------------- SCHEDULES 5.02(e) EXISTING INVESTMENTS See Adobe Investment Policy (attached) 5.02(e)-1 -------------------------------------------------------------------------------- EXHIBIT A NOTICE OF REVOLVING LOAN BORROWING _______, ____ ABN AMRO Bank N.V.    as Administrative Agent Agency Services 208 South LaSalle Street Chicago, IL 60604-1003 Attn: Joycelyn Gay           1.   Reference is made to that certain Credit Agreement, dated as of August 9, 2000 (the “Credit Agreement”), among Adobe Systems Incorporated (“Borrower”), the financial institutions listed in Schedule I to the Credit Agreement (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein.           2.   Pursuant to Subparagraph 2.01(b) of the Credit Agreement, Borrower hereby irrevocably requests a Revolving Loan Borrowing upon the following terms:                 (a)     The principal amount of the requested Borrowing is to be $__________;                 (b)     The requested Borrowing is to consist of [ Base Rate or LIBOR ] Loans;                 (c)     If the requested Borrowing is to consist of LIBOR Loans, the initial Interest Period for such Loans will           be __________ month[s];                 (d)     If the requested Borrowing is to consist of LIBOR Loans, the initial LIBO Rate for such Loans will be based upon           the [Telerate Page or Reference Bank] Rate; and                 (e)     The date of the requested Borrowing is to be __________, ____.           3.   Borrower hereby certifies to Administrative Agent and Lenders that, on the date of this Notice of Revolving Loan Borrowing      and after giving effect to the requested Revolving Loan Borrowing:                 (a)     The representations and warranties of Borrower set forth in Paragraph 4.01 of the Credit Agreement and in the           other Credit Documents are true and correct in all material respects as if made on such date (except for representations           and warranties expressly made as of a specified date, which shall be true as of such date); and   A-1 --------------------------------------------------------------------------------                 (b)     No Default has occurred and is continuing.           4.   Please disburse the proceeds of the requested Revolving Loan Borrowing to _____________________________ __________________________________________________________________________________________________ __________________________________________________________________________.           IN WITNESS WHEREOF, Borrower has executed this Notice of Revolving Loan Borrowing on the date set forth above.                                                                                                                           ADOBE SYSTEMS INCORPORATED                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ A-2 -------------------------------------------------------------------------------- EXHIBIT B EXTENSION REQUEST [Date] ABN AMRO Bank N.V.    as Administrative Agent Agency Services 208 South LaSalle Street Chicago, IL 60604-1003 Attn: Joycelyn Gay           1.   Reference is made to that certain Credit Agreement, dated as of August 9, 2000 (the “Credit Agreement”), among Adobe Systems Incorporated (“Borrower”), the financial institutions listed in Schedule I to the Credit Agreement (the “Lenders”) and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, “Administrative Agent” ). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein.           2.   Pursuant to Paragraph 2.02(a) of the Credit Agreement, Borrower hereby irrevocably requests Lenders to extend the Revolving Maturity Date for an additional 364 days.            3.   Borrower hereby certifies to Lenders and Administrative Agent that, on the date of this Extension Request, and after giving effect to the requested extension of the Revolving Loan Maturity Date:                  (a)     The representations and warranties of Borrower set forth inParagraph 4.01 of the Credit Agreement and in the other            Credit Documents are true and correct in all material respects as if made on such date (except for representations and           warranties expressly made as of a specified date, which shall be true as of such date); and                  (b)     No Default has occurred and is continuing. B-1 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, Borrower has executed this Extension Request on the date set forth above.                                                                                                                             ADOBE SYSTEMS INCORPORATED                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ -------------------------------------------------------------------------------- CONSENT The undersigned Lender hereby consents to the above Extension Request:                                                                                                                           ___________________________________                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ B-2 -------------------------------------------------------------------------------- EXHIBIT C NOTICE OF TERM LOAN BORROWING _______, ____  ABN AMRO Bank N.V.    as Administrative Agent Agency Services 208 South LaSalle Street Chicago, IL 60604-1003 Attn: Joycelyn Gay           1.  Reference is made to that certain Credit Agreement, dated as of August 9, 2000 (the “Credit Agreement”), among Adobe Systems Incorporated (“Borrower”), the financial institutions listed in Schedule I to the Credit Agreement (the “Lenders”) and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein.           2.  Pursuant to Subparagraph 2.03(b) of the Credit Agreement, Borrower hereby irrevocably requests the Term Loan Borrowing on the Revolving Loan Maturity Date upon the following terms:                  (a)     The principal amount of the requested Borrowing is to be $__________; and                  (b)     The requested Borrowing is to consist initially of the following Portions[s] (specify for each Portion the amount; Type;           and, for each LIBOR Portion, Interest Period and basis for determining the initial LIBO Rate Telerate Page or Reference Bank): Portion Amount Portion Type Interest Period LIBO Rate Basis -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- $ __________ __________ __ month[s] __________ $ __________ __________ __ month[s] __________ $ __________ __________ __ month[s] __________ $ __________ __________ __ month[s] __________ $ __________ __________ __ month[s] __________ C-1 --------------------------------------------------------------------------------           3.   Borrower hereby certifies to Administrative Agent and Lenders that, on the date of this Notice of Term Loan Borrowing and after giving effect to the requested Borrowing:                  (a)     The representations and warranties of Borrower set forth in Paragraph 4.01 of the Credit Agreement and in the other           Credit Documents are true and correct in all material respects as if made on such date (except for representations and           warranties expressly made as of a specified date, which shall be true as of such date); and                  (b)     No Default has occurred and is continuing.           4.   The proceeds of the Term Loan Borrowing shall be distributed to the Lenders on the Revolving Loan Maturity Date to repay all Revolving Loans outstanding on that date.            IN WITNESS WHEREOF, Borrower has executed this Notice of Term Loan Borrowing on the date set forth above.                                                                                                                           ADOBE SYSTEMS INCORPORATED                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ C-2 -------------------------------------------------------------------------------- EXHIBIT D NOTICE OF INTEREST PERIOD SELECTION _______, ____ ABN AMRO BANK N.V.       as Administrative Agent Agency Services 208 South LaSalle Street Chicago, IL 60604-1003 Attn: Joycelyn Gay           1.  Reference is made to that certain Credit Agreement, dated as of August 9, 2000 (the “Credit Agreement”), among Adobe Systems Incorporated (“Borrower”), the financial institutions listed in Schedule I to the Credit Agreement (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein.           2.  Pursuant to Subparagraph 2.04(b) of the Credit Agreement, Borrower hereby irrevocably selects a new Interest Period for a [Revolving Loan Borrowing][Portion of the Term Loan Borrowing] as follows:                  (a)     The [Borrowing][Portion] for which a new Interest Period is to be selected [consists of LIBOR Loans]           [is a LIBOR Portion] in the aggregate principal amount of $__________;                 (b)     The current Interest Period for such [Borrowing][Portion] is _______ month[s] and expires on           ________, ____;                 (c)     The next Interest Period for such [Borrowing][Portion], commencing upon the last day of the current           Interest Period, is to be _________ month[s]; and                  (d)     The initial LIBO Rate for such Interest Period will be based upon the [“Telerate Page” or            “Reference Bank”] Rate. D-1 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, Borrower has executed this Notice of Interest Period Selection on the date set forth above.                                                                                                                            ADOBE SYSTEMS INCORPORATED By: _______________________________   Name: ______________________ Title: ______________________   By: _______________________________   Name: ______________________ Title: ______________________ D-2 -------------------------------------------------------------------------------- EXHIBIT E NOTICE OF TERM LOAN CONVERSION      _______, ____  ABN AMRO BANK N.V.       as Administrative Agent Agency Services 208 South LaSalle Street Chicago, IL 60604-1003 Attn: Joycelyn Gay           1.  Reference is made to that certain Credit Agreement, dated as of August 9, 2000 (the “Credit Agreement”), among Adobe Systems Incorporated (“Borrower”), the financial institutions listed in Schedule I to the Credit Agreement (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein.           2.  Pursuant to Subparagraph 2.04(c) of the Credit Agreement, Borrower hereby irrevocably requests to convert a Portion of the Term Loan Borrowing at the end of its current Interest Period as follows:                 (a)     The Portion of the Term Loan Borrowing to be converted is the [“Base Rate” or “LIBOR”] Portion in           the aggregate principal amount of $__________ [which has a current Interest Period of ____ month[s] expiring           on __________, ____];                  (b)     The Portion to be converted is to be converted into [a] Portion(s) of [a] Type(s); in [an] amount(s);             and, if such Portion(s) is [are] to include a LIBOR Portion(s), the Interest Period(s) therefor and the basis for            determining the initial LIBO Rate – Telerate Page or Reference Bank is [are] as follows:   Portion Amount Portion Type Interest Period LIBO Rate Basis -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- $ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- __ month[s] -------------------------------------------------------------------------------- E-1 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, Borrower has executed this Notice of Term Loan Conversion on the date set forth above. ADOBE SYSTEMS INCORPORATED     By: _______________________________   Name: ______________________ Title: ______________________   By: _______________________________   Name: ______________________ Title: ______________________ E-2 -------------------------------------------------------------------------------- EXHIBIT F NEW LENDER JOINDER           THIS NEW LENDER JOINDER (this “New Lender Joinder”), dated as of____________, ____, is executed by ___________________ (“New Lender”) in favor of ADOBE SYSTEMS INCORPORATED (“Borrower”) and ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, “Administrative Agent”) for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, the “Lenders”). RECITALS           A.   Pursuant to a Credit Agreement dated as of August 9, 2000 (as amended from time to time, the “Credit Agreement”), among Borrower, Lenders and Administrative Agent, Lenders have agreed to extend certain credit facilities to Borrower upon the terms and subject to the conditions set forth therein.           B.   New Lender is willing to commit to make loans to Borrower as contemplated by the Credit Agreement. AGREEMENT           NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, New Lender hereby agrees with Borrower and Administrative Agent as follows:           1.   Definitions. Unless otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement.           2.   Agreement to be Bound. Effective ______ , ______ (the “Commitment Effective Date”), upon the consent of Borrower and Administrative Agent and acceptance of this New Lender Joinder by Administrative Agent for recording as evidenced by delivery of a notice in the form of Attachment 1 hereto, New Lender hereby accepts a Commitment of ___________ Dollars ($_______________) and agrees to perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Credit Documents are required to be performed by a Lender with such Commitment.           3.   Representations, Warranties and Covenants. New Lender further represents, warrants and covenants with Borrower, Administrative Agent and Lenders as follows:                  (a)     New Lender confirms that it has received a copy of the Credit Agreement and such other documents           and information as it has deemed appropriate to make its own credit analysis and decision to enter into this            New Lender Joinder. F-1 --------------------------------------------------------------------------------                (b)     New Lender will, independently and without reliance upon Administrative Agent or any other Lender           and based upon such documents and information as it shall deem appropriate at the time, continue to make its           own credit decisions in taking or not taking action under the Credit Agreement and the other Credit Documents.                (c)     New Lender appoints and authorizes Administrative Agent to take such action as Administrative           Agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents           as Administrative Agent is authorized to exercise by the terms thereof, together with such powers as are            reasonably incidental thereto, all in accordance with Section VII of the Credit Agreement.                 (d)     Attachment 2 hereto sets forth administrative information with respect to New Lender.                (e)     New Lender hereby (     ) DOES (     ) DOES NOT request a Revolving Loan Note.           4.   Miscellaneous. This New Lender Joinder shall be governed by, and construed in accordance with, the laws of the State of California. Paragraph headings in this New Lender Joinder are for convenience of reference only and are not part of the substance hereof.           IN WITNESS WHEREOF, New Lender has caused this New Lender Joinder to be executed by its duly authorized officer as of the Commitment Effective Date.   [NEW LENDER] By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   CONSENTED TO BY: ADOBE SYSTEMS INCORPORATED By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- F-2 --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- As Administrative Agent By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- ACCEPTED FOR RECORDATION      IN REGISTER:   -------------------------------------------------------------------------------- As Administrative Agent By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------  F-3 -------------------------------------------------------------------------------- ATTACHMENT 1 TO NEW LENDER JOINDER FORM OF COMMITMENT EFFECTIVE NOTICE           Reference is made to the Credit Agreement, dated as of August 9, 2000, among ADOBE SYSTEMS INCORPORATED (“Borrower”), the financial institutions parties thereto (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Administrative Agent hereby acknowledges receipt of five executed counterparts of a completed New Lender Joinder executed by__________________(“New Lender”), a copy of which is attached hereto. [Note: Attach copy of New Lender Joinder.] Terms defined in the Credit Agreement are used herein as therein defined.           1.  Pursuant to such New Lender Joinder, you are advised that New Lender shall have a Commitment of $_______, effective _____________ (“Commitment Effective Date”).           2.  Pursuant to such New Lender Joinder, Borrower is required to deliver to Administrative Agent on or before the Commitment Effective Date a Revolving Loan Note, dated August 9, 2000, in the principal amount of New Lender’s Commitment.           3.  Pursuant to such New Lender Joinder, New Lender is required to pay $_______, which constitutes New Lender’s Proportionate Share of all outstanding Revolving Loan Borrowings, to Administrative Agent at or before 12:00 Noon on the Commitment Effective Date in same day or immediately available funds. Administrative Agent shall disburse such funds to the other Lenders in the amount necessary so that each Lender’s outstanding Revolving Loans are equal to such Lender’s Proportionate Share of all outstanding Revolving Loan Borrowings. Very truly yours,       ABN AMRO BANK N.V.     as Administrative Agent           By: _______________________________   Name: ______________________ Title: ______________________           By: _______________________________   Name: ______________________ Title: ______________________ F-1 -------------------------------------------------------------------------------- ATTACHMENT 2 TO NEW LENDER JOINDER [New Lender] Domestic Lending Office:    Euro-Dollar Lending Office:    Address for Notices:    Wiring Instructions: F-1 -------------------------------------------------------------------------------- EXHIBIT G CONSENT TO INCREASE COMMITMENT           THIS CONSENT TO INCREASE COMMITMENT (this “Consent to Increase Commitment”), dated as of ____________, ____, is executed by ____________ (“Existing Lender”) in favor of ADOBE SYSTEMS INCORPORATED (“Borrower”) and ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, “Administrative Agent”) for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, the “Lenders”). RECITALS           A.   Pursuant to a Credit Agreement dated as of August 9, 2000 (as amended from time to time, the “Credit Agreement”), among Borrower, Lenders (including Existing Lender) and Administrative Agent, Lenders have agreed to extend certain credit facilities to Borrower upon the terms and subject to the conditions set forth therein.           B.   Existing Lender is willing to increase its commitment to make loans to Borrower as contemplated by the Credit Agreement. AGREEMENT           NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Existing Lender hereby agrees with Borrower and Administrative Agent as follows:           1.   Definitions. Unless otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement.           2.   Agreement to Increase Commitment. Effective ____________,____, (the “Commitment Effective Date”), upon the consent of Borrower and Administrative Agent and acceptance of this Consent to Increase Commitment by Administrative Agent for recording as evidenced by delivery of a notice in the form of Attachment 1 hereto, Existing Lender hereby agrees to increase its Commitment to ____________ Dollars ($____ ).           3.   Delivery of Note. On or prior to the Commitment Effective Date, Existing Lender will deliver to Administrative Agent the Revolving Loan Note, if any, payable to Existing Lender and advise Administrative Agent whether Existing Lender requests a replacement Revolving Loan Note in the amount of Existing Lender’s increased Commitment.           4.   Miscellaneous. This Consent to Increase Commitment shall be governed by, and construed in accordance with, the laws of the State of California. Paragraph headings in this Consent to Increase Commitment are for convenience of reference only and are not part of the substance hereof. G-1 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, Existing Lender has caused this Consent to Increase Commitment to be executed by its duly authorized officer as of the Commitment Effective Date.   [EXISTING LENDER] By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   CONSENTED TO BY: ADOBE SYSTEMS INCORPORATED By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- As Administrative Agent   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- ACCEPTED FOR RECORDATION     IN REGISTER -------------------------------------------------------------------------------- As Administrative Agent   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- G-2 -------------------------------------------------------------------------------- ATTACHMENT 1 TO CONSENT TO INCREASE COMMITMENT FORM OF COMMITMENT EFFECTIVE NOTICE           Reference is made to the Credit Agreement, dated as of August 9, 2000, among ADOBE SYSTEMS INCORPORATED (“Borrower”), the financial institutions parties thereto (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Administrative Agent hereby acknowledges receipt of five executed counterparts of a completed Consent to Increase Commitment executed by __________________ (“Existing Lender”), a copy of which is attached hereto. [Note: Attach copy of Consent to Increase Commitment.] Terms defined in the Credit Agreement are used herein as therein defined.           1.   Pursuant to such Consent to Increase Commitment, you are advised that the Commitment of Existing Lender shall increase to $______________ , effective ________________ (“Commitment Effective Date”).            2.   Pursuant to such Consent to Increase Commitment, Existing Lender is required to deliver to Administrative Agent on or before the Commitment Effective Date the Revolving Loan Note, if any, payable to Existing Lender.           3.   Pursuant to such Consent to Increase Commitment, Borrower is required to deliver to Administrative Agent on or before the Commitment Effective Date a Revolving Loan Note, dated August 9, 2000, in the principal amount of Existing Lender’s increased Commitment.           4.   Pursuant to such Consent to Increase Commitment, Existing Lender is required to pay $ _______________, which constitutes the difference between the principal amount of Existing Lender’s outstanding Revolving Loans and its Proportionate Share of all outstanding Revolving Loan Borrowings, to Administrative Agent at or before 12:00 Noon on the Commitment Effective Date in same day or immediately available funds. Administrative Agent shall disburse such funds to the other Lenders in the amount necessary so that each Lender’s outstanding Revolving Loans are equal to such Lender’s Proportionate Share of all outstanding Revolving Loan Borrowings. Very truly yours,       ABN AMRO BANK N.V.      as Administrative Agent       By: _______________________________   Name: ______________________ Title: ______________________ G-3 --------------------------------------------------------------------------------                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ G-4 -------------------------------------------------------------------------------- EXHIBIT H REVOLVING LOAN NOTE  $______________                                                                                                       ___________________, __________                                                                                                                                           ________________, ____            FOR VALUE RECEIVED, ADOBE SYSTEMS INCORPORATED, a Delaware corporation (“Borrower”), hereby promises to pay to the order of ____________________, a ____________________ (“Lender”), the principal sum of ______________________________ DOLLARS ($__________) or such lesser amount as shall equal the aggregate outstanding principal balance of the Revolving Loans made by Lender to Borrower pursuant to the Credit Agreement referred to below (as amended from time to time, the “Credit Agreement”), on or before the Revolving Loan Maturity Date specified in the Credit Agreement; and to pay interest on said sum, or such lesser amount, at the rates and on the dates provided in the Credit Agreement.           Borrower shall make all payments hereunder, for the account of Lender’s Applicable Lending Office, to Administrative Agent as indicated in the Credit Agreement, in lawful money of the United States and in same day or immediately available funds.           Borrower hereby authorizes Lender to record on the schedule(s) annexed to this note the date and amount of each Revolving Loan and of each payment or prepayment of principal made by Borrower and agrees that all such notations shall constitute prima facie evidence of the matters noted; provided, however, that the failure of Lender to make any such notation shall not affect Borrower’s obligations hereunder.           This note is one of the Revolving Loan Notes referred to in the Credit Agreement, dated as of August 9, 2000, among Borrower, Lender and the other financial institutions from time to time parties thereto (collectively, the “Lenders”) and ABN AMRO Bank N.V., as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein.         The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof.         Borrower shall pay all reasonable fees and expenses, including reasonable attorneys’ fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California. H-1 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, Borrower has executed this Revolving Loan Note on the date set forth above.                                                                                                                           ADOBE SYSTEMS INCORPORATED                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________                                                                                                                           By: ___________________________                                                                                                                                  Name: _____________________                                                                                                                                  Title: ______________________ H-2 -------------------------------------------------------------------------------- LOANS AND PAYMENTS OF PRINCIPAL         Amount of Unpaid     Type of Amount of Interest Principal Paid Principal Notation Date Loan Loan Period or Prepaid Balance Made By --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   H-3 --------------------------------------------------------------------------------   EXHIBIT I TERM LOAN NOTE $_______________                                                                                                     ____________________,_____                                                                                                                                            ___________________,____              FOR VALUE RECEIVED, ADOBE SYSTEMS INCORPORATED, a Delaware corporation (“Borrower”), hereby promises to pay to the order of ____________________, a ____________________ (“Lender”), the principal sum of ______________________________ DOLLARS ($__________), payable on the Term Loan Maturity Date; and to pay interest on the outstanding balance of said sum at the rates and on the dates provided in the Credit Agreement referred to below (as amended from time to time, the “Credit Agreement”).           Borrower shall make all payments hereunder, for the account of Lender’s Applicable Lending Office, to Administrative Agent as indicated in the Credit Agreement, in lawful money of the United States and in same day or immediately available funds.           This note is one of the Term Loan Notes referred to in the Credit Agreement, dated as of August 9, 2000, among Borrower, Lender and the other financial institutions from time to time parties thereto (collectively, the “Lenders”) and ABN AMRO Bank N.V., as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein.           The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof.            Borrower shall pay all reasonable fees and expenses, including reasonable attorneys’ fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California.           IN WITNESS WHEREOF, Borrower has executed this Term Loan Note on the date set forth above.                                                                                                               ADOBE SYSTEMS INCORPORATED                                                                                                               By : ________________________________                                                                                                                       Name: __________________________                                                                                                                       Title:   __________________________                                                                                                                 By:  ________________________________ I-1 --------------------------------------------------------------------------------                                                                                                               Name: _______________________________                                                                                                                Title:   _______________________________   I-2 -------------------------------------------------------------------------------- EXHIBIT J ASSIGNMENT AGREEMENT      THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of Attachment 1 hereto, by and among:                (1)     The bank designated under item A of Attachment 1 hereto as the Assignor Lender      (“Assignor Lender”); and               (2)     Each bank designated under item B of Attachment 1 hereto as an Assignee Lender (individually, an       “Assignee Lender”). RECITALS      A.     Assignor Lender is one of Lenders which is a party to the Credit Agreement dated as of August 9, 2000, by and among ADOBE SYSTEMS INCORPORATED (“Borrower”), Assignor Lender and the other financial institutions parties thereto (collectively, the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). (Such credit agreement, as amended, supplemented or otherwise modified in accordance with its terms from time to time to be referred to herein as the “Credit Agreement”).      B.     Assignor Lender wishes to sell, and Assignee Lender wishes to purchase, all or a portion of Assignor Lender’s rights under the Credit Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement. AGREEMENT     Now, therefore, the parties hereto hereby agree as follows:      1.     Definitions. Except as otherwise defined in this Assignment Agreement, all capitalized terms used herein and defined in the Credit Agreement have the respective meanings given to those terms in the Credit Agreement.      2.     Sale and Assignment. Subject to the terms and conditions of this Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate, without recourse except to the extent of its representations and warranties expressly set forth herein, to each Assignee Lender and each Assignee Lender hereby agrees to purchase, accept and assume the rights, obligations and duties of a Lender under the Credit Agreement and the other Credit Documents having Commitments and Loans as set forth under the caption “Commitments or Loans Transferred” opposite such Assignee Lender’s name on Attachment 1 hereto and corresponding Proportionate Shares. Such sale, assignment and delegation shall become effective on the date designated in Attachment 1 hereto (the “Assignment Effective Date”), which date shall be, unless Administrative Agent shall otherwise consent, at least five (5) Business Days after the date following the date counterparts of this Assignment Agreement are delivered to Administrative Agent in accordance with Paragraph 3 hereof. J-1 --------------------------------------------------------------------------------      3.     Assignment Effective Notice. Upon (a) receipt by Administrative Agent of five (5) counterparts of this Assignment Agreement (to each of which is attached a fully completed Attachment 1), each of which has been executed by Assignor Lender and each Assignee Lender (and, to the extent required by Subparagraph 8.05(c) of the Credit Agreement, by Borrower and Administrative Agent) and (b) payment to Administrative Agent of the registration and processing fee specified in Subparagraph 8.05(f) of the Credit Agreement by Assignor Lender, Administrative Agent will transmit to Borrower, Assignor Lender and each Assignee Lender an Assignment Effective Notice substantially in the form of Attachment 2 hereto, fully completed (an “Assignment Effective Notice”).       4.     Assignment Effective Date. At or before 12:00 noon (local time of Assignor Lender) on the Assignment Effective Date, each Assignee Lender shall pay to Assignor Lender, in immediately available or same day funds, an amount equal to the purchase price, as agreed between Assignor Lender and such Assignee Lender (the “Purchase Price”), for the Commitments, Loans and Proportionate Shares purchased by such Assignee Lender hereunder. Effective upon receipt by Assignor Lender of the Purchase Price payable by each Assignee Lender, the sale, assignment and delegation to such Assignee Lender of such Commitments, Loans and Proportionate Shares as described in Paragraph 2 hereof shall become effective.       5.     Payments After the Assignment Effective Date. Assignor Lender and each Assignee Lender hereby agree that Administrative Agent shall, and hereby authorize and direct Administrative Agent to, allocate amounts payable under the Credit Agreement and the other Credit Documents as follows:               (a)      All principal payments made after the Assignment Effective Date with respect to each Commitment, Loan      and Proportionate Share assigned to an Assignee Lender pursuant to this Assignment Agreement shall be payable      to such Assignee Lender.                    (b)      All interest, fees and other amounts accrued after the Assignment Effective Date with respect to each       Commitment, Loan and Proportionate Share assigned to an Assignee Lender pursuant to this Assignment      Agreement shall be payable to such Assignee Lender. Assignor Lender and each Assignee Lender shall make any separate arrangements between themselves which they deem appropriate with respect to payments between them of amounts paid under the Credit Documents on account of the Commitments, Loans and Proportionate Shares assigned to such Assignee Lender, and neither Administrative Agent nor Borrower shall have any responsibility to effect or carry out such separate arrangements.      6.     Delivery of Notes. On or prior to the Assignment Effective Date, Assignor Lender will deliver to Administrative Agent the Notes, if any, payable to Assignor Lender. On or prior to the Assignment Effective Date, Borrower will, if so requested by Assignee Lender(s) and Assignor Lenders, deliver to Administrative Agent new Notes for each Assignee Lender and Assignor Lender, in each case in principal amounts reflecting, in accordance with the Credit Agreement, their respective Commitments and Loans (as adjusted pursuant to this Assignment Agreement). Each such new Note shall be dated as provided in Subparagraph 8.05(c) of the J-2 -------------------------------------------------------------------------------- Credit Agreement.     Promptly after the Assignment Effective Date, Administrative Agent will send to each of Assignor Lender and the Assignee Lenders its new Notes and will send to Borrower the superseded Notes payable to Assignor Lender, marked “Replaced.”       7.    Delivery of Copies of Credit Documents. Concurrently with the execution and delivery hereof, Assignor Lender will provide to each Assignee Lender (if it is not already a Lender party to the Credit Agreement) conformed copies of all documents delivered to Assignor Lender on or prior to the Closing Date in satisfaction of the conditions precedent set forth in the Credit Agreement.      8.      Further Assurances. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement.      9.      Further Representations, Warranties and Covenants. Assignor Lender and each Assignee Lender further represent and warrant to and covenant with each other, Administrative Agent and Lenders as follows:               (a)     Other than the representation and warranty that it is the legal and beneficial owner of the interest being      assigned hereby free and clear of any adverse claim, Assignor Lender makes no representation or warranty and         assumes no responsibility with respect to any statements, warranties or representations made in or in connection      with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability,      genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents furnished or the      collateral or any security interest therein.              (b)     Assignor Lender makes no representation or warranty and assumes no responsibility with respect to the       financial condition of Borrower or any of its obligations under the Credit Agreement or any other Credit          Documents.              (c)     Each Assignee Lender confirms that it has received a copy of the Credit Agreement and such other      documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into      this Assignment Agreement.               (d)     Each Assignee Lender will, independently and without reliance upon Administrative Agent, Assignor       Lender or any other Lender and based upon such documents and information as it shall deem appropriate at the       time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the       other Credit Documents.              (e)      Each Assignee Lender appoints and authorizes Administrative Agent to take such action as       Administrative Agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit       Documents as Administrative Agent is authorized to exercise by the terms thereof, together with such powers as       are reasonably incidental thereto, all in accordance with Section VII of the Credit Agreement. J-3 --------------------------------------------------------------------------------               (f)      Each Assignee Lender agrees that it will perform in accordance with their terms all of the obligations       which by the terms of the Credit Agreement and the other Credit Documents are required to be performed by it as       a Lender.               (g)      Attachment 1 hereto sets forth administrative information with respect to each Assignee Lender.      10.     Effect of this Assignment Agreement. On and after the Assignment Effective Date, (a) each Assignee Lender shall be a Lender with Commitments and Loans equal to the Commitments and Loans set forth under the caption “Commitments or Loans After Assignment” opposite such Assignee Lender’s name on Attachment 1 hereto and corresponding Proportionate Shares and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents and (b) Assignor Lender shall be a Lender with Commitments and Loans equal to the Commitments and Loans set forth under the caption “Commitments or Loans After Assignment” opposite Assignor Lender’s name on Attachment 1 hereto and corresponding Proportionate Shares and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents, or, if the Commitments and Loans of Assignor Lender have been reduced to $0, Assignor Lender shall cease to be a Lender and shall have no further obligation to make any Loans.      11.     Miscellaneous. This Assignment Agreement shall be governed by, and construed in accordance with, the laws of the State of California. Paragraph headings in this Assignment Agreement are for convenience of reference only and are not part of the substance hereof. J-4 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers as of the date set forth in Attachment 1 hereto.                                                                                             _______________________________________________, as                                                                                             Assignor Lender                                                                                                                                                                                                     By:       __________________________________________                                                                                                           Name:   ___________________________________                                                                                                          Title:     ___________________________________                                                                                                                                                                                                     ____________________________________________, as an                                                                                             Assignee Lender                                                                                                                                                                                                     By:      ____________________________________________                                                                                                          Name:    ____________________________________                                                                                                          Title:      ____________________________________                                                                                                                                                                                                       ____________________________________________, as an                                                                                             Assignee Lender                                                                                                                                                                                                           By:     ____________________________________________                                                                                                          Name:     ___________________________________                                                                                                          Title:       ___________________________________                                                                                                                                                                                              ____________________________________________, as an                                                                                               Assignee Lender                                                                                                                                                                                                                               By:     ____________________________________________                                                                                                           Name:    ___________________________________                                                                                                           Title:      ___________________________________ J-5 -------------------------------------------------------------------------------- CONSENTED TO AND ACKNOWLEDGED BY:  ADOBE SYSTEMS INCORPORATED By:    ___________________________________           Name:  _____________________________          Title:    _____________________________     By:    ___________________________________          Name:  _____________________________          Title:    _____________________________ ________________________________________, As Administrative Agent By:    ___________________________________           Name:  _____________________________          Title:    _____________________________    ACCEPTED FOR RECORDATION   IN REGISTER: ________________________________________, As Administrative Agent By:    ____________________________________           Name:  ______________________________           Title:    ______________________________   J-6 -------------------------------------------------------------------------------- ATTACHMENT 1 TO ASSIGNMENT AGREEMENT ______________, ____ ATTACHMENT 1 TO ASSIGNMENT AGREEMENT PART A Commitments or Loans Commitments or Loans Assigned After Assignment -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Commitment Loan Commitment Loan -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Assignor Lender:                           --------------------------------------------------------------------------------                           ______________   $ __________   $ __________   $ __________   $ __________                               Assignee Lenders:                           --------------------------------------------------------------------------------                                                       ______________   $ __________   $ __________   $ __________   $ __________   ______________   $ __________   $ __________   $ __________   $ __________   ______________   $ __________   $ __________   $ __________   $ __________   ______________   $ __________   $ __________   $ __________   $ __________   J(1)-1 -------------------------------------------------------------------------------- PART B [Assignee Lender] Domestic Lending Office:        Euro-Dollar Lending Office:          Address for Notices:        Wiring Instructions: J(1)-2 -------------------------------------------------------------------------------- C.    ASSIGNMENT EFFECTIVE DATE:  ______________________, ______ J(1)-2 -------------------------------------------------------------------------------- ATTACHMENT 2 TO ASSIGNMENT AGREEMENT   FORM OF ASSIGNMENT EFFECTIVE NOTICE         Reference is made to the Credit Agreement, dated as of August 9, 2000, among ADOBE SYSTEMS INCORPORATED (“Borrower”), the financial institutions parties thereto (the “Lenders”) and ABN AMRO BANK N.V., as agent for Lenders (in such capacity, “Administrative Agent”). Administrative Agent hereby acknowledges receipt of five executed counterparts of a completed Assignment Agreement, a copy of which is attached hereto. [Note: Attach copy of Assignment Agreement.] Terms defined in such Assignment Agreement are used herein as therein defined.         1.     Pursuant to such Assignment Agreement, you are advised that the Assignment Effective Date will be __________.         2.     Pursuant to such Assignment Agreement, Assignor Lender is required to deliver to Administrative Agent on or before the Assignment Effective Date the Note, if any, payable to Assignor Lender.         3.     Pursuant to such Assignment Agreement, Borrower is required to deliver to Administrative Agent on or before the Assignment Effective Date the following Notes, each dated _________________ [Insert appropriate date]:                 [Describe each new Note, if any, for Assignor Lender and each Assignee Lender as to principal amount.]          4.     Pursuant to such Assignment Agreement, each Assignee Lender is required to pay its Purchase Price to Assignor Lender at or before 12:00 Noon on the Assignment Effective Date in immediately available funds.                                                                                   Very truly yours,                                                                                   ABN AMRO BANK N.V.                                                                                         as Administrative Agent                                                                                   ; By:      ________________________________                                                                                                Name:    _________________________                                                                                                Title:      _________________________   J(2)-1   --------------------------------------------------------------------------------
EXHIBIT 10.42 NON-SOLICITATION AGREEMENT         THIS NON-SOLICITATION AGREEMENT (this “Agreement”) is made and entered into effective as of August 7, 2000 (the “Effective Date”), by and between SanDisk Corporation, a Delaware corporation (“SanDisk”), DigitalPortal Inc., a Delaware corporation (“DPI”), and Photo-Me International, Plc. (“PMI”), a corporation organized under the laws of England and Wales.         WHEREAS, as of even date herewith, the parties have entered into a Definitive Agreement for joint operation and control of a Vending Business (the “Definitive Agreement”); and         WHEREAS, the parties desire to enter into this Agreement to set forth their agreement concerning solicitation of employees.         NOW, THEREFORE, in consideration of the premises and the covenants herein and in the Definitive Agreement, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereby agree as follows:         1.  Definitions. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Definitive Agreement.         2.  PMI’s Covenant not to Solicit. PMI covenants that it will not, unless and until such employee has been terminated or subject to a notice of termination, solicit for employment purposes any employee of SanDisk or DPI or endeavor or attempt in any way to interfere with or induce a breach of any employment or contractual relationship that SanDisk or DPI may have with any employee, agent, independent contractor or representative.         3.  SanDisk’s Covenant Not to Solicit. SanDisk covenants that it will not, unless and until such employee has been terminated or subject to a notice of termination, solicit for employment purposes any employee of PMI, Photo-Me USA, LLC or DPI or endeavor or attempt in any way to interfere with or induce a breach of any employment or contractual relationship that PMI, Photo-Me USA, LLC or DPI may have with any employee, agent, independent contractor or representative.         4.  DPI’s Covenant Not to Solicit. DPI covenants that it will not, unless and until such employee has been terminated or subject to a notice of termination, solicit for employment purposes any employee of PMI, Photo-Me USA, LLC or SanDisk or endeavor or attempt in any way to interfere with or induce a breach of any employment or contractual relationship that PMI, Photo-Me USA, LLC or DPI may have with any employee, agent, independent contractor or representative.         5.  Enforcement. Each party acknowledges that execution of this Agreement is a condition to the Definitive Agreement and acknowledges the adequacy of consideration for each covenant contained herein. Each party understands and acknowledges that any violation of this Agreement may cause the other party and/or DPI irreparable harm, the amount of which may be difficult to ascertain, and therefore agrees that the other party and/or DPI shall have the right to apply for specific performance and/or an order restraining and enjoining any breach and for such other relief as the other party and/or DPI shall deem appropriate. Such right is to be in addition to the remedies otherwise available at law or in equity. Each party expressly waives the defense that a remedy in damages will be adequate and any requirement for the posting of a bond by the other party and/or DPI in an action for specific performance or injunction. CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. --------------------------------------------------------------------------------         6.  Limitation of Liability.         EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NEITHER PARTY SHALL BE RESPONSIBLE OR LIABLE TO THE OTHER FOR LOST PROFITS, OR LOST BUSINESS OPPORTUNITIES OR FOR INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH PERFORMANCE OF WORK PROVIDED FOR UNDER THIS AGREEMENT OR FOR TERMINATION OF THIS AGREEMENT AS PROVIDED FOR HEREIN. This section shall survive termination of this Agreement.         7.  Dispute Resolution. All disputes arising in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The arbitration shall take place in New York, New York and shall be conducted in the English language. The parties hereby agree to the enforceability of any judgements worldwide and to the authority of the arbitrator to award injunctive relief. This section shall survive termination of this Agreement.         8.  Governing Law. This Agreement shall in all respects be construed according to the laws of the State of California, without regard to the conflict of laws principles thereof. This section shall survive termination of this Agreement.         9.  Counterparts. This Agreement may be executed in any number of counterparts, each of which may be executed by less than all of the parties to this Agreement, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.         10.  Notices. Any notice, request, instruction, or other document to be given must be in writing and delivered personally or sent by certified mail or by United States Express Mail, postage or fees prepaid, or by FedEx, as follows:  If to SanDisk to: SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 Attn: Vice President, General Counsel Facsimile: 408-548-0385  with copies to: Brobeck, Phleger & Harrison LLP Two Embarcadero Place Palo Alto, CA 94303 Attn: Timothy R. Curry, Esq Facsimile: 650-496-2715  If to PMI to: Photo-Me International, Plc. c/o KIS 2110, avenue du Général de Gaulle 38130 Echirolles France Attn: Directeur Juridique Facsimile: 011-33-476- 339647  with a copy to: Wolin, Ridley & Miller LLP 1717 Main Street, Suite 3100 Dallas, Texas 75201 Attn: Stephen A. Kennedy, Esq. Facsimile: (214) 939-4949  If to DPI: DigitalPortal Inc. c/o SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 Attn: President of DigitalPortal Inc. Attn: President and CEO SanDisk Corporation Facsimile 408-542-0600 -------------------------------------------------------------------------------- Any notice delivered personally in the manner provided here will be deemed given to the party to whom it is directed upon the party’s (or its agent’s) actual receipt. Any notice addressed and mailed in the manner provided here will be deemed given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth (4th) business day after the day it is placed in the mail or, if earlier, the time of actual receipt. This section shall survive termination of this Agreement.         11.  Termination. This Agreement shall terminate with the termination of the Definitive Agreement, except where the Definitive Agreement is terminated due to the closing of an initial public offering and where either party remains at least a * shareholder of DPI.         12.  Miscellaneous. This Agreement contains the entire agreement between the parties regarding its subject matter and supersedes all prior or contemporaneous proposals, agreements, representations and understandings, whether written or oral, between the parties regarding such subject matter. This Agreement may not be amended or modified except in writing signed by each of the parties hereto. This Agreement shall be binding on and shall inure to the benefit of the parties hereto and their respective successors and assigns. In the event that any of the provisions of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be illegal, invalid or unenforceable, such provisions shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect. This Agreement shall be construed as to its fair meaning and not strictly for or against either party. The headings hereof are descriptive only and not to be construed in interpreting the provisions hereof. This Agreement may be executed in any number of counterparts, each of which may be executed by less than all of the parties, each of which shall be enforceable against the party actually executing such counterpart, and all of which together shall constitute one instrument. The parties shall be entitled to rely upon and enforce a facsimile of any authorized signatures as if it were the original. This section shall survive termination of this Agreement. *  INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.         IN WITNESS WHEREOF, PMI and SanDisk have caused this Agreement to be executed by their duly authorized officers as of the date first set forth above.      PHOTO-ME INTERNATIONAL, PLC   By:   /s/ Serge Crasnianski      --------------------------------------------------------------------------------      Name: Serge Crasnianski Title: Chief Executive Officer      SANDISK CORPORATION   By:   /s/ Eli Harari      --------------------------------------------------------------------------------      Name: Eli Harari Title: President      DIGITALPORTAL INC.   By:   /s/ Nelson Chan      --------------------------------------------------------------------------------      Name: Nelson Chan Title: President and Chief Executive Officer
Exhibit 10(h)         BERGEN BRUNSWIG PRE-TAX INVESTMENT RETIREMENT ACCOUNT PLUS EMPLOYER CONTRIBUTION PLAN (Amended and Restated Effective as of November 16, 2000)         --------------------------------------------------------------------------------     TABLE OF CONTENTS           Page ARTICLE I. NAME, DEFINITIONS & FUNDING POLICY 1   Section 1.1: Full Name 1   Section 1.2: Certain Definitions 1   Section 1.3: Other Definitions 1   Section 1.4: Funding Policy 15           ARTICLE II PARTICIPATION 16   Section 2.1: Eligibility Requirements 16   Section 2.2: Enrollment Package For Participation And Beneficiary       Designation 16   Section 2.3: Participation 17   Section 2.4: Break In Service Rules For Eligibility Purposes 17   Section 2.5: Special Provisions for Employees of Bergen Brunswig       Medical Corporation and Certain Related Entities 17         ARTICLE III CONTRIBUTIONS 19   Section 3.1: Company's Discretionary Contributions 19   Section 3.2: Section 3.2: 19   Section 3.3: Company's Matching Contribution 20   Section 3.4: Company's Bonus Matching Contribution 20   Section 3.5: Participants' Contributions 21   Section 3.6: Minimum Company Contributions 21   Section 3.7: Payment Of Discretionary Contributions, Matching       Contributions, And Bonus Matching Contributions To Trustee 21   Section 3.8: Payment Of Discretionary Contributions And Bonus       Matching Contributions In Company Stock 22   Section 3.9: Payment Of Elective Contributions To The Trustee 22   Section 3.10: Payment Of Rollover Contributions And Transferred       Contributions To The Trustee 22   Section 3.11: Actual Deferral Percentage Test 23   Section 3.12: Actual Contribution Percentage Test 28   Section 3.13: No Requirement For Profits 32           ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 33   Section 4.1: Retirement Accounts And Matching Contribution Accounts 33   Section 4.2: PIRA Accounts 33   Section 4.3: Rollover Contribution Accounts and Transferred Accounts 33   Section 4.4: Allocation Of Forfeitures 33   Section 4.5: Allocation Of Discretionary Contribution, Matching       Contribution And Bonus Matching Contribution 34   Section 4.6: Allocation of Minimum Company Contributions 34   Section 4.7: Accounts In General 35   Section 4.8: Limitation On Annual Additions 35   Section 4.9: Investment Of Accounts 38   Section 4.10: Voting Of Company Stock 39           ARTICLE V VESTING 40   Section 5.1: Vesting In Matching Contribution Account And       Matching Contribution Stock Account 40   Section 5.2: Vesting In Other Accounts 40   Section 5.3: Forfeitures 40   Section 5.4: Break In Service Rules For Vesting Purposes 41           ARTICLE VI DISTRIBUTION OF BENEFITS 43   Section 6.1: Distribution Of Benefits 43   Section 6.2: Methods Of Distribution 43   Section 6.3: Survivor Annuity Requirements 45   Section 6.4: Timing Of Distributions 49   Section 6.5: Postponed Retirement 51   Section 6.6: Distributions Due Missing Persons 51   Section 6.7: Transfers To Another Qualified Plan 51   Section 6.8: Loans To Participants 52   Section 6.9: Hardship Withdrawals 53   Section 6.10: Withdrawals 55   Section 6.11: Distribution Of Company Stock 55           ARTICLE VII TOP-HEAVY PLAN LIMITATIONS 56   Section 7.1: Application Of Top-Heavy Rules 56   Section 7.2: Definitions 56   Section 7.3: 60% Test - Special Rules 59   Section 7.4: Minimum Vesting Requirement 60   Section 7.5: Minimum Contribution Requirement 60           ARTICLE VIII THE COMMITTEE 62   Section 8.1: Members 62   Section 8.2: Committee Action 62   Section 8.3: Rights And Duties 63   Section 8.4: Information 64   Section 8.5: Compensation, Indemnity And Liability 65   Section 8.6: Administrative Expenses Of The Plan 65           ARTICLE IX AMENDMENT AND TERMINATION 66   Section 9.1: Amendments 66   Section 9.2: Discontinuance Of Plan 66   Section 9.3: Failure To Contribute 67           ARTICLE X CLAIMS PROCEDURE 68   Section 10.1: Presentation Of Claim 68   Section 10.2: Notification Of Decision 68   Section 10.3: Review Of A Denied Claim 68   Section 10.4: Decision On Review 69           ARTICLE XI MISCELLANEOUS 70   Section 11.1: Contributions Not Recoverable 70   Section 11.2: Limitation On Participants' Rights 70   Section 11.3: Receipt Or Release 70   Section 11.4: Nonassignability 71   Section 11.5: Governing Law 71   Section 11.6: Headings 71   Section 11.7: Counterparts 71   Section 11.8: Successors And Assigns 71   Section 11.9: Gender And Number 71   Section 11.10: Merger, Consolidation Or Transfer Of Plan Assets 72   Section 11.11: Joinder Of Parties 72   Section 11.12: The Trust 72   Section 11.13: Special Requirements For USERRA 72           Signature Page 73       --------------------------------------------------------------------------------     BERGEN BRUNSWIG PRE-TAX INVESTMENT RETIREMENT ACCOUNT PLUS EMPLOYER CONTRIBUTIONS PLAN                   BERGEN BRUNSWIG CORPORATION has adopted the following complete amendment and restatement of its profit sharing plan that evidences the plan portion of a profit sharing plan and trust for the benefit of qualified employees of the Company. The terms of the Plan are as follows:   ARTICLE I. NAME, DEFINITIONS & FUNDING POLICY                 Section 1.1.: Full Name. This profit sharing plan shall be known as the: BERGEN BRUNSWIG PRE-TAX INVESTMENT RETIREMENT ACCOUNT PLUS EMPLOYER CONTRIBUTIONS PLAN (or PIRA PLUS, for short) It is hereby designated as constituting a defined contribution plan intended to qualify under Code Section 401(a) that includes a cash or deferred arrangement under Code Section 401(k). The Trust established in connection with the Plan shall be known as the: BERGEN BRUNSWIG PRE-TAX INVESTMENT RETIREMENT ACCOUNT TRUST PLUS EMPLOYER CONTRIBUTIONS PLAN (or PIRA PLUS TRUST, for short)                 Section 1.2.: Certain Definitions. As used in this document and in the Trust, the following words and phrases shall have the following meanings, unless a different meaning is specified or clearly indicated by the context:                 "Accounts" shall mean, collectively, the Retirement Account, the Retirement Stock Account, the PIRA Account, the Matching Contribution Account, the Matching Contribution Stock Account, the Rollover Contribution Account, the Transferred Account, and the Non-Elective Contribution Account, all as may be established under the Plan for a Participant. If all of such accounts are not established for a Participant, then "Accounts" shall mean, collectively, all of such accounts that are established for such Participant.                 "Adjustment Factor" shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury under Code Section 415(d) for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary of the Treasury shall provide.                 "Affiliated Company" shall mean:                 (a)         a member of a controlled group of corporations of which the Company is a member;                 (b)         an unincorporated trade or business that is under common control with the Company, as determined in accordance with Code Section 414(c) and the applicable Regulations;                (c)         a member of an affiliated service group of which the Company is a member, as determined in accordance with Code Section 414(m) and the applicable Regulations; or                (d)         any other entity required to be aggregated with the Company pursuant to the Regulations under Code Section 414(o). For these purposes, a "controlled group of corporations" shall mean a controlled group of corporations as defined in Code Section 1563(a), determined without regard to Code Sections 1563(a)(4) and 1563(e)(3)(C).                 "Anniversary Date" shall mean the last day of each Plan Year.                 "Article" shall mean an Article of the Plan.                 "Beneficiary" shall mean the person or persons, as the context requires, last designated by a Participant to receive any benefit specified in the Plan that is payable upon such Participant's death. If there is no designated Beneficiary or surviving Beneficiary, the Beneficiary shall be the Participant's surviving spouse; or, if none, the Participant's surviving descendants (including adopted persons), who shall take on the principle of representation; or, if none, the Participant's estate; or, if there is no legal representative appointed to represent the Participant's estate and if the Participant's vested interest does not exceed $2,000, a person (or the persons) selected by the Committee who is related to the Participant by blood, adoption or marriage.                 "Board of Directors" shall mean the Board of Directors of the Company.                 "Break in Service" shall mean a 12-consecutive-month period beginning on an Employee's Severance Date and ending on the first anniversary of such date, provided that such Employee fails to perform at least one Hour of Service during such 1 2-consecutive-month period. Solely for purposes of determining whether a Break in Service has occurred for any individual who is absent from work for maternity or paternity reasons, the Severance Date of an Employee who is absent from service beyond the first anniversary of the first date of absence shall be deemed to be the second anniversary of the first date of such absence. The period between the first and second anniversaries of the first date of absence from work is neither a Period of Service nor a Period of Severance. An absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.                 "Code" shall mean the Internal Revenue Code of 1986, as amended, and its successors.                 "Committee" shall mean the committee described in Section 8.1.                 "Company" shall mean BERGEN BRUNSWIG CORPORATION.                 "Company Stock" shall mean the Company's Class A Common Stock.                 "Compensation" shall mean, for any Plan Year, the total cash compensation, excluding non-cash fringe benefits, received by such Participant, while he or she was eligible to make Elective Contributions, for services actually rendered in the course of employment with the Company or any Affiliated Company that is currently includable in such Participant's gross income under the Code, plus the amount of his or her Elective Contributions, if any, and any amount that is contributed by the Company pursuant to a salary reduction agreement and that is not includable in such Participant's gross income under Code Sections 125, 402(a)(8), 402(h) or 403(b). In addition to other applicable limitations set forth in the Plan, and despite any other provision of the Plan, the Compensation of each Participant shall not exceed the Compensation Limitation (defined below). The Compensation Limitation is $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined beginning in such calendar year. If such a determination period consists of fewer than 12 months, the Compensation Limitation will be multiplied by a fraction, the numerator of which is the number of months in such determination period, and the denominator of which is 12. If Compensation for any prior determination period is taken into account in determining a Participant's benefits accruing in the current Plan Year, the Compensation for such prior determination period is subject to the Compensation Limitation in effect for such prior determination period.                 "Defined Benefit Plan" and "Defined Contribution Plan" shall have the same meanings as given these terms under ERISA.                 "Determination Year" shall mean the Plan Year.                 "Earnings" shall mean a Participant's annual "compensation", as that term is defined in Code Section 415, that is actually paid or made available to the Participant within the Limitation Year, except that for purposes of the definition of "Highly Compensated Employee", the term "Earnings" shall mean a Participant's annual "compensation", as that term is defined in Code Section 415, that is actually paid or made available to the Participant within the Plan Year. A Participant's Earnings shall include such Participant's wages, salaries, fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Company or any Affiliated Company to the extent the amounts are includable in gross income under the Code (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements, and expense allowances). "Earnings" shall not include:                 (a)         Any contribution made by the Company to a plan of deferred compensation to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includable in the gross income of the Participant for the taxable year in which contributed. In addition, the Company's contributions, if any, made on behalf of a Participant to a simplified employee pension plan described in Code Section 408(k) are not considered Earnings for the taxable year in which contributed to the extent such contributions are deductible by the Participant under Code Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered Earnings, regardless of whether such amounts are includable in the gross income of the Participant when distributed. However, any amount received by a Participant pursuant to an unfunded non-qualified plan may be considered Earnings in the year such amounts are includable in the gross income of the Participant.                 (b)         Any amount realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by a Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture.                 (c)         Any amount realized from the sale, exchange or other disposition of stock acquired under a qualified stock option.                 (d)         Any other amount that receives special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Participant), or contributions made by the Company (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code Section 403(b) (whether or not the contributions are excludable from the gross income of the Participant). For Plan Years beginning after December 31, 1997, Earnings paid or made available during any Plan Year shall include any elective deferral (as defined in Code Section 402(g)(3)), and any amount that is contributed or deferred by the Company at the election of the Participant and that is not includable in the gross income of the Participant by reason of Code Section 125.                 "Effective Date" shall mean January 1, 1997, which is the effective date of this complete amendment and restatement, except as specifically provided otherwise below. The initial effective date of the Plan was September 1, 1984.                 "Employee" shall mean every person classified by the Company as a common law employee of the Company and any Affiliated Company that has adopted the Plan with the permission of the Board of Directors. The term "Employee" shall not include any person who is (i) employed by or through a leasing, temporary, or similar agency or company, or (ii) classified by the Company as a leased employee (within the meaning of Code Section 414(n)(2)) of the Company or any such Affiliated Company.                 "Employer" shall mean, with respect to an Employee, the Company, any Predecessor Employer and any Affiliated Company.                 "Employment Commencement Date" for each Employee shall mean the date such Employee first is credited with an Hour of Service. Despite the foregoing, for a Transferred Employee, the "Employment Commencement Date" for each such Employee shall mean the date such Employee first was credited with an hour of service for employment with the employer whose stock or assets were acquired by the Company or an Affiliated Company and whose business is now conducted by the Company or an Affiliated Company.                 "Entry Date" shall mean the first day of the month.                 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and its successors.                 "Fiduciary" shall mean a person who:                 (a)         exercises any discretionary authority, discretionary control, or discretionary responsibility respecting the management or administration of the Plan;                 (b)         exercises any authority or control respecting management or disposition of the Plan's assets; or                (c)         renders investment advice for a fee or other compensation, direct or indirect, with respect to any asset of the Plan, or has any authority or responsibility to do so. "Financial Institution" shall mean a bank, trust company, or other financial institution that is regulated by the United States or any State.                 "5% Owner" shall mean a Participant who (i) owns more than 5% of the outstanding stock (or owns stock possessing more than 5% of the total combined voting power of all classes of stock) of the Company (or any Affiliated Company), if the Company (or the Affiliated Company, whichever applies) is a corporation; or (ii) owns more than 5% of the capital or profit interest in the Company (or the Affiliated Company, whichever applies), if the Company (or the Affiliated Company, whichever applies) is not a corporation. A similar rule shall apply to the determination of a "1% Owner."                 "Forfeiture" shall mean the nonvested portion of a Participant's Accounts that is forfeited and allocated to other Participants' Accounts in accordance with the Plan.                 "Highly Compensated Active Employee" shall mean any Participant who performed service for the Company during the Determination Year and who:                 (a)         During the Look-Back Year received Earnings from the Company in excess of $80,000 (as adjusted pursuant to Code Section 415(d)), and, if the Company so elects, was a member of the Top-Paid Group for such year; or                 (b)         Was a 5% Owner at any time during the Look-Back Year or the Determination Year.                 "Highly Compensated Employee" shall mean any Participant who is a "Highly Compensated Active Employee" or a "Highly Compensated Former Employee."                 "Highly Compensated Former Employee" shall mean any Participant who:                 (a)         Separated from service (or was deemed to have separated from service) prior to the Determination Year,                 (b)         Performed no service for the Company during the Determination Year, and                 (c)        Was a Highly Compensated Active Employee in either (i) the Determination Year during which the Employee separated from service, or (ii) any Determination Year ending on or after the Employee's 55th birthday. For the purposes of this subsection (c), an Employee will be deemed to have separated from service if, in a Determination Year before the Employee attained age 55, the Employee received Earnings in an amount less than 50% of the Employee's average annual Earnings for the 3  consecutive calendar years preceding the Determination Year during which the Employee received the greatest amount of Earnings from the Company.                 "Hour of Service" shall mean:                 (a)         Each hour for which an Employee was paid by, or entitled to payment from, an Employer. Hours under this subsection (a) shall be credited to an Employee for the computation period or periods in which the services were performed. Generally, Hours of Service shall be determined from the Employer's employment records. Despite the foregoing, if an Employee's Compensation is not determined on the basis of certain amounts for each hour worked (such as salaried, commission or piece-work employees) and if his or her hours are not required to be counted and recorded by any federal law (such as the Fair Labor Standards Act), such Employee's Hours of Service need not be determined from employment records. Instead, such Employee may be credited with 190 Hours of Service for each month in which he or she would be credited with at least one Hour of Service pursuant to this subsection (a);                 (b)         Each hour for which an Employee was paid by, or entitled to payment from, an Employer on account of a period during which no services were performed (irrespective of whether the employment relationship had terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this subsection (b) for any single continuous period (whether or not such period occurs in a single computation period);                 (c)         Each hour for which back pay (irrespective of mitigation of damages) is either awarded against, or agreed to by, an Employer. The same Hours of Service shall not be credited under either subsection (a) or (b), whichever is applicable, and under this subsection (c). Hours of Service under this subsection (c) shall be credited for the computation period(s) to which the award or agreement pertains, rather than the computation period in which the award, agreement or payment is made; and                 (d)         Hours under subsections (a) through (c) above shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which is incorporated here by reference.                 "Individual Medical Benefit Account" shall have the same meaning as is given that term under Code Section 415(l)(2).                 "Investment Manager" shall mean a person or entity who (that) is (a) registered as an investment advisor under the Investment Advisor's Act of 1940, as amended, (b) defined as a bank under that Act, or (c) an insurance company qualified under the laws of more than one state to manage, acquire and dispose of trust assets, and who has acknowledged in writing that he (she or it) is a Fiduciary with respect to the Plan.                 "Limitation Year", as defined in the Code, shall mean the calendar year.                 "Look-Back Year" shall mean the 12 month period preceding the Determination Year, or, if the Company elects and allowed by the applicable Regulations, the calendar year ending with or within the applicable Determination Year.                 "Matching Contribution Account" shall mean the account maintained by the Committee for each Participant on whose behalf a Matching Contribution or Bonus Matching Contribution made in cash is made.                 "Matching Contribution Stock Account" shall mean the account maintain by the Committee for each Participant on whose behalf a Bonus Matching Contribution in Company Stock is made.                 "Minimum Company Contributions" shall mean the contributions made by the Company in accordance with the provisions of Section 3.6.                 "Named Fiduciary" shall have the same meaning as under Section 402(a) of ERISA and shall be determined as provided in Section 8.3.                 "Net Profits" shall mean, with respect to any Plan Year, the Company's net income or profit for such Plan Year, as determined on the basis of the Company's books of account in accordance with generally accepted accounting principles, before reduction for income taxes or contributions made by the Company to the Plan.                 "Non-Elective Contribution Account" shall mean the account maintained by the Committee for each Participant on whose behalf an allocation pursuant to Section 4.6(d) is made.                 "Non-Highly Compensated Employee" shall mean any Participant who is not a Highly Compensated Employee.                 "Normal Retirement Age" shall mean a Participant's 65th birthday; provided, however, that for each Participant who completes an Hour of Service on or after November 16, 2000, "Normal Retirement Age" shall mean the earlier of the date on which a Participant (i) attains age 59-1/2 or (ii) earns his 80th "point." For purposes of the foregoing, a Participant shall accumulate 1 "point" for each year of age and 1.5 "points" for each Year of Service.                 "Normal Retirement Date" shall mean the first day of the month that coincides with or immediately follows a Participant's Normal Retirement Age.                 "1% Owner" shall be determined in the same manner as a 5% Owner, defined above.                 "Participant" shall mean any Employee who becomes eligible for participation in accordance with the provisions of the Plan, and, unless the context indicates otherwise, includes former Participants.                 "Period of Service" shall mean a period of time commencing on an Employee's Employment Commencement Date or Reemployment Date, whichever is applicable, and ending on his or her Severance Date.                 "Period of Severance" shall mean the period of time commencing on an Employee's Severance Date and ending on the date, if any, on which Employee again performs an Hour of Service.                 "PIRA Account" shall mean the account maintained by the Committee for each Participant on whose behalf an Elective Contribution is made.                 "Plan" shall mean this document and the plan created by this document (including, unless the context indicates to the contrary, the Trust established in connection with the Plan), as it may be amended from time to time.                 "Plan Year" shall mean:                 (a)         For the "Plan Year" beginning on January 1, 1997, the period commencing on January 1, 1997, and ending on September 29, 1997.                 (b)         For "Plan Years" beginning after September 29, 1997, the 12 month period ending on each September 29th.                 "Predecessor Employer" shall mean any predecessor employer of an Employee that maintained the Plan.                 "Predecessor Plan" shall mean any plan from which assets were transferred to the Transferred Account.                 "Reemployment Date" shall mean the first day following a Period of Severance that is not deemed to be a Period of Service in calculating an Employee's Service or Years of Service on which such Employee performs an Hour of Service.                 "Regulations" shall mean the regulations issued under the Code or ERISA, or both of them, as well as under any other legislation that applies to the Plan.                 "Retirement Account" shall mean the account maintained by the Committee for each Participant on whose behalf a Discretionary Contribution in cash is made.                 "Retirement Stock Account" shall mean the account maintained by the Committee for each Participant on whose behalf a Discretionary Contribution in Company Stock is made.                 "Rollover Contribution" shall mean a qualified rollover contribution as defined in Code Sections 402(c), 403(a)(4), and 408(d)(3), but shall not include a rollover contribution that is attributable to contributions made on behalf of a Key Employee in a Top-heavy Plan, unless such a rollover contribution is permissible under the Code or applicable Regulations.                 "Rollover Contribution Account" shall mean the account maintained by the Committee for each Participant who makes a Rollover Contribution.                 "Section" shall mean, when used in conjunction with some other reference (such as the Code or ERISA), a section of such other reference. When not used in conjunction with some other reference, Section shall refer to a section of the Plan or Trust, as the context requires. References to a Section include future amendments, and successors, to it.                 "Secretary" shall mean the Secretary or an Assistant Secretary of the Committee.                 "Secretary of the Treasury" shall mean the Secretary of the Treasury, as defined in Code Section 7701(a)(11).                 "Severance Date" shall mean the earlier of (i) the date on which an Employee quits, retires, is discharged, or dies, or (ii) the first annual anniversary of the first date of a period in which such Employee remains absent from service (with or without pay) with an Employer for any reason other than a quit, retirement, discharge, or death (e.g., with respect to the foregoing, vacation, holiday, sickness, disability, leave of absence, or layoff).                 "Signature Page" shall mean the page(s) at the end of the Plan entitled "Signature Page."                 "Top-Paid Group" shall mean the group of Employees in a particular year that consists of the top 20% of the Employees, ranked on the basis of Earnings received from the Company during such year.                 (a)         An Employee shall be disregarded for purposes of determining the Top-Paid Group if the Employee:                 (i)         Has not performed an Hour of Service during such year;                (ii)         Has not completed 6 months of service;               (iii)         Normally works less than 17 and 1/2 hours per week or 6 months during any year;                (iv)         Has not attained age 21 by the end of such year; or               (v)         Is a non-resident alien and has received no earned income (within the meaning of Code Section 911(d)(2)) from the Company constituting United States source income within the meaning of Code Section 861(a)(3).                 (b)         In addition, if 90 percent or more of the Employees of the Company are covered under agreements the Secretary of Labor finds to be collective bargaining agreements between Employee representatives and the Company, and the Plan covers only Employees who are not covered under such agreements, then Employees covered by such agreements shall be excluded from both the total number of active Employees as well as from the identification of particular Employees in the Top Paid Group.                 (c)         All Affiliated Companies shall be taken into account as a single employer, and leased employees, within the meaning of Code Sections 414(n)(2) and 414(o)(2), shall be considered Employees unless such leased employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Company. For the purpose of determining the number of active Employees in any year, the following Employees shall be excluded:                 (i)         Employees with less than six (6) months of service;                (ii)         Employees who normally work less than 17 1/2 hours per week;               (iii)         Employees who normally work less than six (6) months during a year; and               (iv)         Employees who have not yet attained age 21.                 "Total Disability" or "Totally Disabled" shall each refer to a physical or mental impairment that, in the Committee's opinion, (i) is expected to be either of indefinite duration or result in death, and (ii) renders a Participant unable to satisfactorily perform his or her duties for the Company or the duties of such other position or job that the Company makes available to such Participant and for which such Participant is qualified by reason of his or her training, education or experience. The Committee's opinion must be supported by the opinion of a qualified physician designated or approved by the Committee.                 "Transfer Date" shall mean the date determined by the Board of Directors, which is the effective date that a Transferred Employee becomes an Employee for purposes of the Plan.                 "Transferred Account" shall mean the account maintained by the Committee for each Transferred Employee who had assets transferred, other than by a rollover in accordance with Sections 3.10 and 4.3, to the Plan from a qualified plan in which the Transferred Employee had formerly participated. At the discretion of the Committee, this account may be divided into one or more subaccounts.                 "Transferred Contribution" shall mean the assets transferred from any other qualified plan to this Plan on behalf of a Transferred Employee.                 "Transferred Employee" shall mean a person who is designated as such by either the Board of Directors or the Committee and who, prior to his or her employment with an Employer, was employed by another employer whose stock or assets were acquired by the Employer in such a manner that the other employer's business is now conducted by the Employer.                 "Trust" shall mean the trust established in connection with the Plan, as it may be amended from time to time.                 "Trust Valuation Date" shall mean each Anniversary Date and such other date or dates selected by the Committee.                 "Trustee" shall mean the person(s) or entity, or combination of them, serving from time to time as the trustee(s) of the Trust.                 "Welfare Benefit Fund" shall have the same meaning as is given that term in Code Section 419(e).                 "Year of Service" shall mean the amount obtained by dividing (i) the number of days in a Participant's Period of Service by (ii) 365, and (iii) rounding the result up to the next higher whole Year of Service if the result is a fraction. Subject to Section 5.4, in determining a Participant's Years of Service, all Periods of Service, whether or not successive, shall be aggregated. In addition, if a Participant ceases to be an Employee by reason of a quit, discharge or retirement and such Participant then performs an Hour of Service within 12 months of his or her Severance Date, then such Period of Severance shall be deemed to be a Period of Service, provided, however, that if a Participant ceases to be an Employee by reason of a quit, discharge, or retirement during an absence from service of 12 months or less for any reason other than a quit, discharge, retirement or death, and then performs an Hour of Service within 12 months of the date on which such Participant was first absent from service, such Period of Severance shall be deemed to be a Period of Service.                 Section 1.3 : Other Definitions. As used in this document and in the Trust, the following words and phrases shall have the meanings set forth in the indicated Sections, unless a different meaning is specified or clearly indicated by the context:   Term Section     "Actual Contribution Percentage" 3.12 "Actual Contribution Ratio" 3.12 "Actual Deferral Percentage" 3.11 "Actual Deferral Ratio" 3.11 "Additional Contribution" 3.11 "Aggregate Account" 7.2 "Aggregation Group" 7.2 "Annual Addition" 4.8 "Annuity Starting Date" 6.3 "Bonus Matching Contribution" 3.4 "Claimant" 10.1 "Company Stock Fund" 4.9 "Compensation Limit" 1.2 "Deemed Elective Contribution" 3.11 "Defined Benefit Plan Fraction" 4.8 "Defined Contribution Plan Fraction" 4.8 "Determination Date" 7.2 "Direct Rollover" 6.7 "Discretionary Contribution" 3.1 "Elective Contribution" 3.2 "Eligible Retirement Plan" 6.7 "Eligible Rollover Distribution" 6.7 "Excess Aggregate Contributions" 3.12 "Excess Contributions" 3.11 "Excess Deferrals" 3.11 "Fund" 4.9 "Key Employee" 7.2 "Matching Contribution" 3.3 "Non-Key Employee" 7.2 "1.0 Rule" 4.8 "Preretirement Election Period" 6.3 "Present Value of Accrued Benefit" 7.2 "Qualified Election" 6.3 "Qualified Joint and Survivor Annuity" 6.3 "Qualified Life Annuity" 6.3 "Qualified Military Service" 11.13 "Qualified Preretirement Survivor Annuity" 6.3 "Relevant Time" 5.3 "Retirement Election Period" 6.3 "Successor Plan" 3.6 "Top-heavy Group" 7.2 "Top-heavy Plan" 7.2 "USERRA" 11.13 "Valuation Date" 7.2                   Section 1.4: Funding Policy. The Plan is to be funded primarily through the Company's contributions and the Participants' contributions as provided for in the Plan. The Trust's assets shall be invested as provided for in the trust document in an effort to safely maximize potential retirement benefits, which shall be paid to Participants and Beneficiaries as provided for in the Plan.     ARTICLE II. PARTICIPATION                 Section 2.1: Eligibility Requirements. Each Employee shall become eligible to 0participate in the Plan on the Entry Date coincident with or next following the date on which such Employee satisfies the following eligibility requirements, provided that he or she is still an Employee on such Entry Date:                 (a)         Service Requirement. Such Employee shall be eligible on the first Entry Date that is at least 30 days from such Employee's Employment Commencement Date.                 (b)         Residency Or Citizenship Requirement. Such Employee is a resident or citizen of the United States of America.                 (c)         Union Employees. Notwithstanding any other provision of the Plan, any Participant who is included in a unit of employees covered by a collective bargaining agreement wherein retirement benefits were the subject of good faith bargaining (within the meaning of Code Section 410(b)(3)(A)) shall for the Plan Year(s) of such inclusion, cease to (i) be eligible to make Elective Contributions and (ii) share in any future Company contributions to the Plan and Forfeitures, unless such collective bargaining agreement expressly provides for participation in the Plan; provided, however, that as to any benefits already earned, such Participant shall remain a Participant, subject to all the terms of the Plan.                 (d)         Transferred Employees. Notwithstanding the foregoing, those persons who are Transferred Employees on their respective Transfer Date(s) shall become eligible to participate in the Plan on such Transfer Date(s).                 Section 2.2: Enrollment Package For Participation And Beneficiary Designation.                 (a)         Each Employee who becomes eligible to participate in the Plan shall be given a disclosure package. A beneficiary designation form will be sent to a Participant in connection with or following his or her enrollment in the Plan. A Participant may, from time to time, change his or her designated Beneficiary by filing a new written designation with the Committee. The Company, the Trustee, and the Committee may rely upon the designation of a Beneficiary that was last filed in accordance with the Plan.                 (b)         Despite the provisions of subsection (a) above, a married Participant's Beneficiary shall in all events be such Participant's surviving spouse, unless such spouse consents to such Participant's designation of a Beneficiary other than such spouse. A spouse's consent to such a designation must satisfy the following requirements: (i) it must be in writing; (ii) it must acknowledge the effect of the Participant's designation of a Beneficiary other than the spouse; and (iii) it must be witnessed by a designated Plan representative or a notary public.                 Section 2.3: Participation. The participation of a Participant in the Plan shall begin as of his or her Entry Date, and shall continue until the Participant's entire benefit has been distributed in accordance with the Plan's terms. A Participant (or his or her Beneficiary) may not receive any distribution of benefits except as provided for in the Plan.                 Section 2.4: Break In Service Rules For Eligibility Purposes.                 (a)         Except as otherwise provided in this Section, all Years of Service of an Employee shall be counted in determining such Employee's eligibility to participate in the Plan.                 (b)         In the case of any Employee who has incurred a Break in Service, such Employee's Years of Service that were completed before such Break in Service shall not be counted until he or she has completed a Year of Service after such Break in Service.                 (c)         This subsection shall apply to any Participant who does not have any nonforfeitable right to any accrued benefit that is attributable to the Company's contributions. Such a Participant's Years of Service before any period of consecutive Breaks in Service shall not be counted if the number of such consecutive Breaks in Service within such period equals or exceeds the greater of (i) 5 or (ii) the aggregate number of such Participant's Years of Service before such period. Such aggregate number of Years of Service shall not include any Year of Service that is disregarded under the preceding sentence by reason of such Participant's prior Breaks in Service.                 Section 2.5: Special Provisions for Employees of Bergen Brunswig Medical Corporation and Certain Related Entities.                 (a)         Notwithstanding any provision of the Plan to the contrary, each Consolidated Corporation Employee (as defined in paragraph (b) below) shall, during the Participation Continuation Period (as defined in paragraph (b) below), be permitted to participate in the Plan as though such Consolidated Corporation Employee's employment with a Consolidated Corporation (as defined in paragraph (b) below) during the Participation Continuation Period was employment with the Company. No contributions shall be made by or on behalf of any Consolidated Corporation Employee with respect to Compensation for services rendered after the expiration of the Participation Continuation Period, nor shall any service of a Consolidated Corporation Employee be taken into account for any purpose of the Plan (other than for purposes of Section 2.4 and 5.4) following the expiration of the Participation Continuation Period.                 (b)         For purposes of the foregoing paragraph, the following terms shall have the meanings assigned thereto:                                 (i)         "Consolidated Corporation Employee" means each Employee who was employed by a Consolidated Corporation both immediately before and immediately after August 16, 2000.                                   (ii)         "Consolidated Corporation" means Bergen Brunswig Medical Corporation, Ransdell Surgical, Inc. and Pacific Criticare, Inc.                                 (iii)         "Participation Continuation Period" means the period commencing on August 16, 2000 and ending upon the earliest to occur of (x) December 31, 2000, or (y) a date determined by written resolution of the Board of Directors.     ARTICLE III. CONTRIBUTIONS                   Section 3.1: Company's Discretionary Contributions. The Company has previously made substantial contributions to the Trust. Subject to the Plan's other provisions, for each Plan Year in which the Plan is in effect, the Company shall contribute to the Trust, out of its current or accumulated Net Profits, such amount, if any, as shall be determined by the Company (the "Discretionary Contribution"), and it shall be credited to the Participants' Retirement Accounts or Retirement Stock Accounts as the case may be as described in Article IV. Despite the foregoing, the Company's Discretionary Contributions are conditioned upon their deductibility under the Code.                 Section 3.2: Elective Contributions Under Code Section 401(k).                 (a)         Subject to the limitations contained elsewhere in the Plan, if as of January 1, 1997, an Employee: (i) had elected to forego the receipt of less than 2% of his or her Compensation; or (ii) was eligible to participate in the Plan but had not elected to participate, then effective as of January 1, 1997, such Employee shall be deemed to have elected to forego the receipt of 2% of his or her Compensation. If an Employee first becomes eligible to participate in the Plan on or after January 1, 1997, then such Employee shall be deemed to have elected to forego the receipt of 2% of his or her Compensation beginning on his or her Entry Date. However, the Participant may elect from time to time, by completing the appropriate forms provided by the Committee, to forgo the receipt of a percentage (stated in whole numbers only) of his or her Compensation other than 2% (including 0%); provided that this percentage may not exceed the maximum amount established by the Committee from time to time (subject to the maximum percentage of the Participant's Compensation that may be deferred pursuant to the provisions of Sections 3.11 and 4.8 below).                 The Company shall contribute to the Trust on behalf of each such electing Participant, out of its current or accumulated Net Profits, an amount equal to the Compensation forgone by such Participant (the "Elective Contribution"), and it shall be credited to such Participant's PIRA Account. Such Elective Contribution shall be considered to be a Company contribution.                 (b)         Despite the foregoing, no Participant shall have any Elective Contributions under the Plan during any calendar year in excess of $7,000, as adjusted by the Adjustment Factor. A Participant's election to forgo receipt of a portion of his or her Compensation shall be subject to such modification or cancellation as the Committee, in its discretion, shall permit; provided, however, that the Committee shall exercise its discretion in a uniform and nondiscriminatory manner.                 (c)         Notwithstanding anything to the contrary, for purposes of subsections (a) and (b) above, Compensation shall not include Compensation that is (i) earned prior to the time that a Participant becomes a Participant in the Plan, or (ii) during any period for which the Participant is not making Elective contributions, or (iii) a management bonus.                 Section 3.3: Company's Matching Contribution.                 (a)         Subject to the Plan's other provisions, for each Plan Year beginning prior to September 30, 1998, each month the Company shall make a matching contribution (the "Matching Contribution") on behalf of each Participant on whose behalf an Elective Contribution is made, and it shall be credited to each such Participant's Matching Contribution Account as described in Article IV. The Company's Matching Contribution for each such Participant for a Plan Year shall be an amount equal to 50% of that portion of the Participant's Elective Contributions for such Plan Year that does not exceed 6% of the Participant's Compensation. Notwithstanding anything to the contrary in this Section 3.3, the Company shall make an additional Matching Contribution on behalf of each Participant whose Elective Contributions have been suspended pursuant to Section 3.2(b), equal to the difference between (i) an amount equal to 50% of that portion of the Participant's Elective Contributions for such Plan Year that does not exceed 6% of the Participant's Compensation and that would have been made without regard to Section 3.2(b) and (ii) the amount of the Matching Contribution actually contributed pursuant to the preceding sentence.                 (b)         For each Plan Year beginning on or after September 30, 1998, each month the Company shall make a Matching Contribution on behalf of each Participant on whose behalf an Elective Contribution is made, and it shall be credited to each such Participant's Non-Elective Contribution Account as described in Article IV. The Company's Matching Contribution for each such Participant for a Plan Year shall be an amount equal to:                 (i)         100% of the Participant's Elective Contributions for the Plan Year, up to 3% of the Participant's Compensation; plus                (ii)         50% of the Participant's Elective Contributions for the Plan Year that exceed 3% of his or her Compensation but do not exceed 5% of the Participant's Compensation. Except as provided for below, the Matching Contributions provided for in this subsection shall be treated for all purposes under Articles IV, V, and VI as Elective Contributions. However, the Matching Contributions provided for in this subsection shall not be treated as Elective Contributions for purposes of hardship withdrawals under Section 6.9.                 (c)         Notwithstanding anything to the contrary, for purposes of subsections (a) and (b) above, Compensation shall not include Compensation that is (i) earned prior to the time that a Participant becomes a Participant in the Plan, (ii) during any period for which the Participant is not making Elective Contributions, or (iii) a management bonus.                 Section 3.4: Company's Bonus Matching Contribution.                 (a)         Subject to the Plan's other provisions, the Company may make a bonus matching contribution (the "Bonus Matching Contribution") on behalf of each Participant on whose behalf an Elective Contribution is made and who is an Employee on the Anniversary Date of such Plan Year, and it shall be credited to each such Participant's Matching Contribution Account as described in Article IV. Despite any other provision of this document, for purposes of the Bonus Matching Contribution, only a Participant's Compensation and Elective Contributions for such Plan Year shall be considered. The Company's Bonus Matching Contribution, if any, for each such Participant shall be an amount determined by the Company from time to time, subject to Section 3.12.                 (b)         Notwithstanding anything to the contrary, for purposes of subsection (a) above, Compensation shall not include Compensation that is (i) earned prior to the time that a Participant becomes a Participant in the Plan, (ii) during any period for which the Participant is not making Elective Contributions, or (iii) a management bonus.                 Section 3.5: Participants' Contributions.                  (a)         A Participant may not make a nondeductible, voluntary contribution to the Plan.                 (b)         An Employee may make a Rollover Contribution to the Plan or a Direct Rollover described in Code Section 401(a)(31), provided that any asset so contributed or transferred is acceptable to the Committee and the Trustee.                 Section 3.6: Minimum Company Contributions.                 For each Plan Year, the Company shall make contributions to the Plan or a Successor Plan in the form of employer contributions (within the meaning of Code Section 404), in cash, at least equal to a specified dollar amount, on behalf of individuals who are both Participants and Employees on the first day of the Plan Year. A "Successor Plan" is any qualified retirement plan to which the assets of the Plan are transferred as a result of a merger, acquisition, or other corporate transaction. The amount shall be determined by the Chief Financial Officer of the Company, by appropriate resolution, on or before the last day of the Company's taxable year that ends within such Plan Year. The Minimum Company Contribution for a Plan Year shall be paid by the Company in one or more installments without interest. The Company shall pay the Minimum Company Contribution at any time during the Plan Year, and for purposes of deducting such contribution, shall make the contribution, not later than the due date, including extensions thereof, of the Company's Federal income tax return for the taxable year of the Company which ends within such Plan Year. Notwithstanding any other provision of the Plan to the contrary, the Minimum Company Contribution made to the Plan by the Company (i) shall not revert to, or be returned to, the Company and (ii) can be made to the Plan whether or not the Company has current or accumulated Net Profits.                 Section 3.7: Payment Of Discretionary Contributions, Matching Contributions, And Bonus Matching Contributions To Trustee. All payments of the Discretionary Contributions, Matching Contributions, and Bonus Matching Contributions shall be made directly to the Trustee and may be made on any date(s) selected by the Company. Despite the foregoing, the Company's total Discretionary Contributions, Matching Contributions, and Bonus Matching Contributions for each Plan Year must be paid on or before the date on which the Company's federal income tax return is due, including any extensions of time obtained for the filing of such return.                 Section 3.8: Payment Of Discretionary Contributions And Bonus Matching Contributions In Company Stock. All or any portion of the Company's Discretionary Contributions or Bonus Matching Contributions may be made in shares of Company Stock.                 (a)         Any portion of the Company's Discretionary Contributions that is made in Company Stock shall be credited to the Participants' Retirement Stock Accounts as described in Article IV. Despite any other provision of the Plan (including Section 4.9 below), but subject to Section 4.9(d) below, a Participant may not designate the investment of the Participant's Retirement Stock Account in any investment other than the Company Stock Fund.                 (b)         Any portion of the Company's Bonus Matching Contributions that is made in Company Stock shall be credited to the Participants' Matching Contribution Stock Accounts as described in Article IV. Despite any other provision of the Plan (including Section 4.9 below), but subject to Section 4.9(d) below, a Participant may not designate the investment of the Participant's Matching Contribution Stock Account in any investment other than the Company Stock Fund.                 Section 3.9: Payment Of Elective Contributions To The Trustee. All payments of Elective Contributions shall be made directly to the Trustee. Such payments shall be made as soon as is administratively practical following the date the foregone Compensation would have been paid to the electing Participant, but in no event later than the fifteenth business day of the month following the month in which the foregone Compensation would have been paid to the Participant.                 Section 3.10: Payment Of Rollover Contributions And Transferred Contributions To The Trustee.                 (a)         A Participant's Rollover Contributions shall be paid directly to the Trustee. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Rollover Contributions (and the income, gains and losses on them). The Trustee shall invest a Participant's Rollover Contributions in the same manner as provided for the investment of the Company's contributions.                 (b)         A Participant's Transferred Contributions shall be paid directly to the Trustee. The Trustee may commingle such contributions with the Company's contributions. However, the Committee shall keep separate records of each Participant's Transferred Contributions by the use of the Transferred Account (including the income, gains and losses on those contributions). The Trustee shall invest a Participant's Transferred Contributions in the same manner as provided for the investment of the Company's contributions.                 Section 3.11: Actual Deferral Percentage Test.                 (a)         It is the Company's intent that all Elective Contributions shall satisfy the requirements of Code Section 401(k).                 (i)         Accordingly, the amount of Elective Contributions made in any Plan Year on behalf of all Highly Compensated Employees shall not result in an Actual Deferral Percentage for such Highly Compensated Employees that exceeds the greater of:                 (A)         the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or                 (B)         the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 2, provided that the Actual Deferral Percentage for all Highly Compensated Employees does not exceed the Actual Deferral Percentage for all Non-Highly Compensated Employees for the preceding Plan Year by more than 2 percentage points (or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee).                (ii)         For the purposes of this subsection (a), the amount of Elective Contributions shall relate to Compensation that either (A) would have been received by the Participant in the Plan Year but for the Participant's election to defer receipt of his or her Compensation pursuant to the terms of the Plan; or (B) is attributable to services performed by the Participant in the Plan Year and, but for the Participant's election to defer, would have been received by the Participant within 2 and 1/2 months after the close of the Plan Year.                 (iii)         In order to prevent the multiple use of the alternative method described in subsection (i)(B) above and in Code Section 401(m)(9)(A), any Highly Compensated Employee eligible to (A) make elective deferrals pursuant to this Section, or (B) receive matching contributions under this Plan or under any other plan maintained by the Company or an Affiliated Company, shall have his actual contribution ratio reduced pursuant to Regulation Section 1.401(m)-2.                 (iv)         For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury.                 (v)         Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the cash or deferred arrangement provided for in the Plan satisfies the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A).                 (b)         Adjustment To Actual Deferral Percentage Tests. If the Committee determines at any time that the limitation on Elective Contributions set forth in subsection (a) above will be exceeded for any Plan Year:                 (i)         the Company may, at its sole option (but still subject to the limitations contained elsewhere in the Plan), either (A) designate that all or any portion of its Discretionary Contribution for such Plan Year (if, and to the extent, it has been made prior to such date and has not been previously allocated pursuant to Section 4.5) shall be treated as an Elective Contribution (the "Deemed Elective Contribution") or (B) make an additional contribution (the "Additional Contribution") on behalf of all Participants other than Highly Compensated Employees, or on behalf of all Participants, in the amount necessary so that the limitation set forth in subsection (a) will not be exceeded. Any Deemed Elective Contribution or Additional Contribution shall be (A) prorated among the Participants on whose behalf it was made, on the basis of each such Participant's Compensation for such Plan Year, and (B) credited to each such Participant's Non-Elective Contribution Account; or                 (ii)         the Committee shall reduce the amount of the Elective Contributions made by the Highly Compensated Employees in the amount necessary so that the limitation set forth in subsection (a) above will not be exceeded. The amount by which each Highly Compensated Employee's Elective Contributions is reduced (the "Excess Contributions") shall be returned to the Company to be paid to such Highly Compensated Employee pursuant to subsection (h) below. For purposes of the foregoing, the amount of Excess Contributions for a Highly Compensated Employee for a Plan Year is to be determined by the following leveling method, under which the Elective Contributions made by the Highly Compensated Employee who made the highest Elective Contributions for the Plan Year is reduced to the extent required to:                 (A)         ;Enable the arrangement to satisfy the Actual Deferral Percentage test described in subsection (a) above, or                 (B)         Cause such Highly Compensated Employee's Elective Contributions to equal the Elective Contributions of the Highly Compensated Employee with the next highest Elective Contributions. This process must be repeated until the Plan satisfies the Actual Deferral Percentage test in subsection (a) above. For each Highly Compensated Employee, the amount of Excess Contributions is equal to the total Elective Contributions, Deemed Elective Contributions, and Additional Contributions made on behalf of the Employee (determined prior to the application of this subsection (b)(ii)), minus the amount determined by multiplying the Highly Compensated Employee's Actual Deferral Ratio (determined after application of this subsection (b)(ii)) by the Employee's Compensation. However, the amount of Excess Contributions to be distributed pursuant to subsection (h) below for a Plan Year with respect to any Highly Compensated Employee shall not exceed the amount of Elective Contributions made on behalf of such Highly Compensated Employee for such Plan Year.                 (c)         For the purposes of this Section, the following definitions shall apply:                 (i)         "Actual Deferral Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non-Highly Compensated Employees, the average of the Actual Deferral Ratios for each such group, calculated separately for each Participant in each such group.                 (ii)         "Actual Deferral Ratio" shall mean the ratio that:                 (A)         the amount of the Elective Contributions, Deemed Elective Contributions, and Additional Contributions made on behalf of each Participant for a Plan Year, bears to                 (B)         such Participant's Compensation for such Plan Year.                 (d)         For the purposes of this Section, the Actual Deferral Percentage for any Highly Compensated Employee who is eligible to have Elective Contributions, Deemed Elective Contributions, or Additional Contributions allocated to his or her account(s) under two or more plans or arrangements described in Code Section 401(k) that are maintained by the Company or any Affiliated Company shall be determined as if all such Elective Contributions, Deemed Elective Contributions, and Additional Contributions were made under a single arrangement.                 (e)         The determination and treatment of the Elective Contributions, Deemed Elective Contributions, Additional Contributions, and Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.                 (f)         The determination of who is a Highly Compensated Employee, including the determination of the Compensation that is considered will be made in accordance with Code Section 414(q).                 (g)         Distribution Of Excess Deferrals.                 (i)         If any Participant has any Excess Deferrals for any calendar year, and if he or she makes a claim pursuant to subsection (ii) below, then the Excess Deferrals allocable to the Plan pursuant to such claim shall be returned to the Company to be distributed to such Participant. Such distribution shall be made no later than the April 15th following the calendar year to which such Excess Deferrals relate.                 (ii)         A Participant's claim for Excess Deferrals shall be in writing, signed by such Participant, and submitted to the Committee no later than the March 1 following the calendar year to which such Excess Deferrals relate. Such claim shall also specify the amount of such Participant's Excess Deferrals for such calendar year allocable to the Plan and shall be accompanied by such Participant's statement that, if such Excess Deferrals are not distributed, such Excess Deferrals, when added to all amounts deferred by such Participant under all plans or arrangements described in Code Sections 401(k), 408(k), or 403(b), exceed the limit imposed on such Participant by Code Section 402(g) for the year to which the Excess Deferrals relate.                 (iii)         For the purposes of this Section, a Participant's "Excess Deferrals" shall mean the amount of such Participant's Elective Contributions for a calendar year that are allocated to the Plan pursuant to subsection (i) above.                 (iv)         The Excess Deferrals shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts.                 (v)         The Committee may elect to further adjust the Excess Deferrals for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Deferrals, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Deferrals under the Plan for the Plan Year.                 (h)         Distribution Of Excess Contributions.                 (i)         Despite any other provision of the Plan, any Excess Contributions that are to be distributed pursuant to Section 3.11(b), and the income, gain or loss allocable thereto, shall be distributed no later than the last day of the Plan Year following the Plan Year to which such Excess Contributions relate.                 (ii)         The Excess Contributions shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts.                 (iii)         The Committee may elect to further adjust the Excess Contributions for income, gain or loss, for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Contributions under the Plan for the Plan Year.                 (iv)         The Excess Contributions that would otherwise be distributed to a Participant shall be reduced, in accordance with the Regulations, by the amount of Excess Deferrals distributed to such Participant.                 (i)         Alternative Method of Satisfying the ADP Test. Despite any other provision of the Plan, effective for the Plan Years beginning after December 31, 1998, the Elective Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i ) above if:                 (i)         Matching Contribution. The Company makes a Matching Contribution and Bonus Matching Contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's Matching Contribution and Bonus Matching Contribution for each such Participant shall be an amount equal to:                 (A)         100% of the Participant's Elective Contributions for the Plan Year, up to 3% of the Participant's Compensation; plus                 (B)         50% of the Participant's Elective Contributions for the Plan Year that exceed 3% of his or her Compensation but do not exceed 5% of the Participant's Compensation. Despite the foregoing, the Committee may choose any other Matching Contribution rate, if such alternative rate satisfies the following requirements:                 (C)         The rate does not increase as a Participant's Elective Contributions increase; and                 (D)         The total amount of the Matching Contributions and Bonus Matching Contributions using this alternative rate must equal or exceed the total amount of Matching Contributions and Bonus Matching Contributions using the rate provided for in the second sentence of subsection (i)(i) above. For all purposes under this subsection (i)(i), the combined Matching Contribution and Bonus Matching Contribution rate for any Participant who is a Highly Compensated Employee shall not be greater than the combined Matching Contribution and Bonus Matching Contribution rate for any Participant who is a Non-Highly Compensated Employee.                 (ii)         Discretionary Contribution. Alternatively, the Company may make a Discretionary Contribution on behalf of each Participant who is a Non-Highly Compensated Employee. The Company's Discretionary Contribution for each such Participant shall be an amount equal to three percent (3%) of the Participant's Compensation.                 (iii)         In addition to satisfying either subsection (i) or (ii) above, the following requirements shall also apply for the Plan Year:                 (A)         Within a reasonable period before each Plan Year, the Committee must give each Participant a written notice of the Participant's rights and obligations under the Plan. The written notice must be sufficiently accurate and comprehensive to apprise the Participant of his or her rights and obligations and written in a manner calculated to be understood by the average Participant; and                 (B)         Except as provided for below, the Matching Contributions and Bonus Matching Contributions or Discretionary Contributions provided for in subsections (i) and (ii) shall be treated for all purposes under Articles IV, V, and VI as Elective Contributions. However, such contributions shall not be treated as Elective Contributions for purposes of hardship withdrawals under Section 6.9.                 Section 3.12: Actual Contribution Percentage Test.                 (a)         It is the Company's intent that all Matching Contributions and Bonus Matching Contributions shall satisfy the requirements of Code Section 401(m).                 (i)         Accordingly, the "Actual Contribution Percentage" for Participants who are all Highly Compensated Employees shall not exceed the greater of:                 (A)         the Actual Contribution Percentage for all Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 1.25; or                 (B)         the Actual Contribution Percentage for all Participants who are Non-Highly Compensated Employees for the preceding Plan Year, multiplied by 2, provided that the Actual Contribution Percentage for all Participants who are Highly Compensated Employees does not exceed the Actual Contribution Percentage for all Participants who are Non-Highly Compensated Employees for the preceding Plan Year, by more than 2 percentage points (or such lesser amount as required in Treasury Regulation Section 1.401(m)-2 to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee).                 (ii)         For the purposes of subsection (i) above, the Committee may elect to use the current Plan Year rather than the preceding Plan Year. If the Committee makes this election, then such election may not be changed except as allowed for by the Secretary of the Treasury.                 (iii)         Effective for Plan Years beginning after December 31, 1998, if the Committee elects to apply Code Section 410(b)(4)(B) to determine whether the Plan satisfies the coverage requirements provided for in Code Section 410(b)(1), then for purposes of subsection (i) above, the Committee may exclude all eligible Employees (other than Highly Compensated Employees) who have not met the minimum age and service requirements of Code Section 410(a)(1)(A).                 (b)         Definitions. For the purposes of this Section, the following definitions shall apply:                 (i)         "Actual Contribution Percentage" shall mean, with respect to the groups consisting of (A) all Highly Compensated Employees and (B) all Non-Highly Compensated Employees, the average of the Actual Contribution Ratios for each such group, calculated separately for each Participant in each such group.                 (ii)         "Actual Contribution Ratio" for a Plan Year shall mean the ratio that:                 (A)         the amount of the Matching Contributions and Bonus Matching Contributions made on behalf of each Participant for a Plan Year, bears to                 (B)         such Participant's Compensation for such Plan Year. The Actual Contribution Ratio must be rounded to the nearest one-hundredth of 1%.                 (iii)         "Excess Aggregate Contributions" shall mean, for each Highly Compensated Employee, the total Matching Contributions and Bonus Matching Contributions made on behalf of such Highly Compensated Employee for such Plan Year, minus the amount determined by multiplying the Employee's Actual Contribution Ratio by the Employee's Compensation for such Plan Year.                 (c)         Elective Deferrals And Matching Contributions. For purposes of determining the Actual Contribution Percentage and the amount of Excess Aggregate Contributions pursuant to this Section, only Matching Contributions and Bonus Matching Contributions contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Committee may elect to take into account, with respect to Employees eligible to have Matching Contributions and Bonus Matching Contributions pursuant to this Section allocated to their accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and qualified nonelective contributions (as defined in Code Section 401(m)(4)(c)) contributed to any plan maintained by the Company. Such elective deferrals and qualified non-elective contributions shall be treated as Matching Contributions subject to Treasury Regulation Section 1.401(m)-1(b)(2). However, the Plan Year must be the same as the plan year of the plan to which the elective deferrals and the qualified nonelective contributions are made.                 (d)         Plan Aggregation. For purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(m), if two or more plans, which are maintained by the Company or any Affiliated Company, to which matching contributions, Employee contributions, or both, are made, are treated as one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the average benefits tests under Code Section 410(b)(2)(A)(ii)), such plans shall be treated as one plan.                 (i)         In addition, two or more plans of the Company to which matching contributions, Employee contributions, or both, are made may be considered as a single plan for purposes of determining whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans were a single plan. However, plans may be aggregated under this subsection only if they have the same plan year.                 (ii)         Despite the foregoing, an employee stock ownership plan described in Code Section 4975(e)(7) may not be aggregated with this Plan for purposes of determining whether the employee stock ownership plan or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).                 (e)         Plan Aggregation. If a Highly Compensated Employee is a Participant under two or more plans (other than an employee stock ownership plan as defined in Code Section 4975(e)(7)) which are maintained by the Company or an Affiliated Company to which matching contributions, Employee contributions, or both, are made, all such contributions on behalf of such Highly Compensated Employee shall be aggregated for purposes of determining such Highly Compensated Employee's Actual Contribution Ratio. However, if the plans have different plan years, this subsection shall be applied by treating all plans ending with or within the same calendar year as a single plan.                 (f)         Distribution of Excess Aggregate Contributions.                 (i)         If the Committee determines at any time that the limitation on Matching Contributions and Bonus Matching Contributions set forth in subsection (a) above will be exceeded for any Plan Year, the Committee (on or before the fifteenth day of the third month following the end of the Plan Year) shall direct the Trustee to:                 (A)         distribute to the Highly Compensated Employee who received the most Matching Contributions and Bonus Matching Contributions during the Plan Year, his or her vested portion of Excess Aggregate Contributions (and income allocable to such contributions) or,                 (B)         if forfeitable, forfeit such non-vested Excess Aggregate Contributions attributable to Matching Contributions and Bonus Matching Contributions (and income allocable to such Forfeitures) until either one of the tests set forth in this Section is satisfied, or until the amount of Matching Contributions and Bonus Matching Contributions that such Highly Compensated Employee received equals the Matching Contributions and Bonus Contributions received by the Highly Compensated Employee who received the second highest Matching Contributions and Bonus Matching Contributions. This process shall continue until one of the tests set forth in this Section is satisfied.                 (ii)         The Excess Aggregate Contribution shall be adjusted for income, gain or loss for the Plan Year pursuant to any reasonable method adopted by the Committee, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participants' Accounts.                 (iii)         The Committee may elect to further adjust the Excess Aggregate Contributions for income, gain or loss for the gap period between (A) the last day of the Plan Year and (B) the date of distribution of the Excess Aggregate Contributions, provided that such adjustments are made pursuant to any reasonable method adopted by the Committee that does not violate Code Section 401(a)(4) and is used consistently for all Participants and for all Excess Aggregate Contributions under the Plan for the Plan Year.                 (iv)         Any distribution (and/or Forfeiture) of less than the entire amount of Excess Aggregate Contributions (and income) shall be treated as a pro rata distribution (and/or Forfeiture) of Excess Aggregate Contributions and income. Distribution of Excess Aggregate Contributions shall be designated by the Company as a distribution of Excess Aggregate Contributions (and income). Forfeitures of Excess Aggregate Contributions shall be treated in accordance with Section 4.4. However, no such Forfeiture may be allocated to a Highly Compensated Employee whose contributions are reduced pursuant to this Section.                 (v)         Excess Aggregate Contributions shall be treated as Company contributions for purposes of Code Sections 404 and 415 even if distributed from the Plan.                 (vi)         The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to be recharacterized as a Deemed Elective Contribution for the plan year of any other qualified cash or deferred arrangement (as defined in Code Section 401(k)) maintained by the Company that ends with or within the Plan Year.                 (vii)         Despite the above, within twelve (12) months after the end of the Plan Year, the Company may make a special qualified Non-Elective Contribution on behalf of Non-Highly Compensated Employees in an amount sufficient to satisfy one of the tests set forth in this Section. Such contribution shall be allocated to the PIRA Account of each Participant who is Non-Highly Compensated Employee in the same proportion that each such Participant's Compensation for the Plan Year bears to the total Compensation of all such Participants for such Plan Year. A separate accounting shall be maintained for the purpose of excluding such contributions for the "Actual Deferral Percentage" test set forth in Section 3.11.                 (g)         Despite any other provision of the Plan, for Plan Years beginning after December 31, 1998, the Matching Contributions for any Plan Year shall be deemed to satisfy subsection (a)(i) if:                 (i)         The Company makes the contribution provided for in Section 3.11(i)(i) or (ii);                 (ii)         The Committee gives each Participant the written notice provided for in Section 3.11(i)(iii);                 (iii)         The Matching Contribution does not exceed six percent (6%) of any Participant's Compensation;                 (iv)         The rate of the Matching Contribution does not increase as the rate of the Elective Contribution increases; and                 (v)         The Matching Contribution rate for any Participant who is a Highly Compensated Employee is not greater than the Matching Contribution rate for any Participant who is a Non-Highly Compensated Employee.                 Section 3.13: No Requirement For Profits. Despite any other provision of the Plan, the Company may, but is not required to, make all contributions to the Plan for any Plan Year without regard to whether the Company has any Net Profits for the taxable year or years ending with or within such Plan Year. Despite the preceding sentence, the Plan shall continue to be designed to qualify as a profit sharing plan for the purposes of Code Sections 401(a), 402, 412, and 417.     ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS                   Section 4.1: Retirement Accounts And Matching Contribution Accounts.                 (a)         The Committee shall open and maintain in the name of each Participant for whom a Discretionary Contribution is made a Retirement Account for contributions in cash and a Retirement Stock Account for contributions in Company Stock. Each Account shall be credited or charged with the amounts allocable to it as set forth below.                 (b)         For each Plan Year beginning prior to September 30, 1998, the Committee shall open and maintain in the name of each Participant for whom a Matching Contribution or a Bonus Matching Contribution is made a Matching Contribution Account for contributions in cash and a Matching Contribution Stock Account for contributions in Company Stock. Each Account shall be credited or charged with the amounts allocable to it as set forth below. For each Plan Year beginning on or after September  30, 1998, a Participant's Matching Contribution shall be credited to his or her Non-Elective Contribution Account.                 Section 4.2: PIRA Accounts. The Committee shall open and maintain a PIRA Account in the name of each Participant for whom an Elective Contribution is made. This Account shall be credited with each such Elective Contribution (and such Participant's allocable share of any Deemed Elective Contribution or Additional Contribution) as it is received by the Trustee, and it shall be credited or charged with the amounts allocable to it as set forth below.                 Section 4.3: Rollover Contribution Accounts and Transferred Accounts.                 (a)         The Committee shall open and maintain a Rollover Contribution Account for each Participant who contributes a Rollover Contribution. This Account shall be credited with such Participant's Rollover Contributions, and it shall be credited or charged with the amounts allocable to it as set forth below.                 (b)         The Committee shall open and maintain a Transferred Account for each Participant who is a Transferred Employee. This Account shall be credited or charged with the amounts allocable to it as set forth below.                 Section 4.4: Allocation Of Forfeitures. Subject to the limitations contained elsewhere in the Plan, as of each Anniversary Date, any Forfeitures that are created pursuant to the other provisions of the Plan shall be allocated as follows: first, to pay the administrative expenses charged to the Plan (excepted as otherwise directed by the Committee); second, to fund the Matching Contributions or Bonus Matching Contributions, if any; and, third, to fund the Elective Contributions that the Company must make pursuant to Section 3.2 above. Despite the foregoing, any Forfeitures of Excess Aggregate Contributions pursuant to Section 3.12 above shall be allocated to the Matching Contribution Accounts of the Participants who are Non-Highly Compensated Employees in the same proportion that each such Participant's Compensation for such Plan Year bears to the total Compensation of all such Participants for such Plan Year.                 Section 4.5: Allocation Of Discretionary Contribution, Matching Contribution And Bonus Matching Contribution.                 (a)         Discretionary Contribution. Subject to the limitations contained elsewhere in the Plan, as of each Anniversary Date, the Company's Discretionary Contribution (if any) made on account of the Plan Year ending on such Anniversary Date shall be allocated to the Retirement Accounts, if made in cash, or the Retirement Stock Accounts, if made in Company stock, of those Participants on whose behalf it was made. This allocation shall be made after the allocations described in Section 4.4.                 (b)         Matching Contribution. Each month, and such other dates as directed by the Committee, the Company's Matching Contribution made on account of such month shall be allocated to the Matching Contribution Accounts of those Participants on whose behalf it was made. With respect to a Participant whose Elective Contributions are suspended under Section 3.2(b), the additional Matching Contribution described in the last sentence of Section 3.3(a) shall be allocated each month in which the Participant receives Compensation following the date of such suspension. This allocation shall be made after the allocations described in Section 4.4.                 (c)         Bonus Matching Contribution. As of each Anniversary Date and such other dates as directed by the Committee, the Company's Bonus Matching Contribution made on account of the Plan Year ending on such Anniversary Date shall be allocated to the Matching Contribution Accounts, if made in cash, or the Matching Contribution Stock Accounts, if made in Company Stock, of those Participants on whose behalf it was made. This allocation shall be made after the allocations described in Section 4.4.                 Section 4.6: Allocation of Minimum Company Contributions. The Minimum Company Contribution made for the Plan Year shall be allocated to the Plan by the Company to the Accounts of each individual who is both a Participant and an Employee on the first day of the Plan Year, as follows:                 (a)         First, the Minimum Company Contribution for the Plan Year shall be allocated during the Plan Year to the PIRA Account of each Participant as Elective Contributions pursuant to the provision of Section 3.2(a), and to the Matching Contribution Account of each Participant as Matching Contributions pursuant to the provision of Section 3.3.                 (b)         Second, the balance of the Minimum Company Contribution remaining after the Allocation in Section 4.6(a), shall be allocated to the Matching Contribution Account of each Participant who is a Non-Highly Compensated Employee and who is an Employee on the last day of the Plan Year, in the ratio that the sum of such Participant's Elective Contributions during the Plan Year bears to the sum of Elective Contributions of all such Participants, during the Plan Year.                 (c)         Third, notwithstanding Section 4.8, if the total contributions allocated to a Participant's accounts including the Minimum Company Contribution exceeds the Participant's maximum Annual Addition limit for any Limitation Year, then such excess shall be held in a suspense account. Such amounts shall be used to reduce Company contributions in the next, and succeeding, Limitation Years.                 (d)         Fourth, the balance of the Minimum Company Contribution remaining after the allocation under Sections 4.6(a), (b), and (c) shall be allocated as a non-elective contribution to each Participant who is a Non-Highly Compensated Employee, in the ratio that such Participant's Compensation for the Plan Year bears to the Compensation of all such Participants. This amount shall be credited to the Participant's Non-Elective Contribution Account. The Participant shall vest in his or her Non-Elective Contribution Account in accordance with Section 5.2. Such contributions shall be invested in the Trust in the same proportion that the Participant designates in accordance with the provisions of Section 4.9.                 (e)         Each installment of the Minimum Company Contribution shall be held in a contribution suspense account unless, or until, allocated on or before the end of the Plan Year in accordance with this Section 4.6. Such suspense account shall not participate in the allocation of investment gains, losses, income and deductions of the Trust as a whole, but shall be invested separately and all gains, losses, income and deductions attributable to such investment shall be applied to reduce Plan expenses, and thereafter, to reduce Company contributions.                 (f)         The Minimum Company Contribution allocated to the Matching Contribution Account of a Participant pursuant to Section 4.6(b) shall be treated in the same manner as Matching Contributions for all purposes of the Plan.                 (g)         Notwithstanding any of the foregoing provisions to the contrary, any allocation of Elective Contributions to a Participant's PIRA Account shall be made under either Section 4.2 or this Section 4.6, as applicable, but not both Sections and any allocation of Matching Contributions shall be made under either Section 4.5(b) or this Section 4.6 as applicable, but not both Sections.                 Section 4.7: Accounts In General. The credits made to a Participant's Accounts shall not vest in such Participant any right, title or interest in the Trust, except to the extent, at the time or times, and upon the terms and conditions set forth in the Plan. Neither the Company, the Trustee, nor the Committee, to any extent, warrant, guarantee or represent that the value of any Participant's Accounts at any time will equal or exceed the amount previously allocated or contributed to such Accounts.                 Section 4.8: Limitation On Annual Additions.                 (a)         The following limitations shall apply to the allocations to each Participant's Accounts in any Limitation Year:                 (i)         As used in the Plan, a Participant's "Annual Addition" shall mean the sum for any Limitation Year of:                 (A)         Such Participant's share of the Company's contributions; plus                 (B)         Such Participant's voluntary, nondeductible contributions to the Plan (excluding any Rollover Contribution); plus                 (C)         Such Participant's share of any Forfeiture; plus              (D)        Such Participant's allocable share of the Company's contributions to any Individual Medical Benefit Account; and plus                (E)         With respect to any Participant who is a Key Employee, any amount that is derived from the Company's contributions paid or accrued after December 31, 1985 in taxable years ending after such date, and that is attributable to post-retirement medical benefits allocated to such Participant's account under a Welfare Benefit Fund maintained by the Company. Any excess amount applied under subsection (c) below in a Limitation Year to reduce the Company's contributions on behalf of any Participant shall be considered to be an Annual Addition for such Participant for such Limitation Year.                 (ii)         Subject to the adjustments set forth below, during any Limitation Year the maximum Annual Addition for any Participant shall in no event exceed the lesser of:                 (A)         $30,000, as adjusted by the Adjustment Factor; or                 (B)         25% of the Participant's Earnings for such Limitation Year.                 (iii)         The earnings limitation referred to in subsection (a)(ii)(B) above shall not apply to (A) any contribution for medical benefits (within the meaning of Code Section 419A(f)(2)) after separation from service that is otherwise treated as an Annual Addition, or (B) any amount otherwise treated as an Annual Addition under Code Section 415(l)(1).                 (b)         For Plan Years beginning before January 1, 2000, the following additional limitations shall apply to any Participant when such Participant, in addition to his or her participation in the Plan (and any Welfare Benefit Fund), is also a participant in a Defined Benefit Plan maintained by the Company or an Affiliated Company:                                 (i)         The amount of (A) the Annual Additions to such Participant's account(s) or (B) such Participant's normal retirement benefit in any such plan(s) shall be reduced by each such plan's committee to the extent necessary to prevent the sum of the Defined Benefit Plan Fraction (defined below) and the Defined Contribution Plan Fraction (defined below) for any such year from exceeding 1.0 (the "1.0 Rule") (benefits under Welfare Benefit Funds shall be reduced first, then benefits under profit sharing plans, then benefits under other Defined Contribution Plans, and, finally, benefits under Defined Benefit Plans).                                 (ii)         For the purpose of applying the 1.0 Rule, the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction shall be applied in a manner consistent with the provisions of Code Section 415 and the Regulations under it.                                 (iii)         As used above, "Defined Benefit Plan Fraction" shall mean a fraction, the numerator of which is the Participant's projected annual benefit under the Defined Benefit Plan (determined as of the end of the Limitation Year for such plan), and the denominator of which is the lesser of:                 (A)         1.25 multiplied by the dollar limitation in effect for such Limitation Year (determined under Code Section 415(b)(1)(A)); or                 (B)         1.4 multiplied by 100% of such Participant's average Earnings for his or her highest 3 consecutive years, including such Limitation Year (determined under Code Section 415(b)(1)(B)).                 (iv)         As used above, "Defined Contribution Plan Fraction" shall mean a fraction, the numerator of which is the sum of the annual additions to the Participant's account(s) as of the end of the Limitation Year, and the denominator of which is the sum of the lesser of the following amounts determined for such Limitation Year and for each of such Participant's prior years of service with the Company:                 (A)         1.25 multiplied by the dollar limitation in effect for such Limitation Year (determined under Code Section 415(c)(1)(A), but without regard to Code Section 415(c)(6)); or                 (B)         1.4 multiplied by 25% of such Participant's Earnings for such Limitation Year (determined under Code Section 415(c)(1)(B), or Code Section 415(c)(7), if applicable).                 (c)         If, for any Limitation Year, it is necessary to limit the Annual Addition of any Participant pursuant to subsections (a) or (b) above, the following reallocations shall be made:                 (i)         First, the amount of such Participant's nondeductible, voluntary contributions for that Limitation Year that are included in his or her Annual Addition shall be refunded to him or her;                 (ii)         Second, the amount of such Participant's Elective Contribution for such Limitation Year that causes such Participant's Annual Addition to exceed the applicable limitation shall be returned to the Company to be paid to such Participant;                 (iii)         Third, the amount of the Company's contribution, inclusive of Forfeitures, that is allocable to such Participant and that causes such Participant's Annual Addition to exceed the applicable limitation shall, instead, be allocated to all other Participants who are not subject to this limitation, in proportion to their Compensation for such Limitation Year; and                 (iv)         Fourth, if the amount of the Company's contribution, inclusive of Forfeitures, is so great as to cause all Participants for such Limitation Year to be subject to the limitations of this Section, then the excess of the Company's contributions that cannot be allocated for such Limitation Year shall be held unallocated in a suspense account and applied against and reduce the Company's future contributions.                 (d)         If a suspense account is in existence at any time during a Limitation Year pursuant to subsection (c)(iii) above, it shall not participate in the Trust's income, gains and losses.                 (e)         The limitations of this Section with respect to any Participant who, at any time, has been a participant in any other Defined Contribution Plan (whether or not terminated) or in more than one Defined Benefit Plan (whether or not terminated) maintained by the Company or by an Affiliated Company shall apply as if all such Defined Contribution Plans or all such Defined Benefit Plans in which the Participant has been a participant were one plan.                 Section 4.9: Investment Of Accounts.                 (a)         Participants shall manage the investment of all or a portion of the Trust's assets attributable to their Accounts. Subject to uniform and nondiscriminatory rules adopted by the Committee, a Participant shall designate the percentage of any one or more of his or her Accounts that is to be invested in each of several authorized investments designated by the Committee from time to time, which investments shall include a "Company Stock Fund." For convenience, such designated investments are referred to in this Plan individually as a "Fund," and collectively as the "Funds." Despite the foregoing, the Trustee may invest and reinvest the principal and income of any Account in short term obligations or bank accounts, pending investment in designated Funds, and may retain such cash balances in each of the Accounts as the Committee directs to meet the current cash needs of the Plan. In the absence of proper election by a Participant under this Section, the Participant's Accounts shall be invested in such Fund as the Committee may designate from time to time for such purpose, and all distributions shall be charged first to the portion of the Participant's Accounts invested in that Fund and then to the balance of his or her Accounts.                 (b)         As of each Trust Valuation Date, each Participant's Account shall be credited (or charged) with the income, gains, and losses of the Funds in which such Account is invested, as such income, gains, and losses are realized. The Trustee shall value the assets of the Trust at their fair market value as of each such Trust Valuation Date. In addition, each Participant's Accounts shall be charged (as the Committee, in a uniform and nondiscriminatory manner, shall direct) with brokerage commissions and other direct costs related to investing such Participant's Accounts pursuant to his or her directions.                 (c)         Stock dividends on account of Company Stock held in a Company Stock Fund shall be allocated to an Account to the extent the Account is invested in the Company Stock Fund. Cash dividends paid on account of Company Stock held in a Company Stock Fund shall be reinvested in Company Stock.                 (d)         Despite the foregoing, as set forth in Section 3.8 above, a Participant may not designate the investment of the Participant's Retirement Stock Account or Matching Contribution Stock Account in any investment other than the Company Stock Fund, unless the Committee, in its discretion and based on uniform and nondiscriminatory rules, provides otherwise.                 (e)         Despite the foregoing, but subject to Section 3.8, the Committee may prohibit any "Section 16(b) Insider," as defined below, from investing any portion of his or her Accounts in the Company Stock Fund. For purposes of the foregoing, a "Section 16(b) Insider" shall mean any person (i) who is directly or indirectly the beneficial owner of more than 10% of any class of stock of the Company that is registered under Section 12 of the Securities Exchange Act of 1934, (ii) who is an officer of the Company or a director of the Company (whether by title or on the board of directors) or (iii) who, for the six month period following his or her termination of employment from the Company, was a person described in (i) or (ii) immediately prior to his or her termination of employment with the Company.                 Section 4.10: Voting Of Company Stock. If the Trustee holds any Company Stock with voting rights, the Trustee shall vote such Company Stock as provided in the Trust.     ARTICLE V VESTING                   Section 5.1: Vesting In Matching Contribution Account And Matching Contribution Stock Account.                 (a)         Each Participant shall have a nonforfeitable right or vested interest in his or her Matching Contribution Account and Matching Contribution Stock Account, according to the following table: Years of Service Vested Percentage     Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100%                   (b)         Despite the provisions of subsection (a), a Participant shall become 100% vested in his or her Matching Contribution Account and Matching Contribution Stock Account upon (i) such Participant's attainment of his or her Normal Retirement Age, (ii) such Participant's death, or (iii) such Participant's Total Disability; provided that such Participant is an Employee upon the happening of the applicable event.                 Section 5.2: Vesting In Other Accounts. Each Participant shall at all times be 100% vested in his or her Retirement Account, Retirement Stock Account, PIRA Account, Rollover Contribution Account and Non-Elective Contribution Account, if such Accounts have been established for such Participant. With respect to the Transferred Account, a Participant shall vested in the assets of that account in accordance with the vesting rules that apply to those assets at the time of their initial transfer to that account.                 Section 5.3: Forfeitures.                 (a)         If a Participant (i) ceases to be an Employee in any Plan Year for any reason other than his or her death, Total Disability or retirement on or after his or her Normal Retirement Age, and (ii) as of the coinciding or immediately preceding Anniversary Date, such Participant was not 100% vested in his or her Matching Contribution Account, then this Section shall apply.                 (b)         The nonvested portion of such a Participant's Matching Contribution Account shall be retained therein until he or she incurs 5 consecutive Breaks in Service or again becomes an Employee, whichever occurs first.                 (i)         If 5 consecutive Breaks in Service occur first, then (A) the nonvested portion shall be forfeited and allocated as provided elsewhere in the Plan, as of the Anniversary Date in the Plan Year during which such Participant incurs his or her fifth consecutive Break in Service, and (B) any additional amounts that may have become vested prior to such Forfeiture in accordance with subsection (d) below shall be distributed to the Participant within 60 days following the Anniversary Date of such Forfeiture.                 (ii)         If the Participant becomes an Employee before he or she incurs 5 consecutive Breaks in Service and if he or she repays, subject to the provisions of the next sentence, the amount of the distribution, if any, he or she received from his or her Matching Contribution Account at his or her previous termination of employment, the repaid amount and the balance in his or her previous Matching Contribution Account shall become the beginning balance in his or her new Matching Contribution Account. Such repayment must be made (A) in the case of a distribution on account of separation from service, before the earlier of 5 years after the first date on which the Participant is subsequently re-employed by the Company, or the close of the first period of 5 consecutive 1-year Breaks in Service commencing after the distribution; or (B) in the case of any other distribution, 5 years after the date of the distribution. If the nonvested portion is not reinstated under the preceding two sentences, the re-employed Participant's previous Matching Contribution Account shall be closed and his or her nonvested portion shall be treated as a Forfeiture for the Plan Year in which the repayment period has expired; any additional amounts that may have become vested prior to such Forfeiture in accordance with subsection (d) shall be credited to his or her new Matching Contribution Account.                 (iii)         The nonvested portion maintained under this Section in a Participant's Matching Contribution Account shall be treated as a suspense account for purposes of Section 4.4, and it shall not share in the Trust's income, gains or losses while it is held in suspense.                 (c)         At any Relevant Time (defined below) after a distribution to a terminated Participant, such Participant's vested portion of his or her Matching Contribution Account shall be not less than an amount ("X") determined by the formula:   X = P(AB + (R x D)) - (R x D)     where P is the vested percentage at the Relevant Time computed in accordance with Section 5.1; AB is the balance in the Participant's Account at the Relevant Time; D is the amount of the distribution; R is the ratio of the balance in the Participant's Account at the Relevant Time to the balance in his or her Account after the distribution; and the Relevant Time is the time at which, under the Plan, the vested percentage in the Account cannot increase.                 Section 5.4: Break In Service Rules For Vesting Purposes.                 (a)         Except as otherwise provided in this Section, all Years of Service with the Company shall be counted in determining a Participant's nonforfeitable percentage interest in his or her Matching Contribution Account.                 (b)         In the case of any Participant who incurs a Break in Service, such Participant's Years of Service that were completed before such Break in Service shall not be counted for vesting purposes until he or she has completed one Year of Service after such Break in Service.                 (c)         If a Participant does not have any non-forfeitable right to his or her Matching Contribution Account at the time he or she incurs a Break in Service, then such a Participant's Years of Service before any period of consecutive Breaks in Service shall not be counted for vesting purposes if the number of such consecutive Breaks in Service equals or exceeds the greater of (i) 5 or (ii) the aggregate number of such Participant's Years of Service before such period. Such aggregate number of Years of Service shall not include any Year of Service that is disregarded under the preceding sentence by reason of such Participant's prior Breaks in Service.     ARTICLE VI DISTRIBUTION OF BENEFITS                   Section 6.1: Distribution Of Benefits.                 (a)         Benefits become distributable to a Participant or to the Beneficiary of a deceased Participant upon the first to occur of such Participant's Normal Retirement Date, Total Disability or death that coincides with or first follows a Participant's ceasing to be an Employee prior to his or her Normal Retirement Date for a reason other than death or Total Disability. A Participant (or the Beneficiary of a deceased Participant) must make a claim for such Participant's benefits prior to any distribution. Such benefits shall be determined as follows:                 (i)         If such benefits became distributable because of the Participant's death or Total Disability, such benefits shall be the sum of the amounts credited to his or her Accounts as of the Trust Valuation Date that coincides with or first follows the Committee's receipt of (A) written proof of such Participant's death or Total Disability and (B) a properly completed claim for benefits.                 (ii)         If such benefits became distributable for a reason other than the Participant's death or Total Disability, such benefits shall be the sum of the amounts credited to his or her Accounts as of the Trust Valuation Date that coincides with or first follows the Committee's receipt of a properly completed claim for benefits.                 (b)         If a Participant's benefits become distributable by reason of more than one of the events specified in subsection (a) above, then such Participant's vested percentage in his or her Matching Contribution Account shall be determined as if only the first to occur of such events had occurred.                 (c)         Despite the foregoing provisions, the Committee may, in its sole discretion, elect to pay a Participant who terminates his or her employment with the Company for a reason other than his or her death, Total Disability, or retirement on or after his or her Normal Retirement Date an immediate lump sum distribution of the amount specified in subsection (a) above. The Participant's consent to such a distribution is required if the portion of such distribution representing the vested portion in his or her Accounts is (or ever has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997).                 Section 6.2: Methods Of Distribution.                 (a)         Except as provided in this Section 6.2(b) or in Section 6.3 below, when a Participant's benefits become distributable, the Committee shall, with reasonable promptness, direct the Trustee to distribute such Participant's benefits as follows:                 (i)         If a Participant's benefits become distributable by reason of his or her death, the benefits shall be distributed to such deceased Participant's Beneficiary as an immediate lump sum. Such Participant's vested amount shall be reduced by any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8.                 (ii)         If a Participant's benefits become distributable for a reason other than his or her death, the Committee shall direct the Trustee to distribute such benefits as an immediate lump sum, and make such a distribution if such Participant consents. Despite the foregoing, if the vested amount credited to such Participant's Accounts is (or ever has been) $3,500 (or $5,000, for Plan Years beginning after August 5, 1997) or less, the Committee may direct the Trustee to distribute such benefits as an immediate cash lump sum, without such Participant's consent.                 (iii)         A Participant may, with respect to any portion of his or her benefits attributable to his or her Transferred Account, elect to be paid those benefits in installments rather than as an immediate lump sum in accordance with subsections (a)(i) and (ii) above, if such option is available under the Participant's Predecessor Plan. Such installments shall be paid in equal or nearly equal quarterly, semiannual, or annual installments over a period not exceeding:                 (A)         the life expectancy of the Participant; or                 (B)         the joint life and last survivor expectancy of the Participant and his or her Beneficiary. The expected return multiples of Section 1.72-9 of the Regulations under the Code shall be used to determine such life expectancy periods.                 (iv)         If a Participant's benefits became distributable for a reason other than his or her death, and if such Participant dies before his or her entire benefits have been distributed, then his or her Beneficiary(ies) shall receive a death benefit equal to the balance of the remaining installments (if any) or deferred cash lump sum (if any) due such deceased Participant.                 (v)         Despite the foregoing provisions, the Committee may at any time, with the consent of a Participant or his or her Beneficiary, direct the Trustee to accelerate or to postpone any installment payment to such Participant or Beneficiary or to reduce or to increase the period over which future installments are to be made, in which latter event the Trustee shall adjust the amount of such installments accordingly. In addition, a Participant may at any time withdraw any or all of his or her undistributed benefit, and a Participant's Beneficiary shall, unless such Participant provided otherwise, have a similar withdrawal right. If less than all of the undistributed benefit is withdrawn, the remaining installment payments shall be adjusted accordingly.                 (b)         Despite the foregoing, with respect to a Participant's Transferred Account, if an optional form of benefit was available under the Participant's Predecessor Plan with respect to any portion of that Transferred Account, the Participant may elect to have the benefits attributed to that portion of the Transferred Account paid in accordance with that optional form of benefit.                 (c)         The complete distribution of a Participant's benefit as provided for above shall constitute full payment and satisfaction of any obligation of the Company, the Trustee or the Committee to such Participant or to the Beneficiary of a deceased Participant.                 (d)         If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence fewer than 30 days after the notice required under Section 1.411(a)-11(c) of the Regulations under the Code is given, provided that:                 (i)         the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and                 (ii)         the Participant, after receiving the notice, affirmatively elects a distribution.                 Section 6.3: Survivor Annuity Requirements.                 (a)         Applicability. This Section shall apply to all benefits payable from a Participant's Transferred Account that are required by applicable law to be paid in the form of a joint and survivor annuity. Any other benefit payable under this Plan shall be paid in accordance with Section 6.2.                 (b)         Qualified Joint And Survivor Annuity. Unless an optional method of distribution under Section 6.2 is selected, a Participant who is married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Joint and Survivor Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period.                 (c)         Qualified Life Annuity. Unless an optional method of distribution under Section 6.2 is selected, a Participant who is not married on his or her Annuity Starting Date shall receive his or her benefits in the form of a Qualified Life Annuity. An optional method of distribution may only be selected or changed pursuant to a Qualified Election made within the Retirement Election Period.                 (d)         Qualified Preretirement Survivor Annuity. Unless an optional method of distribution under Section 6.2 is selected, or a different Beneficiary has been selected, if a married Participant dies before his or her Annuity Starting Date, such Participant's surviving spouse, if any, shall receive such Participant's benefits in the form of a Qualified Preretirement Survivor Annuity. If an optional method of distribution under Section 6.2 or Beneficiary other than such Participant's surviving spouse has not been selected, such surviving spouse may direct that the payments under the Qualified Preretirement Survivor Annuity commence within a reasonable time after the Participant's death. An optional method of distribution under Section 6.2 or Beneficiary other than such Participant's surviving spouse may only be selected or changed pursuant to a Qualified Election made within the Preretirement Election Period. Despite the foregoing, and to the extent allowed by law, a deceased Participant's Beneficiary may, at any time after such Participant's death but before his or her Annuity Starting Date, select a method of distribution in accordance with Section 6.2, provided that such Participant had not elected against such a selection.                 (e)         Definitions. For purposes of this Section, the following definitions shall apply:                 (i)         "Annuity Starting Date" shall mean the first day of the first period for which an amount is payable as an annuity, or in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred that entitled the Participant to such benefit. For purposes of the foregoing sentence, the first day of the first period for which a benefit is to be received by reason of disability shall be treated as the Annuity Starting Date only if such benefit is not an auxiliary benefit under Code Section 417(f)(2)(B).                 (ii)         "Preretirement Election Period" shall mean, with respect to any Participant, the period that begins on the first day of the Plan Year in which such Participant attains age 35 and ends on the date of such Participant's death. If a Participant separates from service before the first day of the Plan Year in which he or she attains age 35, the Preretirement Election Period shall begin on the date of separation with respect to benefits accrued before such separation.                 (iii)         "Qualified Election" shall mean an election to waive the Qualified Joint and Survivor Annuity, the Qualified Life Annuity, or the Qualified Preretirement Survivor Annuity form of benefit. Such election must satisfy the following requirements: (A)  it must be in writing; (B) it must be consented to in writing by the Participant's spouse, if he or she is married; (c) it must designate a beneficiary (or a form of benefits) which may not be changed without the consent of the Participant's spouse (or the Participant's spouse's consent must expressly permit the Participant to designate a beneficiary without requiring further consent from the Participant's spouse); (D) such spouse's consent must acknowledge the effect of the election; and (E) such spouse's consent must be witnessed by a Plan representative or a notary public. Spousal consent is not required if the Participant establishes to the satisfaction of a Plan representative that such consent cannot be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may prescribe by Regulations. Any consent by a spouse (or establishment that the consent of a spouse cannot be obtained) shall be effective only as to such spouse. A Participant may revoke a prior Qualified Election and choose again to take a Qualified Joint and Survivor Annuity, Qualified Life Annuity, or Qualified Preretirement Survivor Annuity without the consent of his or her spouse, at any time and any number of times, within the applicable election period.                 (iv)         "Qualified Joint and Survivor Annuity" shall mean a benefit that can be purchased with that portion of the Participant's Transferred Account that is subject to this Section 6.3 and payable in the form of an annuity for the life of the Participant with a survivor annuity for the life of such Participant's spouse. Such survivor annuity must not be less than 50% nor more than 100% of the amount of the annuity payable during the joint lives of the Participant and his or her spouse. Such survivor annuity must commence immediately as provided in Regulation 1.417(e)-1(b)(1). Unless the Participant elects otherwise, the automatic form of the qualified joint and survivor annuity shall provide for a survivor annuity equal to 50% of the amount of the annuity payable during the joint lives of the Participant and his or her spouse.                 (v)         "Qualified Life Annuity" shall mean a benefit that can be purchased with that portion of the Participant's Transferred Account that is subject to this Section 6.3 and payable in the form of an annuity for the life of the Participant.                 (vi)         "Qualified Preretirement Survivor Annuity" shall mean a benefit that can be purchased with that portion of the Participant's Transferred Account that is subject to this Section 6.3, determined as of the date of such Participant's death (less any portion that is automatically forfeited upon such Participant's death pursuant to the Plan's other provisions), that is payable to such Participant's surviving spouse in the form of an annuity for the life of such spouse. Despite the foregoing, such annuity shall be the actuarial equivalent of at least 50% of the vested amount credited to a Participant's Accounts as of the date of such Participant's death. For the purposes of the foregoing, (A) any security interest held by the Plan, the Trust or the Trustee by reason of a loan outstanding pursuant to Section 6.8 to the Participant shall be taken into account in determining the amount of the Qualified Preretirement Survivor Annuity, and (B) the Participant's Transferred Account, starting with that portion subject to this Section 6.3, shall be first reduced by any such security interest held by reason of such loan.                 (vii)         "Retirement Election Period" shall mean, with respect to any Participant, the 90-day period that ends on his or her Annuity Starting Date.                 (f)         Information To Participants. A Participant shall be provided with the following information with regard to the applicable Qualified Election:                 (i)         With regard to the Qualified Election to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, a Participant shall be provided with a written explanation of (A) the terms and conditions of the Qualified Joint and Survivor Annuity or Qualified Life Annuity, (B) the Participant's right to elect to waive the Qualified Joint and Survivor Annuity or Qualified Life Annuity form of benefit, (C) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Annuity form of benefit, and (D) the right of the Participant to revoke such an election, and the effect of such a revocation. Such written explanation shall be provided to a Participant no less than 30  days and no more than 90 days before the Annuity Starting Date.                 (ii)         With regard to the Qualified Election regarding the Qualified Preretirement Survivor Annuity form of benefit, a Participant shall be provided with a written explanation of the Qualified Preretirement Survivor Annuity containing comparable information to that required pursuant to subparagraph (i) above. Such written explanation shall be provided to each Participant within whichever of the following periods ends last: (A) the period beginning with the first day of the Plan Year in which such Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which such Participant attains age 35, (B) a reasonable period after such Participant first became a Participant, or (c) a reasonable period after such Participant ceases to be an Employee in the case of a Participant who ceases to be an Employee before attaining age 35.                 (g)         Cash-Out Restrictions.                 (i)         Despite the other provisions of this Section, but subject to the next sentence, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is not (nor never has been) in excess of $3,500 (or $5,000, for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum. No such distribution may be made after a Participant's Annuity Starting Date unless such Participant and his or her spouse (or, in the case of a deceased Participant, the surviving spouse) consent in writing to such distribution.                 (ii)         Despite the other provisions of this Section, if, when a Participant's benefits become distributable, the vested amount credited to such Participant's Accounts is (or ever has been) in excess of $3,500 (or $5,000 for Plan Years beginning after August 5, 1997), the Committee may direct that such benefit be distributed as an immediate cash lump sum, provided the Participant and his or her spouse (or, where the Participant has died, his or her surviving spouse) consent in writing to such distribution during the 90-day period ending on the date such benefit is so distributed. If such Participant or his or her spouse (or surviving spouse) does not so consent, such failure to consent shall be deemed to be an election to defer distribution of such benefit until the later of age 62 or the Participant's Normal Retirement Age.                 (h)         The Annuity Starting Date for a distribution in a form other than a Qualified Joint and Survivor Annuity may be less than 30 days after receipt of the written explanation described above provided: (i) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) to a form of distribution other than a Qualified Joint and Survivor Annuity; (ii) the Participant is permitted to revoke any affirmative distribution election at least until the Annuity Starting Date or, if later, at any time prior to the expiration of the 7-day period that begins the date after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (iii) the Annuity Starting Date is a date after the date that the written explanation was provided to the Participant. For distributions on or after December 31, 1996, the Annuity Starting Date may be a date prior to the date the written explanation is provided to the Participant if the distribution does not commence until at least 30 days after such written explanation is provided, subject to the waiver of the 30-day period as provided for above.                 (i)         Special Limitation. Despite any other provision of the Plan, no preretirement death benefit in addition to the Qualified Preretirement Survivor Annuity shall be permitted to the extent such other benefit would violate the incidental benefit rule.                 Section 6.4: Timing Of Distributions.                 (a)         The provisions of this Section shall govern the timing of the distribution of a Participant's benefit.                 (b)         If a Participant's benefits become distributable because of his or her death or Total Disability, such benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of (i) written proof of such Participant's death or Total Disability and (ii) a properly completed claim for benefits. If a Participant's benefits become distributable for a reason other than his or her death or Total Disability, such Participant's benefits shall begin to be distributed as soon as is administratively practical after the Trust Valuation Date that coincides with or first follows the Committee's receipt of a properly completed claim for benefits. Despite the foregoing, and subject to subsections (c) and (d) below, a Participant's benefits must begin to be distributed no later than 60 days after the latest of the close of the Plan Year in which:                 (i)         the Participant attained age 65 (or Normal Retirement Age, if earlier);                (ii)        occurred the 10th anniversary of the year in which the Participant began participation in the Plan; or               (iii)         the Participant terminated his or her employment with the Company. Despite the foregoing, a Participant may elect a later date on which the distribution of his or her benefit is to begin, in a manner consistent with the applicable Regulations. Any failure by a Participant (or, if he or she is married, such Participant's spouse in the event of such Participant's death) to consent to an immediate distribution of his or her benefit (provided that such benefit is otherwise then immediately distributable pursuant to the foregoing provisions) shall be deemed to be an election to defer distribution to the later of age 62 or such Participant's Normal Retirement Age.                 (c)         Despite any other provision of the Plan, one of the following provisions shall apply:                 (i)         A Participant's benefit shall be distributed to him or her not later than April 1 of the calendar year following the later of (A) the calendar year in which the Participant attains age 70-1/2, or (B) the calendar year in which the Participant retires, if such Participant is not a 5% Owner with respect to the Plan Year ending in the calendar year in which he or she attains age 70-1/2; or                 (ii)         Alternatively, distributions to a Participant must begin no later than the date determined under subsection (c)(i) above and must be made, in accordance with the applicable Regulations, over the life of the Participant or over the lives of such Participant and his or her designated Beneficiary (or over a period not extending beyond the life expectancy of the Participant or the life expectancy of the Participant and his or her designated Beneficiary).                 (d)         If a Participant dies before his or her entire interest has been distributed to him or her, the remaining portion of such Participant's interest must be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death.                 (e)         If a Participant dies before distribution of his or her benefits has begun, the entire benefit of such Participant must be distributed within 5 years after his or her death.                 (f)         For purposes of subsection (e) above, any portion of a Participant's benefits that is payable to or for the benefit of his or her Beneficiary shall be treated as distributed on the date on which such distribution begins if:                 (i)         such portion will be distributed in accordance with the applicable Regulations over such Beneficiary's life (or over a period not extending beyond such Beneficiary's life expectancy), and                 (ii)         such distribution must begin not later than the date that is 1 year after the date of such Participant's death (or such later date as the Secretary of the Treasury may by Regulations prescribe). However, if such Beneficiary is the Participant's surviving spouse, then the date on which the distribution is required to begin shall be not later than the date on which the Participant would have attained age 70 1/2, and if such spouse dies before the distribution to him or her begins, this subsection shall be applied as if such spouse were the Participant.                 (g)         For purposes of subsection (f) above, the life expectancy of a Participant and his or her spouse (other than in the case of life annuity) may be redetermined on an annual or less frequent basis, and under Regulations prescribed by the Secretary of the Treasury, any amount paid to a child of a Participant shall be treated as if it had been paid to such Participant's surviving spouse if such amount will become payable to such spouse upon such child attaining majority (or any other designated event permitted under the applicable Regulations).                 (h)         Despite the foregoing provisions, the Committee shall not permit any Participant to receive his or her benefits under a method of distribution that violates the Regulations under Code Section 401(a)(9), including the minimum distribution incidental benefit requirements of proposed Regulation 1.401(a)(9)-2, or any successor or final Regulation.                 Section 6.5: Postponed Retirement. If a Participant continues to be an Employee beyond his or her Normal Retirement Date, his or her corresponding participation in the Plan shall likewise continue. In such case, to the extent permitted by law and the applicable Regulations, the distribution of such a Participant's benefits will be postponed until he or she actually ceases to be an Employee. Such benefits will become distributable as of the first day of the month next following such Participant's actually ceasing to be an Employee.                 Section 6.6: Distributions Due Missing Persons. If the Trustee is unable to distribute any benefit due to a Participant or Beneficiary, the Trustee shall (i) so advise the Committee and (ii) segregate such benefit from the Trust, in which event such benefit shall participate in the income, gains and losses realized by such segregated Trust Fund. The Committee shall then send a written notice to such Participant or Beneficiary at his or her last known address, as reflected in the Company's or Committee's records. If such Participant or Beneficiary shall not have presented himself or herself to the Company or to the Committee within 3 years of the date of such written notice, any undistributed benefit (and any income gains and losses realized by such segregated part) shall be forfeited by such Participant or Beneficiary and may be applied against and reduce the Company's future contributions to the Plan. Despite the foregoing, if at any subsequent time a valid claim for any undistributed benefit is presented to the Committee, such benefit that was so applied (and any income, gains and losses realized by such segregated part) shall be paid directly by the Company to such claimant.                 Section 6.7: Transfers To Another Qualified Plan. If a Participant who is a distributee of any Eligible Rollover Distribution (as defined below) elects to have such distribution paid directly to an Eligible Retirement Plan and who specifies the Eligible Retirement Plan to which such distribution is to be paid (in such form and at such time as the Committee may prescribe), then such distribution shall be made in the form of a direct trustee-to-trustee transfer to such Eligible Retirement Plan, provided that such Eligible Retirement Plan accepts such a transfer. The foregoing sentence shall apply only to the extent that such Eligible Rollover Distribution would be includable in gross income if not transferred as provided in such sentence (determined without regard to Code Sections 402(c) and 403(a)(4)). For purposes of the foregoing:                 (a)         "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).                 (b)         "Eligible Retirement Plan" shall mean an individual retirement account described in Section 408(a) of the Code, and individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.                 (c)         A Participant's (i) surviving spouse and (ii) spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the surviving spouse, spouse, or former spouse and shall have the same rights as a Participant to make a transfer in accordance with this Section 6.7 as to the interest of the surviving spouse, spouse, or former spouse.                 Section 6.8: Loans To Participants.                 (a)         The Committee shall be the fiduciary with authority to establish a loan program for Participants and to direct the Trustee concerning the investment of the Trust's assets pursuant to such a loan program.                 (b)         A Participant may make a written application to the Committee for a loan from the Trust. Each such loan must be adequately secured, and if it is secured in part by the balance in such Participant's Transferred Account, then, in the case of a married Participant whose Transferred Account is subject to Section 6.3 above, (i) such loan and security interest must be consented to in writing by such Participant's spouse during the 90-day period ending on the date on which the loan is so secured, (ii) such consent must acknowledge the effect of such loan and security interest, and (iii) such consent must be witnessed by a Plan representative or a notary public.                 (c)         The Committee shall have sole discretion in granting or denying any such loan application; provided, however, that the Committee shall exercise such discretion in a uniform and nondiscriminatory manner. In connection with any such loan, a Participant shall sign such notes, evidences of indebtedness, security agreements and other documents as the Committee may, in its discretion, require.                 (d)         Interest on such loans shall be charged at a reasonable rate, not in excess of that permitted by law, and all notes or other evidences of indebtedness shall require repayment of the principal amount of the loan and interest on it over a period certain, which shall not exceed 5 years. Such payments of interest and principal shall be made no less frequently than quarterly and shall provide for the level amortization of the loan over its term. Despite the foregoing, a loan's term may exceed 5  years if such loan is used to acquire any dwelling unit that is used or within a reasonable time (determined at the time the loan is made) will be used as the principal residence of the Participant. Only one loan may be outstanding any one time, except that a loan exceeding 5 years may be outstanding at the same time with a loan that does not exceed 5 years. The Trustee, on receipt of authorization and the appropriate notes or other evidences of indebtedness from the Committee, shall advance the amount of the loan to the Participant and shall treat such loan as an investment of the Trust.                 (e)         In no event shall the outstanding principal balance of all loans from the Trust to any Participant exceed the lesser of:                 (i)         $50,000, reduced by the excess (if any) of (A) the highest outstanding balance of all loans from the Trust to such Participant during the 1-year period ending on the day before the date on which such loan is made, over (B) the outstanding balance of all loans from the Trust to such Participant on the date on which such loan is made;                (ii)         one-half (1/2) of the total vested amount credited to such Participant's Accounts; or                 (iii)         any lesser amount set forth in rules established by the Committee.                 Section 6.9: Hardship Withdrawals.                 (a)         A Participant may request a hardship withdrawal of a portion of his or her Accounts in accordance with this Section 6.9. The maximum amount that a Participant may withdraw may not exceed the sum of (i) the vested balance of such Participant's Matching Contribution Account, plus (ii) the vested balance of such Participant's Matching Contribution Stock Account, plus (iii) the vested balance of such Participant's Transferred Account that is attributable to matching contributions under Code Section 401(m), plus (iv) the smaller of:                 (i)         the aggregate amount of all of such Participant's Elective Contributions and contributions made under Code Section 401(k) and held in the Transferred Account; or                 (ii)         the current value of such Participant's PIRA Account and the Code Section 401(k) portion of the Participant's Transferred Account. Despite the foregoing, the maximum amount that can be withdrawn pursuant to the foregoing may not exceed the amount required to meet the immediate and heavy financial need created by the hardship and not available to such Participant through the Plan or through all non-taxable loans available through the Company. A request for such a withdrawal shall be written, dated and delivered to the Committee in accordance with rules promulgated by the Committee, and in the case of a married Participant, it must be consented to in writing by such Participant's spouse during the 90-day period ending on the date the withdrawal is made and such consent must be witnessed by a Plan representative or a notary public. If the Committee approves the withdrawal, distribution shall be made as soon thereafter as is administratively practical.                 (b)         The Committee may, in its sole discretion, approve or deny a hardship withdrawal request, but the Committee's determination shall be made in accordance with uniform and nondiscriminatory standards. The Committee shall approve a hardship withdrawal only if the withdrawal is necessary to satisfy one of the following immediate and heavy financial needs:                 (i)         Payments of medical expenses incurred by the Participant and the Participant's spouse, children, and dependents or payments necessary for those persons to obtain medical care.                  (ii)         Payments (excluding mortgage payments) for the Participant's residence.                 (iii)         Payments of tuition and related educational fees for the next 12 months of post-secondary education for the Participant and the Participant's spouse, children, and dependents.               (iv)         Payments to prevent the Participant's eviction from the Participant's principal residence.                 (v)         Payments to prevent a foreclosure on the Participant's mortgage of the Participant's principal residence.                (vi)         Such other expenses that the Commissioner of the Internal Revenue Service deems to be an immediate and heavy financial need through the publication of revenue rulings, notices, and other documents of general applicability. The amount of an immediate and heavy financial need may include any amount that is necessary to pay federal, state, or local income taxes or penalties that are reasonably anticipated to result from the distribution.                 (c)         For the purpose of this Section, the Committee may reasonably rely upon a Participant's representations regarding the Participant's financial affairs.                 (d)         The Participant must sign an agreement that he or she will not make any elective contribution or employee contribution to the Plan or any other plan maintained by the Company (including all qualified and nonqualified plans of deferred compensation, stock option plans, stock purchase plans, and cash or deferred arrangements that are part of a cafeteria plan) for twelve consecutive months following a hardship withdrawal.                 (e)         The total amount of the Participant's Elective Contributions during the year following the Participant's taxable year in which the Participant made a hardship withdrawal may be no greater than (i) $7,000, as adjusted by the Adjustment Factor, minus (ii) the amount of the Participant's Elective Contributions during the Participant's taxable year in which the hardship withdrawal was made.                 (f)         Any earnings and gains on a Participant's Elective Contributions are not subject to withdrawal pursuant to this Section and shall be distributed only upon the events specified in Section 6.1.                 Section 6.10: Withdrawals.                 (a)         Despite any other provision of the Plan, except Section 6.3 (in the event that section is applicable to the Participant's Transferred Account), any Participant who has reached at least age 59 1/2 may elect to withdraw all or any portion of the vested balance of his or her Accounts even though he or she is still an Employee. Such withdrawal shall be paid only in the form of a cash lump sum. The maximum amount that may be withdrawn shall be the sum of the amounts credited to the Participant's Accounts as of the Trust Valuation Date that coincides with or immediately follows the Committee's receipt of a properly completed claim for benefits after such Participant attains age 59 1/2.                 (b)         Despite any other provision of the Plan, any Participant may elect to withdraw at any time all or any portion of the balance of his or her Rollover Contribution Account (determined as of the Trust Valuation Date that coincides with or immediately follows the Committee's receipt of a properly completed claim for benefits) even though he or she is still an Employee. Each such withdrawal shall be paid only in the form of a cash lump sum. Only two withdrawals may be made for a Participant's Rollover Contribution Account during any Plan Year.                 (c)         Despite any other provision of this Plan, if the withdrawal provisions of this Plan are more restrictive than the withdrawal provisions of any Predecessor Plan, the withdrawal provisions of that other plan, rather than the withdrawal provisions of this Plan, shall govern the withdrawal of the applicable portion of the Transferred Account.                 (d)         The Committee may adopt rules regulating a Participant's right to withdraw amounts from his or her Accounts. Such rules may prohibit Participants who receive distributions under this Section from continuing to make contributions under Section 3.2 for a stated period of time.                 Section 6.11: Distribution Of Company Stock. Despite any other provision of this Plan, if (a) a Participant is entitled to a distribution or withdrawal pursuant to the terms of the Plan, and (b) a portion of the Participant's Accounts is invested in Company Stock, the Participant may elect to receive such portion in Company Stock attributable to such investment in lieu of cash.     ARTICLE VII TOP-HEAVY PLAN LIMITATIONS                   Section 7.1: Application Of Top-Heavy Rules. If the Plan is or becomes a Top-heavy Plan, the limitations and requirements contained in this Article shall apply and shall supersede any conflicting provision of the Plan.                 Section 7.2: Definitions.                 (a)         Top-heavy Plan. A "Top-heavy Plan" shall mean, with respect to any Plan Year, (i) any Defined Benefit Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Present Value of Accrued Benefits under such plan for Key Employees exceeds 60% of the total Present Value of Accrued Benefits under such plan for all participants in such plan; and (ii) any Defined Contribution Plan maintained by the Company or an Affiliated Company if, as of the Determination Date, the total Aggregate Accounts of Key Employees under the plan exceeds 60% of the total Aggregate Accounts of all participants under such plan. Each plan of the Company required to be included in an Aggregation Group shall be treated as a Top-heavy Plan if the Aggregation Group is a Top-heavy Group.                 (b)         Top-heavy Group. A "Top-heavy Group" shall mean any Aggregation Group if the sum of (i) the total Present Value of Accrued Benefits for Key Employees under all Defined Benefit Plans included in the Aggregation Group (determined as of the Determination Date for each such plan), and (ii) the total Aggregate Accounts of Key Employees under all Defined Contribution Plans included in the Aggregation Group (determined as of the Determination Date for each such plan) exceeds 60% of a similar sum determined for all participants in such plans. For purposes of determining whether the plans in a Top-heavy Group exceed the foregoing 60% test, the plans shall be aggregated by adding together the results for each plan as of the Determination Dates for such plans that fall within the same calendar year.                 (c)         Aggregation Group. An "Aggregation Group" shall mean each plan of the Company or of an Affiliated Company in which a Key Employee is a participant, and each plan of the Company or of an Affiliated Company that enables the plan(s) containing a Key Employee to meet the antidiscrimination requirements of Code Sections 401(a)(4) or 410, including terminating or terminated plans maintained within the last 5 years ending on the Determination Date that would, but for such plan(s) termination, be part of the Aggregation Group. The Company can elect to include in the Aggregation Group any plan not otherwise required to be included, if such group, after such election, would continue to meet the antidiscrimination requirements of Code Sections 401(a)(4) and 410; provided, however, that any such plan will not be otherwise deemed a Top-heavy Plan by reason of such election.                 (d)         Determination Date. With respect to any plan year, "Determination Date" shall mean the last day of the preceding plan year or, in the case of the first plan year of any plan, the last day of such plan year.                 (e)         Present Value Of Accrued Benefit: A participant's "Present Value of Accrued Benefit" as of any Determination Date shall be calculated:                 (i)         as of the most recent valuation date ("Valuation Date") which is within the 12-month period ending on such Determination Date;                (ii)         for the first plan year, as if (1) the participant terminated service as of the Determination Date, or (2) the participant terminated service as of the Valuation Date, but taking into account the estimated Present Value of Accrued Benefit as of the Determination Date;               (iii)         for any other plan year, as if the participant terminated service as of the Valuation Date; and                (iv)         using the interest rate and mortality assumptions set forth in the Defined Benefit Plan.                 (v)         Solely for the purposes of determining if the Plan, or any other plan included in the Aggregation Group, is a Top-heavy Plan, the accrued benefit of a Non-Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Company and all Affiliated Companies, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code Section 411(b)(1)(C). For the foregoing purposes, the Valuation Date must be the same valuation date used for computing the defined benefit plan minimum funding costs, regardless of whether a valuation is performed that year.                 (f)         Aggregate Account: A participant's "Aggregate Account" shall be determined as follows:                 (i)         For Defined Contribution Plans not subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of:                 (A)         such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date; plus                 (B)         an adjustment for contributions due as of such Determination Date. Such adjustment is generally the amount of any contributions actually made after the Valuation Date but before the Determination Date. In the first plan year, such adjustment shall also reflect any contributions actually made after the Determination Date that are allocated as of a date in that first plan year.                 (ii)         For Defined Contribution Plans subject to the minimum funding requirements of Code Section 412, a participant's Aggregate Account as of any Determination Date shall be the sum of:                 (A)         such participant's account balance as of the most recent valuation date ("Valuation Date") occurring within the 12-month period ending on such Determination Date, including contributions that would be allocated as of a date not later than such Determination Date; plus                 (B)         an adjustment for contributions due as of such Determination Date. Such adjustment shall reflect the amount of any contribution actually made (or due to be made) after the Valuation Date but before the expiration of the extended payment period described in Code Section 412(c)(10).                 (g)         Key Employee. "Key Employee" shall mean any participant of any plan maintained by the Company or an Affiliated Company who, at any time during the plan year or any of the 4 preceding plan years, was:                 (i)         an officer of the Company or an Affiliated Company whose annual Compensation exceeds 50% of the amount in effect under Code Section 415(b)(1)(A) for such plan year (provided, however, that no more than 50 employees (or, if lesser, the greater of 3 employees or 10% of all employees) shall be treated as officers; provided further, however, that if the total number of officers exceeds this numerical limitation, only the highest compensated officers shall be included);                 (ii)         one of the 10 employees who (1) has annual Compensation for a plan year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such plan year ends, and (2) owns (or is considered to own under Code Section 318) both more than 1/2 percent interest and the largest interests in the Company or an Affiliated Company;                 (iii)         a 5% Owner of the Company or an Affiliated Company; or                (iv)        a 1% Owner of the Company or an Affiliated Company whose annual Compensation exceeds $150,000, or such other amount as may be allowed under Code Section 416(I) and the applicable Regulations. In making this determination of a 5% Owner and a 1% Owner for purposes of this Section, (i) the Code Section 318(a)(2) corporate attribution rules, as modified by Code Section 416(I)(1)(B)(iii), shall apply, and (ii) the business aggregation rules of Code Section 414 shall not apply. For purposes of the foregoing definition, (i) the beneficiary of a Key Employee shall be treated as a Key Employee, and (ii) the beneficiary of a former Key Employee shall be treated as a former Key Employee. Inherited benefits will retain the character of the benefits of the Key Employee who performed the services for the Company. For purposes of the foregoing, the identification of a Key Employee will be determined in accordance with Code Section 416(I).                 (h)         Non-Key Employee. "Non-Key Employee" shall include any Participant who is not a Key Employee, including any Participant who is a former Key Employee.                 Section 7.3: 60% Test - Special Rules. For purposes of applying the 60% test described in Section 7.2(a), the following special rules shall apply:                 (a)         Participant Contributions. Benefits derived from both Participant contributions (whether voluntary or mandatory, but not deductible contributions) and the Company's contributions shall be considered.                 (b)         Previous Distributions. In determining the Present Value of Accrued Benefit or the Aggregate Account of any participant under any plan (or plans that form the Aggregation Group), such present value or account shall be increased by the aggregate of distributions made to such participant from such plan (or plans forming the Aggregation Group) during the 5-year period ending on the Determination Date. For this purpose, "participant" shall include an employee who is no longer employed by the Company or an Affiliated Company. Despite the foregoing, any distribution to a participant that is made after the Valuation Date and before the Determination Date for any plan year shall not be considered a distribution to the extent it is already included in such participant's Present Value of Accrued Benefit or Aggregate Account as of such Valuation Date.                 (c)         Rollover Contributions. Rollover contributions shall be treated as follows:                 (i)         The following rules shall apply to related rollovers and plan-to-plan transfers (ones either not initiated by the participant or made to a plan maintained by the Company or any Affiliated Company). If the plan provides such rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account, regardless of the date on which such rollover or plan-to-plan transfer was received.                 (ii)         The following rules shall apply to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by a participant and made from a plan maintained by one employer to a plan maintained by another employer). If the plan provides such rollover or plan-to-plan transfer, it shall always consider such rollover or plan-to-plan transfer as a distribution for purposes of this Section 7.3. If the plan receives such rollover or plan-to-plan transfer, it shall not consider such rollover or plan-to-plan transfer as part of the participant's Present Value of Accrued Benefit or Aggregate Account if it was accepted after December 31, 1983.                 (d)         Change Of Status. The accrued benefit or account of a participant who was formerly a Key Employee, but who ceased to be a Key Employee in any plan year, will not be taken into account for such plan year.                 (e)         No Service For Last 5 Years. If any individual has not performed services for the employer maintaining the plan during the 5-year period ending on the Determination Date, the accrued benefit or account of such individual shall not be taken into account.                 Section 7.4: Minimum Vesting Requirement.                 (a)         If the Plan is a Top-heavy Plan, the top-heavy vesting schedule set forth below shall apply:                 6-Year Graded Vesting. Each Participant shall have a nonforfeitable right or vested interest in his or her Matching Contribution Account, according to the following table:   Years of Service Vested Percentage     Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100%                   (b)         Despite the foregoing, if the Plan becomes a Top-heavy Plan, any portion of a Participant's Matching Contribution Account that was nonforfeitable before the Plan became a Top-heavy Plan shall remain nonforfeitable.                 (c)         If the Plan ceases to be a Top-heavy Plan, the Plan shall nevertheless continue to apply the top-heavy vesting schedule then in effect.                 (d)         Despite the foregoing provisions, if the Plan's normal vesting schedule equals or exceeds the top-heavy vesting schedule, the normal vesting schedule shall continue to apply.                 Section 7.5: Minimum Contribution Requirement.                 (a)         If the Plan is a Top-heavy Plan, then in no event shall the Company's annual contribution on behalf of any Non-Key Employee be less than 3% of such Participant's Compensation. This minimum contribution shall be made even though, under the other provisions of the Plan, the Participant would not otherwise be entitled to a contribution on his or her behalf, or would have received a lesser contribution for the Plan Year, because of (i) the Participant's failure to complete 1,000 Hours of Service, (ii) the Participant's failure to make mandatory employee contributions to the Plan, or (iii) the Participant's exclusion from the Plan because such Participant's Compensation is less than the Plan's stated amount. Despite the foregoing, no minimum contribution needs to be made under this Section on behalf of a Participant who was not an Employee on the last day of the Plan Year.                 (b)         For Plan Years beginning on or after January 1, 1985, any Company contribution that is attributable to a salary reduction or similar arrangement shall be considered for purposes of satisfying the minimum contribution required by this Section. For Plan Years beginning on or after January 1, 1989, Elective Contributions on behalf of Key Employees are taken into account in determining the minimum required contribution under Code Section 416(c)(2), but such contributions on behalf of Non-Key Employees may not be treated as employer contributions for purposes of the minimum contribution or benefit requirements of Code Section 416.                 (c)         If the Company maintains one or more qualified plans in addition to the Plan, and if the Plan is a Top-heavy Plan, then in accordance with the applicable Regulations, only one such plan need be designated by the Company to provide the minimum benefit provided for in this Section. However, if for Plan Years beginning before January 1, 2000, such multiple plans, including the Plan, include a Defined Benefit Plan and a Defined Contribution Plan, the 1.0 Rule (as it may be modified by the top-heavy plan transitional rule under Code Section 416(h)(3)) shall be in effect if, and only if, the following two requirements are satisfied:                 (i)         Minimum Benefit Requirement. The "3%" set forth in this Section shall be replaced by "4%".                 (ii)         The 90% Test. The sum of the Present Value of Accrued Benefits plus the Aggregate Accounts held for all Key Employees under the plans cannot exceed 90% of a similar sum determined for all participants. For purposes of the 1.0 Rule, all references to "1.25" shall be replaced by "1.0," if either of the above additional requirements is not met.     ARTICLE VIII THE COMMITTEE                   Section 8.1: Members.                 (a)         The Board of Directors shall appoint a single plan administrator or a Committee of two or more members.                 (i)         If such a plan administrator is appointed, he or she alone shall constitute the entire Committee and all references in this document to the Committee shall include such plan administrator.                 (ii)         The Committee shall serve at the pleasure of the Board of Directors. A person so appointed shall become a member by filing a written notice of acceptance with the Board of Directors. A member of the Committee may resign by delivering a written notice of resignation to the Board of Directors. The Board of Directors may remove any member of the Committee by delivering a written notice of such removal to him or her. A resignation or removal shall be effective on the date specified in such notice or resolution. The Trustee shall be promptly notified by the Board of Directors of any change in the membership of the Committee, and shall be supplied with specimen signatures of each Committee member.                 (b)         Vacancies in the membership of the Committee shall be filled promptly by the Board of Directors. If the Company is not in existence when a vacancy in the Committee membership arises, such vacancy shall be filled as follows, in the indicated order of priority: 1st:         The remaining member(s) of the Committee shall appoint new member(s) to fill all vacancies. 2nd:         A majority of the adults then entitled to benefits from the Plan shall appoint new member(s) to fill all vacancies. If such an adult is not able to participate in such appointment, then his or her spouse, if any, shall act for him or her. If there is no such spouse, then such adult's guardian or conservator shall act for him or her. 3rd:         If vacancies on the Committee are not filled pursuant to the foregoing, then a court of competent jurisdiction shall fill such vacancies. The Trust shall pay the expenses incurred in connection with such court appointment.                 Section 8.2: Committee Action.                 (a)         The Committee shall choose a Secretary and an Assistant Secretary (either of whom is referred to below as the "Secretary") who shall keep minutes of the Committee's proceedings and all records and documents pertaining to the Committee's administration of the Plan. Any action of the Committee shall be taken pursuant to the vote of a majority, or pursuant to the written consent of a majority, of its members. A quorum of the Committee shall consist of two members. The Secretary may sign any certificate or other document on behalf of the Committee. The Trustee and all other persons dealing with the Committee may conclusively rely upon any certificate or other document that is signed by the Secretary and that purports to have been duly authorized by the Committee.                 (b)         A member of the Committee shall not vote or act upon any matter that relates solely to himself or herself as a Participant. If a matter arises affecting one member of the Committee as a Participant and the other members of the Committee are unable to agree on the disposition of such matter, the Board of Directors shall appoint a substitute member of the Committee in the place and stead of the affected member, for the sole purpose of passing upon and deciding that particular matter. If the Company is not in existence then, such substitute member of the Committee shall be appointed in the manner provided for in this Article when there is a vacancy in the Committee's membership.                 Section 8.3: Rights And Duties.                 (a)         Except as otherwise set forth in subsection (b), (c) and (d) below, all fiduciary responsibility respecting the management or administration of the Plan and its assets are vested in the Committee, and the Committee shall be the Named Fiduciary with respect to the Plan's assets, and the "administrator" of the Plan as defined in Section 3(16)(A) of ERISA.                 (b)         The Trustee shall (i) have custody of the Plan's assets, (ii) have the powers designated in the trust document and (iii) be the Named Fiduciary with respect to the custody of the Plan's assets.                 (c)         The Company may designate one or more Investment Managers (including the Trustee, if the Trustee is authorized to be an Investment Manager) to manage the investment of the Plan's assets, and such Investment Manager(s) shall be the Named Fiduciary with respect to the management and investment of the Plan's assets.                 (d)         The Committee may designate one or more persons or entities to carry out any of its functions under the Plan, other than those of managing and controlling the Plan's assets, which may only be done pursuant to subsections (b) or (c) immediately above.                 (e)         The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, and shall be charged with the general administration of the Plan, except to the extent that powers are retained by the Company. The Committee shall have the discretion and authority to interpret the Plan. The Committee's powers shall include (without limitation) the power and discretion:                 (i)         to determine all questions relating to the eligibility of Employees to participate in the Plan;                 (ii)         to determine, compute and certify to the Trustee the amount and kind of benefits payable to the Participants and their Beneficiaries;                 (iii)         to authorize all disbursements by the Trustee from the Trust;                (iv)         to direct the Trustee with respect to all investments of the principal or income of the Trust and with respect to other matters concerning the Trust's assets;                 (v)         to maintain all the necessary records for the administration of the Plan, other than those maintained by the Trustee; and                 (vi)         to adopt, amend and interpret rules for the administration or regulation of the Plan that are not inconsistent with its terms and the applicable law and Regulations.                 (f)         Members of the Committee and other Fiduciaries shall discharge their duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims. Subject to any right of Participants to direct how their Accounts will be invested and other provisions of the Plan, the Committee shall diversify the Plan's investments so as to minimize the risk of large losses, unless, under the circumstances, it is clearly prudent not to do so, or unless the Plan specifically provides for the acquisition and holding of qualifying employer real property or securities, as defined in Sections 407(d)(4) and (5) of ERISA.                 (g)         A member of the Committee or other Fiduciary shall be liable for a breach of fiduciary responsibility of another member or another Fiduciary only if:                 (i)         such member or Fiduciary participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other member or Fiduciary, knowing that such act or omission is a breach;                  (ii)          such member or Fiduciary has enabled such other member or Fiduciary to commit a breach by virtue of his or her failure to comply with the duty of care set forth above in the administration of such member's or Fiduciary's own responsibilities as a Fiduciary; or                 (iii)         such member or Fiduciary has knowledge of a breach by such other member or Fiduciary, unless such member or Fiduciary makes reasonable efforts under the circumstances to remedy such breach.                 Section 8.4: Information. To enable the Committee to perform its functions, the Company shall supply complete and timely information to the Committee on all matters relating to the compensation of all Participants, their employment, their retirement, death, or the cause for termination of employment, and such other pertinent information as the Committee may require. The Committee shall advise the Trustee of such of the foregoing information as may be pertinent to the Trustee's administration of the Trust.                 Section 8.5: Compensation, Indemnity And Liability.                 (a)         The members of the Committee shall serve without compensation for their services. No member of the Committee or other Fiduciary need be bonded, except as required by federal or state law or regulation. The Committee is authorized to employ such legal counsel or other persons as it may deem advisable to assist it in the performance of its duties under the Plan.                 (b)         The Company shall indemnify and hold each member of the Committee harmless against any and all expenses and liabilities arising out of membership on the Committee (including reasonable attorneys' fees and disbursements), excepting only expenses and liabilities arising out of such member's own willful misconduct or gross negligence. The provisions of this subsection shall survive the termination of the Plan and the resignation or removal of the Committee member who is entitled to the indemnity.                 Section 8.6: Administrative Expenses Of The Plan. All expenses of administering the Plan shall by paid by the Trustee and shall be a charge against the trust estate, except to the extent that such expenses may be paid by the Company. The expense of maintaining errors and omissions liability insurance, if any, covering members of the Committee, the Trustee, or any other Fiduciary shall be paid by the Company.     ARTICLE IX AMENDMENT AND TERMINATION                   Section 9.1: Amendments. The Company, through the Board of Directors, or the Committee may amend the Plan from time to time, and may amend or cancel any such amendment. Each amendment must be set forth in a document that is signed by the Company or the Committee, as the case may be, and the Plan shall be deemed to have been amended in the manner and at the time set forth in such document, and all Participants shall be bound by it. Despite the foregoing, any such amendment shall be subject to the following provisions:                 (a)         No amendment shall be effective that attempts to cause any asset of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants or their Beneficiaries, except for such changes, if any, that are required to permit the Plan to meet the applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company.                 (b)         No amendment shall have any retroactive effect that would deprive any Participant of any benefit already vested, nor shall the vesting provisions of the Plan be amended, unless each Participant with at least 3 Years of Service is permitted to elect to continue to have the prior vesting provisions apply to him or her, except for such changes, if any, that are required to permit the Plan to meet applicable requirements of the Code, or as may be made to assure the deductibility for tax purposes of any contribution by the Company. Any such election must be made during the period beginning with the date the amendment is adopted and ending 60 days after the latest of: (i)         the date the amendment is adopted; (ii)        the date the amendment becomes effective; or (iii)       the date on which the Participant receives written notice of the amendment from the Company or the Committee.                 (c)         No amendment shall create or effect any discrimination in favor of Participants who are highly compensated Employees.                 (d)         No amendment shall increase the duties or liabilities of the Trustee without the Trustee's written consent.                 (e)         No amendment shall decrease any Participant's account balance or eliminate an optional form of distribution.                 Section 9.2: Discontinuance Of Plan.                 (a)         The Company expects that the Plan and the Company's contributions under it will be continued indefinitely, and the Trust is irrevocable. However, continuance of the Plan is not assumed as a contractual obligation of the Company, and the Company, through the Board of Directors, reserves the right to reduce, temporarily suspend, or discontinue contributions under the Plan if, and to the extent, permitted under ERISA or the Code. Upon a complete discontinuance of the Company's contributions, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. In addition, upon a partial termination (within the meaning of Code Section 411(d)(3)), the interest of each affected Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested.                 (b)         The Company may terminate the Plan at any time upon delivering a written notice to the Trustee. Upon the Plan's termination, the interest of each Participant in each of his or her Accounts shall become 100% vested, if it is not already fully vested. Upon the termination of the Plan without the establishment of a successor plan (within the meaning of Code Section 401(k)(10)(A)(i)), the Committee shall, as is necessary, direct the Trustee to liquidate the Trust's assets. After such liquidation, the Committee shall make, after deducting the estimated expenses of such liquidation and distribution, the allocations required under the Plan as though the date when such liquidation was completed were an Anniversary Date. After receiving appropriate instructions from the Committee, the Trustee shall promptly distribute the Trust's assets in accordance with such instructions.                 (c)         The Plan shall automatically terminate upon the happening of any of the following events: (i)         adjudication of the Company as a bankrupt; (ii)        general assignment by the Company to or for the benefit of creditors; or (iii)       dissolution of the business of the Company, provided, however, that the Plan may be continued by any successor business organization or any business organization into which the Company is merged or consolidated that employs some or all of the Participants, if such business organization agrees with the Trustee in writing to accept the obligations of the Plan and to continue it in full force and effect in accordance with Section 11.10.                 Section 9.3: Failure To Contribute. The Company's failure to contribute to the Trust for any Plan Year shall not, of itself, be a discontinuance of contributions to the Plan.     ARTICLE X CLAIMS PROCEDURE                   Section 10.1: Presentation Of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts (i) credited to (or deducted from) such Claimant's Participant's Account(s), or (ii) distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant.                 Section 10.2: Notification Of Decision. The Committee shall consider a Claimant's claim within a reasonable time, and shall notify the Claimant in writing:                 (a)         that the Claimant's requested determination has been made, and that the claim has been allowed in full; or                 (b)         that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must be given within 90 days and set forth in a manner calculated to be understood by the Claimant: (i)         the specific reason(s) for the denial of the claim, or any part of it; (ii)        specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii)       a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv)        an explanation of the claim review procedure set forth in Section 10.3.                 Section 10.3: Review Of A Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than the time period established by the Committee, the Claimant (or the Claimant's duly authorized representative):                 (a)         may review pertinent documents;                 (b)         may submit written comments or other documents; and/or                 (c)         may request a hearing, which the Committee, in its discretion, may grant.                 Section 10.4: Decision On Review. The Committee shall render its decision on review promptly, and not later than 60 days after the review procedure begins, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after the review procedure. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a)         specific reasons for the decision; (b)         specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c)         such other matters as the Committee deems relevant.     ARTICLE XI MISCELLANEOUS                   Section 11.1: Contributions Not Recoverable. Subject to the next two sentences, it shall be impossible for any part of the Trust's principal or income to be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries. Despite any other provision of the Plan, the Company shall be entitled to recover (within one year of the specified event):                 (a)         any contribution made to the Trust if (i) the Commissioner of Internal Revenue, or his delegate, determines that the Plan and the Trust do not meet the applicable requirements of the Code upon their initial qualification, with the result that the Trust is not exempt from federal income tax, (ii) such contribution was conditioned on such initial qualification of the Plan and Trust, (iii) the application for determination of such initial qualification was made within the time prescribed by law for filing the Company's tax return for the taxable year in which the Plan and Trust was adopted, or such later date as the Secretary of the Treasury may prescribe, and (iv) such contribution is returned to the Company within one year after the date the initial qualification is denied;                 (b)         any contribution by the Company that was made by a mistake of fact, provided that such contribution is returned to the Company within one year of the contribution;                 (c)         any contribution by the Company (or any portion of it) that was disallowed by the Internal Revenue Service as a deduction, provided that such contribution (or such portion of it), to the extent disallowed, is returned to the Company within one year of the disallowance of the deduction; and                 (d)         upon termination of the Plan, any assets held in a suspense account pursuant to Section 4.8(c)(iv). subsections (b) and (c) above shall be operative only if, and to the extent, expressly authorized by the applicable Regulations, or a Revenue Ruling, Revenue Procedure, or other official promulgation of the Internal Revenue Service.                 Section 11.2: Limitation On Participants' Rights. Participation in the Plan and Trust shall not give any Employee the right to be retained in the Company's employ or any right or interest in the Trust other than as provided in the Plan. The Company reserves the right to dismiss any Employee without any liability for any claim against the Trust (except to the extent provided in the Plan) or against the Company. All benefits payable under the Plan shall be provided solely from the assets of the Trust.                 Section 11.3: Receipt Or Release. Any payment to any Participant or Beneficiary pursuant to the Plan shall, to the extent of it, be in full satisfaction of all claims against the Trustee, the Committee, Board of Directors, and the Company, and the Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to sign a receipt and release to such effect.                 Section 11.4: Nonassignability.                 (a)         None of the benefits, payments, proceeds or claims of any Participant or Beneficiary shall be subject to any claim of any creditor and, in particular, they shall not be subject to attachment or garnishment or other legal process by any creditor. In addition, no Participant or Beneficiary shall have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits or payments or proceeds that he or she may expect to receive, contingently or otherwise, under the Plan.                 (b)         Any restriction or prohibition against the assignment or alienation of benefits under the Plan shall not apply to (i) a "qualified domestic relations order" ("QDRO"), as that term is defined in Code Section 414(p), or (ii) a benefit reduction or offset in accordance with Code Section 401(a)(13)(C). To the extent provided in any QDRO, a former spouse of a Participant shall be treated as the spouse or surviving spouse of such Participant for all purposes under the Plan. Notwithstanding any other provision in this Plan, a lump sum distribution may be made to an alternate payee under a QDRO at any time after the Committee has determined that such QDRO satisfies the requirements of Code Section 414(p) and Section 206(d) of ERISA, and regardless of whether or not the Participant who is a party to such QDRO is then eligible to receive a distribution under the Plan.                 Section 11.5: Governing Law. The Plan and the Trust shall be construed, administered, and governed in all respects under and by applicable federal law and, if they are not inconsistent with federal law, the internal laws of the State of California. If any provision is susceptible to more than one interpretation, the controlling interpretation shall be the one that is consistent with the Plan being a qualified plan under Code Section 401. If any provision of the Plan is held by a court of competent jurisdiction to be invalid or unenforceable, the other provisions shall continue to be fully effective.                 Section 11.6: Headings. Headings and subheadings in the Plan are inserted for convenience of reference only, and they are not to be considered in construing the provisions of the Plan.                 Section 11.7: Counterparts. This Agreement may be signed in counterparts, each of which shall be deemed an original, and all such counterparts shall constitute but one and the same document, which may be sufficiently evidenced by any one counterpart.                 Section 11.8: Successors And Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties to it, and their successors, heirs, estates and assigns.                 Section 11.9: Gender And Number. As used in the Plan, the masculine, feminine and neuter gender, and the singular and plural number, each include the other(s), unless the context indicates otherwise.                 Section 11.10: Merger, Consolidation Or Transfer Of Plan Assets. The Plan shall not be merged or consolidated with, nor shall its assets or liabilities be transferred to, any other plan (the "new plan") unless each Participant would receive in such new plan a benefit immediately after such merger, consolidation or transfer, if such new plan were then terminated, that is equal to, or greater than, the benefit he or she would have been entitled to receive immediately before such merger, consolidation or transfer, if the Plan had been terminated then.                 Section 11.11: Joinder Of Parties. In any action or other judicial proceeding affecting the Plan, it shall be necessary to join as parties only the Trustee, the Committee and the Company, and no Participant or other person having an interest in the Plan shall be entitled to any notice or service of process.                 Section 11.12: The Trust. This Plan and the Trust are both part of and constitute a single integrated employee benefit plan and trust and shall be construed together.                 Section 11.13: Special Requirements For USERRA.                 (a)         Despite any other provision of the Plan, an Employee reemployed under Chapter 43 of Title 38, United States Code ("USERRA") shall not incur a Break in Service by reason of such Employee's period of Qualified Military Service.                 (b)         Each period of Qualified Military Service served by an Employee shall, upon reemployment under USERRA with the Company, constitute service with the Company for the purpose of determining the nonforfeitability of the Employee's accrued benefits under the Plan and for the purpose of determining the accrual of benefits under the Plan.                 (c)         An Employee reemployed under USERRA shall be entitled to accrued benefits that are contingent on the making of, or derived from, employee contributions or elective deferrals only to the extent the Employee makes payment to the Plan with respect to such contributions or deferrals. No such payment may exceed the amount the Employee would have been permitted or required to contribute had the Employee remained continuously employed by the Company throughout the period of Qualified Military Service. Any payment to the Plan shall be made during the period beginning on the date of reemployment and whose duration is three times the period of the Qualified Military Service (but not greater than five years).                 (d)         For purposes of this Section, "Qualified Military Service" shall mean any service in the uniformed services (as defined in USERRA) by any Employee if such Employee is entitled to reemployment rights under USERRA with respect to such service.       *  *   *  *  *  *  *   *  * [Signature Page Follows]         -------------------------------------------------------------------------------- Signature Page                     The Company has signed the Plan on the date indicated below, to be effective as of the Effective Date.   "Company"         BERGEN BRUNSWIG CORPORATION       _____________, 2000. By: _____________________________         Its ____________________________                     By: _____________________________         Its ____________________________            
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.39 AMENDMENT NO. 3 TO THE INTERCONNECTION AGREEMENT—TEXAS EFFECTIVE JANUARY 7, 2000 BETWEEN SOUTHWESTERN BELL TELEPHONE COMPANY AND BIRCH TELECOM OF TEXAS LTD, LLP     This Amendment No. 3 to the Interconnection (T2A) Agreement ("the Agreement") is by and between Southwestern Bell Telephone Company ("SWBT") and Birch Telecom of Texas Ltd, LLP ("CLEC") in Texas.     WHEREAS, pursuant to Section 252(i) of the Federal Telecommunications Act of 1996, CLEC has requested to replace its current Attachment 25: xDSL-TX and related provisions by adopting ("MFNing") Attachment 25: xDSL-TX and related provisions from the Covad/SWBT Texas Interconnection Agreement ("the donor Agreement");     WHEREAS, by executing this Amendment MFNing into Attachment 25: xDSL-TX and its related provisions of the donor Agreement providing certain rates, terms and conditions, SWBT reserves all appellate rights with respect to such rates, terms and conditions and does not waive any legal argument by executing this Amendment. It is SWBT's intent and understanding of state and federal law, that any negotiations, appeal, stay, injunction or similar proceeding which impacts the applicability of such rates, terms or conditions to the underlying Agreement will similarly and simultaneously impact the applicability of such rates, terms and conditions to CLEC. In the event that any of the rates, terms and/or conditions herein, or any of the laws or regulations that were the basis for a provision of the Agreement, are invalidated, modified or stayed by any action of any state or federal regulatory bodies or courts of competent jurisdiction, including but not limited to any decision by the Eighth Circuit relating to any of the costing/pricing rules adopted by the FCC in its First Report and Order, In re: Implementation of the Local Competition Provisions of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Red 15499 (1996), (e.g., Section 51.501, et seq.), upon review and remand from the United States Supreme Court, in AT&T Corp. v. Iowa Utilities Bd., 119 S. Ct. 721 (1999) or Ameritech v. FCC, No. 98-1381, 1999 WL 116994, 1999 Lexis 3671 (June 1, 1999), ("such Actions"), the Parties shall immediately incorporate changes from the underlying Agreement, made as a result of such Actions into this Agreement. Where revised language is not immediately available, the Parties shall expend diligent efforts to incorporate the results of such Actions into this Agreement on an interim basis, but shall conform this Agreement to the underlying Agreement, once such changes are filed with the Commission.     NOW, THEREFORE, in consideration of the mutual provisions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CLEC and SWBT hereby covenant and agree as follows:     (1) The list of Attachments in the General Terms and Conditions Table of Contents and Section 61.0 under "Other Requirements and Attachments" have been amended as follows: Appendix Pricing—UNE Schedule of Prices   Amended 6/2000 Attachment 25: DSL   Amended 6/2000 --------------------------------------------------------------------------------     (2) Attachment 25: xDSL-TX has been deleted and replaced by Attachment 25: xDSL-TX of the donor Agreement and is attached hereto in its entirety. The Attachment 25: xDSL Appendix in the donor Agreement is the result of an Arbitration Award in 20226/20272.     (3) The UNE Appendix Pricing—Schedule of Prices has been deleted and replaced by the UNE Appendix Pricing—Schedule of Prices from the donor Agreement and is attached hereto in its entirety. The rates in the UNE Appendix Pricing—Schedule of Prices in the donor Agreement was the result of an Arbitration Award in 20226/20272.     (4) Section 4.0, Term of Agreement of the General Terms and Conditions of this T2A Interconnection Agreement shall not apply to the amended Attachment 25: xDSL. Rather, such Attachment shall become effective ten (10) days following approval by the PUC and shall expire on February 19, 2001, unless the donor Agreement is terminated or expires prior to February 19, 2001, in which case, Attachment 25: xDSL-TX will terminate or expire on the same date as the donor Agreement.     (5) This Amendment shall not modify or extend the Effective Date or Term of the underlying T2A Agreement.     (6) EXCEPT AS MODIFIED HEREIN, ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT SHALL REMAIN UNCHANGED AND IN FULL FORCE AND EFFECT, and such terms are hereby incorporated by reference and the Parties hereby reaffirm the terms and provisions thereof.     (7) This Amendment shall be filed with and is subject to approval by the Public Utility Commission of Texas and shall become effective ten (10) days following approval by the Commission. IN WITNESS WHEREOF, this Amendment to the Agreement was executed in triplicate on this 10th day of July, 2000, by SWBT, signing by and through its duly authorized representative, and CLEC, signing by and through its duly authorized representative. BIRCH TELECOM OF TEXAS LTD, LLP   SOUTHWESTERN BELL TELEPHONE COMPANY   By:       /s/ GREGORY C. LAWHON          By:       /s/ LARRY B. COOPER        --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Title:   Senior Vice President   Title:   President—Industry Markets     --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Name:   Gregory C. Lawhon -------------------------------------------------------------------------------- (Print or Type)   Name:   Larry B. Cooper -------------------------------------------------------------------------------- (Print or Type) 2 -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.39 AMENDMENT NO. 3 TO THE INTERCONNECTION AGREEMENT—TEXAS EFFECTIVE JANUARY 7, 2000 BETWEEN SOUTHWESTERN BELL TELEPHONE COMPANY AND BIRCH TELECOM OF TEXAS LTD, LLP
QuickLinks -- Click here to rapidly navigate through this document     EXHIBIT 10.22 FIFTH AMENDMENT TO LOAN AGREEMENT     This amendment to Loan Agreement ("Amendment") is made as of May 11, 2000 by and among the following parties:     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association ("Bank of America" and a "Lender")     U.S. Bank National Association ("U.S. Bank" and a "Lender")     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association, in its capacity as Agent ("Agent")     Each of the several financial institutions which subsequently becomes party to the Loan Agreement pursuant to Section 11.7 (each individually a "Lender")     Northwest Pipe Company, an Oregon corporation ("Borrower") R E C I T A L S     A.  The Borrower, the Lenders and the Agent are parties to that certain Amended and Restated Loan Agreement dated as of June 30, 1998, as amended as of December 23, 1998, June 16, 1999, November 30, 1999 and December 30, 1999, and as the same may be further amended, modified or extended from time to time (the "Loan Agreement") and the related Loan Documents described therein.     B.  The parties desire to amend the Loan Agreement as set forth below:     NOW, THEREFORE, the parties agree as follows: A G R E E M E N T     1.  Definitions.  Capitalized terms used herein and not otherwise defined shall have the meaning given in the Loan Agreement.     2.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the following definition of "Applicable Margin": "Applicable Margin" is amended by adding to the end of such definition the following sentence: Notwithstanding the foregoing, the Applicable Margin for Temporary Supplemental Revolving Loans shall always be 2.25%.     Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the following definition of "Loans": "Loans" means the Revolving Loans, the Term Loans, and the Temporary Supplemental Revolving Loans.     3.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the following definition of "Reference Related Rate": "Reference Related Rate" is amended by adding to the end of such definition the following sentence: Notwithstanding the foregoing, the Reference Related Rate for all Temporary Supplemental Revolving Loans shall always be equal to the Reference Rate. --------------------------------------------------------------------------------     4.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by adding the definition of "Temporary Supplemental Revolving Loan Commitment" as follows: "Temporary Supplemental Revolving Loan Commitment" means Ten Million Dollars ($10,000,000.00) until August 31, 2000, after which there shall be no Temporary Supplemental Revolving Loan Commitment.     5.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by adding the following definition of "Temporary Supplemental Revolving Loan Maturity Date": "Temporary Supplemental Revolving Loan Maturity Date" means August 31, 2000.     6.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the following definition of "Total Commitment": "Total Commitment" is amended by adding to the end of such definition the following sentence: "Total Commitment" shall not include the Temporary Supplemental Revolving Loan Commitment.     Amendment to Section 6.6 "Restriction on Acquisitions."  Section 6.6 of the Loan Agreement is amended to provide in full:     "Section 6.6    Restriction on Acquisitions. Borrower shall not, and shall not permit any Subsidiary to acquire any portion of any business directly or indirectly, whether by stock acquisition, asset acquisition, the acquisition of equity interests in any entity or by way of merger or reorganization."     7.  Addition of Article 12.  Article 12, as set for the below, is hereby added to the Loan Agreement: ARTICLE 12 TEMPORARY SUPPLEMENTAL REVOLVING LOANS     Section 12.1    Temporary Supplemental Revolving Loans. Subject to the terms and conditions of this Agreement, each Lender hereby severally agrees, during the period beginning on the date hereof and ending August 31, 2000, to make temporary supplemental revolving loans duly requested hereunder (the "Temporary Supplemental Revolving Loans") to Borrower in an amount equal to such Lender's Revolving Loan Pro Rata share of each requested loan, provided that after giving effect to any requested loan, absent such Lender's consent, the aggregate of all Temporary Supplemental Revolving Loans outstanding from such Lender will not exceed at any one time, its Revolving Loan Pro Rata share of the total Temporary Supplemental Revolving Loan Commitment. The Temporary Supplemental Revolving Loans described in this section constitute a revolving credit and, within the amount and time specified, Borrower may pay, prepay and reborrow.     Section 12.2    Applicability of Provisions. Except for Sections 2.1, 2.4, 2.5, 2.9 and 5.1, the provisions of the Loan Agreement shall apply to the Temporary Supplemental Revolving Loans.     Section 12.3    Repayment of Principal.     (a) On each day that the principal balance of all outstanding Temporary Supplemental Revolving Loans exceeds the Temporary Supplemental Revolving Loan Commitment, Borrower shall repay the Temporary Supplemental Revolving Loans in such amount as is necessary to reduce the principal balance of them to an amount equal to or less than the Temporary Supplemental Revolving Loan Commitment. If Borrower shall pay any Offshore Related Rate Loan pursuant to this section, prior to the end of the Applicable Interest Period, Borrower shall include with such payment any amount payable pursuant to Section 2.7 and applicable to the payment of such Offshore Related Rate Loan prior to the termination of the Applicable Interest Period.     (b) Borrower shall repay the principal amount of the Temporary Supplemental Revolving Loans on or before the Temporary Supplemental Revolving Loan Maturity Date. --------------------------------------------------------------------------------     Section 12.4    Use of Temporary Supplemental Revolving Loan Proceeds. The proceeds from the Temporary Supplemental Revolving Loans will be used to finance accounts receivable and inventory of Borrower.     8.  Fees.  Upon execution of this Amendment, Borrower agrees to pay Agent for the benefit of Lenders, a fee of Thirty Thousand Dollars ($30,000.00) to be divided in proportion to their Revolving Loan Pro Rata shares.     9.  No Further Amendment; Fees.  Except as expressly modified by this Amendment, the Loan Agreement and the other Loan Documents shall remain unmodified and in full force and effect and the parties hereby ratify their respective obligations thereunder. Without limiting the foregoing, the Borrower expressly reaffirms and ratifies its obligation to pay or reimburse the Agent and the Lender on request for all reasonable expenses, including legal fees, actually incurred by the Agent or such Lender in connection with the preparation of this Amendment, any other amendment documents, and the closing of the transactions contemplated hereby and thereby.     10.  Miscellaneous.       (a)  Entire Agreement.  This Amendment comprises the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, representations or commitments.     (b)  Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same Amendment.     (c)  Governing Law.  This Amendment and the other agreements provided for herein and the rights and obligations of the parties hereto and thereto shall be construed and interpreted in accordance with the laws of the State of Oregon.     (d)  Certain Agreements Not Enforceable.   UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION, AND BE SIGNED BY THE LENDERS TO BE ENFORCEABLE. --------------------------------------------------------------------------------     EXECUTED AND DELIVERED by the duly authorized officers of the parties as of the date first above written. BORROWER:   NORTHWEST PIPE COMPANY           By: BRIAN DUNHAM     Its: PRESIDENT                 Address:      12005 N. Burgard                    Portland OR 97203                    Fax No. (503) 240-6615   LENDER:       BANK OF AMERICA, N.A.           By: ED KLUSS     Its: VICE PRESIDENT                 Address:      Commercial Banking                    121 SW Morrison Street, Suite 1700                    Portland OR 97204                    Fax No. (503) 275-1391                    Attn: Larry C. Ellis           U.S. BANK NATIONAL ASSOCIATION           By: J. STEPHEN MITCHELL     Its: VICE PRESIDENT                 Address:      Oregon Corporate Banking, T-4                    111 SW Fifth Avenue, Suite 400                    Portland OR 97208                    Fax No. (503) 275-7290                    Attn: Stephen Mitchell   AGENT:       BANK OF AMERICA, N.A.           By: DORA A. BROWN     Its: VICE PRESIDENT                 Address:      Agency Services                    701 Fifth Avenue, Floor 16                    Seattle WA 98104                    Fax No. (206) 358-0971                    Attn: Dora A. Brown -------------------------------------------------------------------------------- QUICKLINKS FIFTH AMENDMENT TO LOAN AGREEMENT R E C I T A L S A G R E E M E N T ARTICLE 12 TEMPORARY SUPPLEMENTAL REVOLVING LOANS
10600 North De Anza Blvd. 408.446.0700 Suite 200 Facsimile 408.446.0583 Cupertino, CA 95014-2075 www sobrato.com   SOBRATO DEVELOPMENT COMPANIES FIRST AMENDMENT TO LEASE Building 1 - 2215 Bridgepointe Parkway, San Mateo This first amendment to lease (`Amendment') is made this 11th day of June, 1999 (the "Effective Date") by and between SOBRATO INTERESTS III, a California limited partnership having an address at I060 N. De Anza Blvd Suite 200, Cupertino, California 95014 ("Landlord") and SIEBEL SYSTEMS, INC., a Delaware corporation having its principal place of business at 1855 South Grant Street, San Mateo, California 94402 ("Tenant"). WITNESSETH WHEREAS Landlord and Tenant entered to a lease dated March 11, 1999, (the "Lease") for a building to be constructed at 2215 Bridgepointe Parkway in the location labeled as Building 1 on Exhibit "A" attached hereto ("Premises"), and WHEREAS Landlord and Tenant are concurrently entering into a lease for Building 3 (the "Building 3 Lease"); and WHEREAS Landlord and Tenant wish to accelerate the construction of the Premises in exchange for a reduction in the Base Monthly Rent and a modification of the security deposit provisions to provide for individual letters of credit for this Lease, the Building 2 Lease and the Building 3 Lease; NOW, THEREFORE, in order to effect the intent of the parties as set forth above and for good and valuable consideration exchanged between the parties, the Lease is amended as of the Effective Date as follows: 1. The first sentence of Section 4.A is modified to provide that the Lease Term shall be automatically extended so as to be coterminous with the Expiration Date of the Building 3 Lease. Rent during such extended term shall be at the Base Monthly Rent in effect immediately prior to such extended term. The second sentence of 4.A is deleted is replaced by the following: "Notwithstanding the foregoing, in no event shall the Commencement Date be less than forty five (45) days following the Commencement Date for Building 2." 2. The anticipated Commencement Date for the Premises referenced in Section 4.A is accelerated from August 1, 2001 to September 15, 2000. 3. The Base Monthly Rent referenced in Section 4.A is decreased from the sum of Three Hundred Thirty Four Thousand Three Hundred Fifty Five Dollars ($334,355.00) to Three Hundred Twenty Thousand Sixty Four Dollars ($320,064.00). 4. The Base Monthly Rent referenced in Section 4.B is reduced from Two and 363/1000 ($2.363) per square foot to Two and 262/1000 ($2.262) per square foot. 5. Section 4.D is replaced in its entirety by the following:   Security Deposit (i) Amount: Tenant shall deposit with Landlord a letter of credit (`Letter of Credit") in a form reasonably acceptable to Landlord in the amount of Eight Million Four Hundred Thousand Dollars ($8,400,000.00) to secure Tenant's obligation to complete Tennant Improvements in the Building. Upon Landlord's receipt of evidence reasonably satisfactory to Landlord of lien free completion of the Tenant Improvements and that Tenant has fully paid for the cost of all Tenant Improvements for the Building, the Letter of Credit shall be cancelled and returned to Tenant by Landlord. Notwithstanding the foregoing, in the event Tenant elects to defer construction on a portion of the non-core Tenant Improvements in the Building (as provided further and restricted in Section 5.B), Landlord shall not require Tenant to continue to post the Letter of Credit after payment in full for all other Tenant Improvements associated with the Building. (ii) Use by Landlord: Landlord shall be entitled to draw against the full amount of the Letter of Credit at any time provided only that Landlord certifies to the issuer of the Letter of Credit that Tenant has failed to make a payment for Tenant Improvement costs as provided in 5.F, that Tenant has failed to timely renew or extend the Letter of Credit as required by this subsection (ii), or that Tenant has failed to amend the Letter of Credit or obtain a new Letter of Credit as required by this subsection (ii) and such failure has not been cured within ten (10) days following Landlord's notice to Tenant. Tenant shall keep the Letter of Credit in effect at all times prior to payment in full for the Tenant Improvements for the Building. At least sixty (60) days prior to expiration of any Letter of Credit, the term thereof shall be renewed or extended for a period until Tenant has paid in full for the Tenant Improvements for the Building. Subject to the notice requirement and cure period provided herein, Tenant's failure to so renew or extend the Letter of Credit shall be a material default of this Lease by Tenant entitling Landlord to draw down on the entire amount of the Letter of Credit. Any amounts drawn on the Letter of Credit shall be used to pay for the cost of the Tenant Improvements. In the event the Letter of Credit is drawn by Landlord, and the proceeds used to pay for the completion of the Tenant Improvements in the Building, after Landlord's completion of the Tenant Improvements in the Building, Landlord shall refund to Tenant any excess proceeds from the Letter of Credit. In the event of termination of Landlord's interest in this Lease, Landlord may deliver the Letter of Credit to Landlord's successor in interest in the Premises and thereupon be relieved of further responsibility with respect to the Letter of Credit. Except as provided herein, no other security deposit shall be required by Tenant. (iii) Letter of Credit Fee: Landlord and Tenant agree to share equally in the fee charged to provide the Letter of Credit. In no event, however, shall Landlord's share of the fee exceed the sum of Forty Two Thousand Dollars ($42,000.00) per annum. 6. The seventh through the ninth sentences of Section 5.A beginning "Landlord shall contract for the installation" shall be replaced in its entirety by "Landlord's affiliated construction company, Sobrato Construction Corporation shall act as the general contractor for the Building Shell and shall begin construction of the Building Shell immediately following the Effective Date. Upon completion of the Tenant Improvement Plans, Landlord and Tenant shall select a general contractor ("General Contractor") on the basis of a competitive bid of the cost to construct the Tenant Improvements. Thereafter, Landlord shall cause the General Contractor to complete construction of the Tenant Improvements. Landlord and Sobrato Construction shall use commercially reasonable efforts to ensure effective coordination between the General Contractor selected to construct the Tenant Improvements and Sobrato Construction Corporation." 7. The first sentence of Section 5.J is replaced by "Sobrato Construction Corporation and General Contractor shall each procure (as a cost of the Building Shell or the Tenant Improvements as applicable) a "Broad Form" liability insurance policies in the amount of Three Million Dollars ($3,000,000.00)." 8. The first three sentences of Section 5.K are replaced by "After the Building Shell and Tenant Improvements are Substantially Complete, Landlord shall cause Sobrato Construction Corporation and/or the General Contractor to immediately correct any construction defect or other "punch list" item which Tenant brings to Landlord's attention. All such work shall be performed so as to reasonably minimize the interruption to Tenant and its activities on the Premises. Sobrato Construction Corporation shall provide a standard contractor's warranty with respect to the Building Shell for one (1) year from the Commencement Date. The General Contractor shall provide a standard contractor's warranty with respect to the Tenant Improvements for one (1) year from the Commencement Date." 9. The completion date for the Tenant Improvement Plans referenced in Section 5.B is accelerated from October 1, 2000 to November 15, 1999. 10. The Termination Date reference in Section 5.G is accelerated from August 1, 2002, until September 15, 2001. 11. All defined terms shall have the same meanings as in the Lease, except as otherwise stated this Amendment. 12. Except as hereby amended, the Lease and all of the terms, covenants and conditions thereof shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of this Amendment and the terms and provisions of the Lease, the terms and provisions of this Amendment shall prevail. IN WITNESS WHEREOF, the parties hereto have set their hands to this Amendment as of the day and date first above written.   Landlord Sobrato Interests III, a California limited partnership By:/s/ Its: General Partner Tenant Siebel Systems, Inc. a Delaware Corporation By:/s/ Its: Director, Legal Affairs -------------------------------------------------------------------------------- 10600 North De Anza Blvd. 408.446.0700 Suite 200 Facsimile: 408.446.0583 Cupertino CA 95014-2075 www.sobrato.com   SOBRATO DEVELOPMENT COMPANIES   SECOND AMENDMENT TO LEASE This second amendment to lease ("Amendment') is made this 31st day of July, 2000 ("Effective Date") by and between Sobrato Interests III, a California limited partnership having an address at 10600 N. De Anza Blvd., Suite 200, Cupertino, California 95014 ("Landlord") and Siebel Systems, Inc., a Delaware corporation having its principal place of business at 1855 South Grant Street, San Mateo, CA 94402 California ("Tenant"). WITNESSETH WHEREAS Landlord and Tenant entered into a lease dated March 11, 1999, and a First Amendment to Lease dated June 11, 1999 (the "Lease") for the premises ("Premises") located at 2215 Bridgepointe Parkway, San Mateo, California; and WHEREAS Landlord and Tenant wish to memorialize the Lease Commencement date. NOW, THEREFORE, in order to effect the intent of the parties as set forth above and for good and valuable consideration exchanged between the parties, the Lease is amended as of the Effective Date as follows: 1. The Lease Commencement date shall be July 5, 2000 2. All defined terms shall have the same meanings as in the Lease, except as otherwise stated in this Amendment. 3. Except as hereby amended, the Lease and all of the terms, covenants and conditions thereof shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of this First Amendment and the terms and provisions of the Lease, the terms and provisions of this First Amendment shall prevail. IN WITNESS WHEREOF, the parties hereto have set their hands to this Amendment as of the day and date first above written. Landlord Sobrato Interests III, a California limited partnership By:/s/ Its: General Partner Tenant Siebel Systems, Inc. a Delaware Corporation By:/s/ Its: Vice President, Facilities & Real Estate --------------------------------------------------------------------------------
Exhibit 10.10 Slade's Ferry Bank LIFE INSURANCE ENDORSEMENT METHOD SPLIT DOLLAR PLAN AGREEMENT Owner: Slade's Ferry Bank Policy Number: Mass Mutual 0036855      Southland Life 06 0009 3732 Insured: Janice R. Partridge Relationship of Insured to Bank: Key Executive The respective rights and obligations of the Bank (herein Owner) and the Insured (herein Insured) in the above-referenced policy shall be pursuant to the terms set forth below: I. DEFINITIONS Refer to the policy contract for the definition of all terms in this Agreement. II. POLICY TITLE AND OWNERSHIP Title and ownership shall reside in the Owner for its use and for the use of the Insured all in accordance with the Agreement. The Owner alone may, to the extent of its interest, exercise the right to borrow or withdraw on the policy cash values. Where the Owner and the Insured mutually agree to exercise the right to increase the coverage under the subject Split Dollar policy, then, in such event, the rights, duties and benefits of the parties to such increased coverage shall continue to be subject to the terms of this Agreement. III. BENEFICIARY DESIGNATION RIGHTS The Insured shall have the right and power to designate a beneficiary or beneficiaries to receive the Insured's share of the proceeds payable upon the death of the Insured, and to elect and change a payment option for such beneficiary, subject to any right or interest the Owner may have in such proceeds, as provided in this Agreement. IV. PREMIUM PAYMENT METHOD The Bank shall pay all premiums necessary to keep the policy in force. V. TAXABLE BENEFIT The Bank will report to the Insured the amount of imputed income each year on Form W-2 or its equivalent, the amount of taxable benefit derived by the Insured. VI. DIVISION OF DEATH PROCEEDS Subject to Paragraphs VII and IX herein, the division of the death proceeds of the policy is as follows: A. Should the Insured be employed by the Bank upon death , the Insured's beneficiary(ies), designated in accordance with Paragraph III, shall be entitled to an amount equal to three times (3x's) the Insured's salary at the time of death. B. Should the Insured by retired from the Bank upon death , the Insured's beneficiary(ies), designated in accordance with Paragraph III, shall be entitled to an amount equal to three time (3x's) the Insured's salary at the time of retirement from the Bank. C. Should the Insured leave the employment of the Bank (voluntarily or involuntarily) prior to retirement, early retirement, or medical retirement , the Insured's beneficiary(ies), designated in accordance with Paragraph III, shall be entitled to an amount equal to five thousand and No/00ths ($5,000.00). D. The Bank shall be entitled to the remainder of proceeds. E. The Bank and the Insured (or assignee) shall share in any interest due on the death proceeds on a pro rata basis as the proceeds due each respectively bears to the total proceeds, excluding any such interest.   VII. DIVISION OF THE CASH SURRENDER VALUE OF THE POLICY The Bank shall at all times be entitled to an amount equal to the policy's cash value, as that term is defined in the policy contract, less any policy loans and unpaid interest or cash withdrawals previously incurred by the Bank and any applicable surrender charges. Such cash value shall be determined as of the date of surrender or death as the case may be. VIII. TERMINATION OF AGREEMENT This Agreement shall terminate upon the occurrence of the following: 1. The Insured shall be discharged from employment with the Bank for cause. The term for "cause" shall mean any of the following that result in an adverse effect on the Bank: (i) gross negligence or gross neglect; (ii) the commission of a felony or gross misdemeanor involving moral turpitude, fraud, or dishonesty; (iii) the willful violation of any law, rule, or regulation (other than a traffic violation or similar offense); (iv) an intentional failure to perform stated duties; or (v) a breach of fiduciary duty involving personal profit.   Except as provided above, this Agreement shall terminate upon distribution of the death benefit proceeds in accordance with Paragraph VI above. IX. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS The Insured may not, without the written consent of the Bank, assign to any individual, trust or other organization, any right, title, or interest in the subject policy nor any rights, options, privileges or duties created under this Agreement. X. AGREEMENT BINDING UPON THE PARTIES This Agreement shall bind the Insured and the Bank, their heirs, successors, personal representatives, and assigns. XI. ERISA PROVISIONS The following provisions are part of this Agreement and are intended to meet the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"): A. Named Fiduciary and Plan Administrator.   The "Plan Administrator" of this Endorsement Method Split Dollar Agreement shall be Slade's Ferry Bank's Senior Human Resources Officer until resignation or removal by the Board of Directors. As Administrator, the Bank shall be responsible for the management, control, and administration of this Split Dollar Plan as established herein. The Administrator may delegate to others certain aspects of the management and operation responsibilities of the Plan, including the employment of advisors and the delegation of any ministerial duties to qualified individuals. B. Funding Policy.   The funding policy for this Split Dollar Plan shall be to maintain the subject policy in force by paying, when due, all premiums required. C. Basis of Payment of Benefits.   Direct payment by the Owner is the basis of payment of benefits under this Agreement, with those benefits in turn being based on the payment of premiums as provided in this Agreement. D. Claim Procedures.   Claim forms or claim information as to the subject policy can be obtained by contacting The Benefit Marketing Group, Inc.   In the event that a claim is not eligible under the policy, the Owner will notify the Named Fiduciary of the denial pursuant to the requirements under the terms of the policy. If the Named Fiduciary is dissatisfied with the denial of the claim and wishes to contest such claim denial, they should contact the office named above and they will assist in making inquiry to Owner. All objections to the Owner's actions should be in writing and submitted to the office named above for transmittal to the Owner. XII. GENDER Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine, or neuter gender, whenever they should so apply. XIII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT The insurance company shall not be deemed a party to this Agreement, but will respect the rights of the parties as herein developed upon receiving an executed copy of this Agreement. Payment or other performance in accordance with the policy provisions shall fully discharge the insurance company for any and all liability. XIV. CHANGE OF CONTROL Change of Control shall be deemed to be the cumulative transfer of more than fifty percent (50%) of the voting stock of Slade's Ferry Bancorp from the date of this Agreement. For the purposes of this Agreement, transfers on account of deaths or gifts, transfers between family members, or transfers to a qualified retirement plan maintained by the Bank shall not be considered in determining whether there has been a Change of Control. Upon a Change of Control, if the Insured's employment is subsequently terminated, except for cause, then the Insured shall be one hundred percent (100%) vested in the benefits promised in this Agreement and, therefore, upon the death of the Insured, the Insured's beneficiary(ies) (designated in accordance with Paragraph III) shall receive the death benefit provided herein as if the Insured had died while employed by the Bank. [See Subparagraphs VI (A) & (B)]. XV. AMENDMENT OR REVOCATION It is agreed by and between the parties hereto that, during the lifetime of the Insured, this Agreement may be amended or revoked at any time or times, in whole or in party, by the mutual written consent of the Insured and the Bank. XVI. EFFECTIVE DATE The Effective Date of this Agreement shall be April 27, 2000. XVII. SEVERABILITY AND INTERPRETATION If a provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nonetheless be enforceable according to their terms. Further, in the event that any provision is held to be over broad as written, such provision shall be deemed amended to narrow its application to the extent necessary to make the provision enforceable according to law and enforced as amended. XVIII. APPLICABLE LAW The validity and interpretation of this Agreement shall be governed by the laws of the State of Massachusetts. Executed in Somerset, Massachusetts this 27th day of April, 2000.   SLADE'S FERRY TRUST CO. Somerset, Massachusetts /s/ Charlene J. Jarest Witness By: /s/ James D. Carey President Title /s/ Charlene J. Jarest Witness /s/ Janice R. Partridge Insured   MassMutual The Blue Chip Company (sm) Massachusetts Mutual Life Insurance Company Springfield, MA 01111-0001 Flexible Premium Life Insurance Policy POLICY NUMBER 0 036 855 INSURED JANICE R PARTRIDGE SELECTED FACE AMOUNT $ 177,868 Dear Policy Owner: READ YOUR POLICY CAREFULLY. It has been written in readable language to help You understand its terms. We have used examples to explain some of its provisions. These examples do not reflect the actual amounts or status of this policy. As You read through this policy, remember the words "You" and "Your" refer to the Owner and "We", "Us" and "Our" refer to Massachusetts Mutual Life Insurance Company. We will, subject to the terms of this policy, pay the death benefit to the Beneficiary when due proof of the Insured's death is received at Our Home Office. The terms of this policy are contained on this and the following pages, together with attached application(s). For service or information on this policy, contact the agent who sold this policy, any of Our agency offices or Our Home Office. YOU HAVE A RIGHT TO RETURN THIS POLICY. If you decide not to keep this policy, return it within 10 days after You receive it. This policy may be returned by delivering or mailing it to Our Home Office, to any of Our agency offices, or to the agent who sold this policy. Then, this policy will be as though it had never been issued. We will promptly refund any premium paid for this policy; minus any amounts borrowed or withdrawn. Signed for Massachusetts Mutual Life Insurance Company. Sincerely Yours, /s/ R J O'Connell President /s/ Ann F. Lomeli Secretary This Policy provides that: Insurance is payable when the Insured dies. Within specified limits, flexible premiums may be paid during the Insured's lifetime. Within specified limits, the Selected Face Amount may be decreased. This policy is non-participating.   The Schedule Page This page shows specific information about this policy and is referred to throughout the policy Policy Number 0 036 855 Insured JANICE R PARTRIDGE Selected Face Amount $ 177,868 Issue Date April 27, 2000 Policy Date April 27, 2000 Paid-Up Policy Date April 27, 2052 Insured's Age On Policy Date 48 Female Basic Policy Information Plan Selected Face Amount Minimum Face Amount Death Benefit Option Flexible Premium Life Insurance Policy $ 177,868 See Minimum Face Amount Provision 2 Premium Information      As of April 27, 2000 First Premium                   $80,783,00 First Premium is 100% of premium paid. Other Information Monthly face amount charge is $0.00 for total amount of coverage provided under this policy, including any riders. See Monthly Charges in Part 3. An administrative charge is deducted from the account value on each Monthly Calculation Date. It will not be more than $9.00 per month. This is a Non-Tobacco policy. This policy was issued on a Guaranteed Issue underwriting basis. Owner and Beneficiary - See application attached to and made a part of this policy. It is possible that coverage will expire prior to the paid up policy date where either no premiums are paid following payment of the initial premium or subsequent premiums are insufficient to continue coverage to such date. POLICY COMPONENT ANALYSIS Slades Ferry Trust Company Somerset, MA May 18, 2000 Opportunity Cost: 5% Marginal Tax Rate: 36% Janice R. Partridge MassMutual Age End of Year Total Premiums Paid Policy Surrender Values Proceeds At Death (Net of Split Dollar Pymnt) Total Insurance Amount Net Amount at Risk Annualized Tax Equivalent YIeld Gross Income From Policies Policy Loads Policy Surrender Charges Insurance Costs Total Income From Policies Insurance Costs Per $1,000 of Face Value 48 2000 $80,783 $  85,367   $274,028 $188,661 8.87% $  4,807     ($223) $  4,584 ($0.81) 49 2001       89,943     279,723   189,780 8.38%     5,079     ($503)     4,576 ($1.80) 50 2002       94,779     286,233   191,454 8.40%     5,352     ($516)     4,836 ($1.80) 51 2003       99,893     291,687   191,794 8.43%     5,639     ($526)     5,114 ($1.80) 52 2004     105,297     299,044   193,747 8.45%     5,944     ($539)     5,404 ($1.80) 53 2005     111,012     305,283   194,271 8.48%     6,265     ($550)     5,715 ($1.80) 54 2006     117,054     312,535   195,481 8.50%     6,605     ($563)     6,042 ($1.80) 55 2007     123,444     319,720   196,276 8.53%     6,965     ($575)     6,390 ($1.80) 56 2008     130,203     326,810   196,607 8.56%     7,345     ($586)     6,759 ($1.79) 57 2009     137,351     335,136   197,785 8.58%     7,747     ($599)     7,148 ($1.79) 58 2010     144,911     343,440   198,528 8.60%     8,172     ($612)     7,560 ($1.78) 59 2011     152,910     351,692   198,783 8.62%     8,622     ($624)     7,999 ($1.77) 60 2012     161,355     359,822   198,467 8.63%     9,098     ($653)     8,445 ($1.81) 61 2013     170,251     369,444   199,194 8.61%     9,601     ($705)     8,896 ($1.91) 62 2014     179,627     377,217   197,590 8.61%   10,130     ($754)     9,376 ($2.00) 63 2015     189,508     386,596   197,088 8.59%   10,688     ($807)     9,881 ($2.09) 64 2016     199,912     397,826   197,913 8.58%   11,276     ($871)   10,404 ($2.19) 65 2017     210,877     406,993   196,116 8.57%   11,895     ($930)   10,965 ($2.29) 66 2018     222,423     418,155   195,732 8.55%   12,547     ($1,001)   11,546 ($2.40) 67 2019     234,581     429,283   194,702 8.54%   13,234     ($1,076)   12,158 ($2.51) 68 2020     247,385     440,345   192,960 8.53%   13,958     ($1,153)   12,804 ($2.62) 69 2021     260,856     453,890   193,034 8.51%   14,719     ($1,248)   13,471 ($2.75) 70 2022     275,044     464,825   189,781 8.50%   15,521     ($1,333)   14,188 ($2.87) 71 2023     289,965     478,442   188,477 8.48%   16,365     ($1,445)   14,920 ($3.02) 72 2024     305,650     492,096   186,446 8.45%   17,253     ($1,568)   15,685 ($3.19) 73 2025     322,125     505,736   183,611 8.42%   18,186     ($1,711)   16,475 ($3.38) 74 2026     339,410     519,298   179,888 8.38%   19,166     ($1,881)   17,286 ($3.62) 75 2027     357,439     536,159   178,720 8.30%   20,195     ($2,166)   18,029 ($4.04) 76 2028     376,245     554,113   177,868 8.22%   21,268     ($2,462)   18,805 ($4.44) 77 2029     395,778     573,646   177,868 8.11%   22,387     ($2,853)   19,534 ($4.97) 78 2030     416,016     593,884   177,868 7.99%   23,549     ($3,311)   20,238 ($5.58) 79 2031     436,927     614,795   177,868 7.85%   24,753     ($3,842)   20,911 ($6.25) 80 2032     458,539     636,407   177,868 7.73%   25,997     ($4,384)   21,613 ($6.89) 81 2033     480,757     658,625   177,868 7.57%   27,283     ($5,066)   22,217 ($7.69) 82 2034     $681,396       200,639       200,639   Benmark  Projected values are based primarily on current non-guaranteed elements and assumptions. (see Introduction Section for more details) SOUTHLAND LIFE INSURANCE COMPANY (A TEXAS CORPORATION) 5780 POWERS FERRY ROAD, N. W. ATLANTA, GEORGIA 30327-4390 MAILING ADDRESS P. O. BOX 105006 ATLANTA, GEORGIA 30348-5006 A STOCK COMPANY - ESTABLISHED 1908 Janice R Partridge 06 009 3732            $177,868 Agreement by Southland Life Insurance Company Southland Life Insurance Company will pay the benefits described in this Policy in accord with the terms of this Policy. Consideration for Issuing This Policy This Policy is issued in consideration of: 1.    the application; and 2.    payment of at least the Minimum Initial Premium. Please Read Your Policy Carefully This Policy is a legal Policy between you as Owner of the Policy and the Company. 10 Day Right to Examine This Policy You have the right to examine and return this Policy. You may return it by mail or other delivery to the agent who sold it to you or to our Home Office within 10 days after you receive it. It will then be void from the beginning. Upon return of the Policy, we will refund all premiums paid. This Policy is signed for Southland Life Insurance Company by /s/ Stephen M. Christopher /s/ B. Scott Burton Stephen M. Christopher President B. Scott Burton Secretary FLEXIBLE PREMIUM ADJUSTABLE LIFE INSURANCE POLICY Death Benefit Proceeds Payable at Insured's Death Flexible Premiums Payable until Attained Age 100 This Policy is Nonparticipating and is not Eligible for Dividends SCHEDULE POLICY NUMBER 06 009 3732 INSURED Janice R Partridge AGE 48 SEX Female RATING CLASS Select Business NT RATING FACTOR 1.25 FACE AMOUNT $177,868 MINIMUM FACE AMOUNT $50,000 POLICY DATE April 27, 2000 MONTHLY PROCESSING DATE 27th DEATH BENEFIT TYPE B PREMIUM PAYMENT FREQUENCY AT ISSUE Single Premium FIRST PREMIUM $76,157.00 MINIMUM INITIAL PREMIUM $80.04 PLANNED PERIODIC PREMIUM   GUARANTEED MINIMUM INTEREST RATE 3.50% LOAN INTEREST RATE 5.50% REDUCED LOAN INTEREST RATE 4.00% BENEFICIARY NAME See Application BENEFICIARY RELATIONSHIP   OWNER Slades Ferry Trust Co. PLANNED PERIODIC PREMIUM AT ISSUE ON AVAILABLE PAYMENT FREQUENCIES Annual $76,157.00 Quarterly $19,039.25 Semi-Annual $38,078.50 Special Monthly $6,346.42 IT IS POSSIBLE THAT COVERAGE WILL TERMINATE PRIOR TO AGE 100 IF NO PREMIUMS ARE PAID FOLLOWING PAYMENT OF THE FIRST PREMIUM OR IF THE PLANNED PREMIUMS ARE INSUFFICIENT. BASED ON YOUR POLICY'S GUARANTEED MAXIMUM COST, GUARANTEED MINIMUM INTEREST RATE AND YOUR PAYMENT OF PLANNED PREMIUMS, THE POLICY WILL TERMINATE ON 11/01/2004 WITH NO VALUE. POLICY COMPONENT ANALYSIS Slades Ferry Trust Company Somerset, MA May 18, 2000 Opportunity Cost: 5% Marginal Tax Rate: 36% Janice R. Partridge Southland Life Age End of Year Total Premiums Paid Policy Surrender Values Proceeds At Death (Net of Split Dollar Pymnt) Total Insurance Amount Net Amount at Risk Annualized Tax Equivalent YIeld Gross Income From Policies Policy Loads Policy Surrender Charges Insurance Costs Total Income From Policies Insurance Costs Per $1,000 of Face Value 48 2000 $76,157 $  80,377   $260,473 $180,096 8.66% $  4,341     ($121) $  4,220 ($0.46) 49 2001       84,693     265,985   181,292 8.39%     4,581     ($265)     4,316 ($1.00) 50 2002       89,109     271,265   182,156 8.15%     4,828     ($412)     4,416 ($1.52) 51 2003       93,782     276,785   183,003 8.19%     5,079     ($406)     4,673 ($1.47) 52 2004       98,729     282,560   183,831 8.24%     5,346     ($399)     4,947 ($1.41) 53 2005     103,965     288,615   184,650 8.29%     5,628     ($392)     5,236 ($1.36) 54 2006     109,508     294,950   185,442 8.33%     5,926     ($383)     5,543 ($1.30) 55 2007     115,375     301,575   186,200 8.37%     6,242     ($375)     5,867 ($1.24) 56 2008     121,527     308,341   186,814 8.33%     6,576     ($424)     6,152 ($1.38) 57 2009     127,967     315,209   187,242 8.28%     6,927     ($487)     6,440 ($1.55) 58 2010     134,706     322,158   187,452 8.23%     7,294     ($555)     6,739 ($1.72) 59 2011     141,754     329,179   187,425 8.18%     7,678     ($630)     7,048 ($1.91) 60 2012     149,138     336,324   187,186 8.14%     8,080     ($696)     7,384 ($2.07) 61 2013     156,820     343,496   186,676 8.05%     8,501     ($819)     7,682 ($2.38) 62 2014     164,854     350,830   185,976 8.00%     8,939     ($905)     8,034 ($2.58) 63 2015     173,302     358,481   185,179 8.01%     9,397     ($949)     8,448 ($2.65) 64 2016     182,186     366,496   184,310 8.01%     9,878     ($994)     8,884 ($2.71) 65 2017     191,530     374,894   183,364 8.01%   10,385     ($1,041)     9,344 ($2.78) 66 2018     201,357     383,683   182,326 8.02%   10,917     ($1,090)     9,827 ($2.84) 67 2019     211,694     392,850   181,156 8.02%   11,477     ($1,140)   10,337 ($2.90) 68 2020     222,644     402,512   179,868 8.08%   12,067     ($1,117)   10,950 ($2.77) 69 2021     234,123     412,461   178,338 8.06%   12,691     ($1,212)   11,479 ($2.94) 70 2022     246,156     424,024   177,868 8.03%   13,345     ($1,312)   12,033 ($3.09) 71 2023     258,754     436,622   177,868 8.00%   14,031     ($1,433)   12,598 ($3.28) 72 2024     271,934     449,802   177,868 7.96%   14,749     ($1,569)   13,180 ($3.49) 73 2025     285,700     463,568   177,868 7.91%   15,500     ($1,734)   13,766 ($3.74) 74 2026     300,065     477,933   177,868 7.86%   16,285     ($1,920)   14,365 ($4.02) 75 2027     315,024     492,892   177,868 7.79%   17,104     ($2,145)   14,959 ($4.35) 76 2028     330,577     508,445   177,868 7.71%   17,956     ($2,403)   15,553 ($4.73) 77 2029     346,682     524,550   177,868 7.61%   18,843     ($2,738)   16,105 ($5.22) 78 2030     363,310     541,178   177,868 7.49%   19,761     ($3,133)   16,628 ($5.79) 79 2031     380,387     558,255   177,868 7.34%   20,709     ($3,632)   17,077 ($6.51) 80 2032     398,177     576,045   177,868 7.31%   21,682     ($3,892)   17,790 ($6.76) 81 2033     416,481     594,349   177,868 7.18%   22,696     ($4,392)   18,304 ($7.39) 82 2034     $613,193       196,712       196,712  
Exhibit 10.20 AMENDMENT OF LEASE        THIS AMENDMENT OF LEASE (this "Amendment") dated as of the 26th day of April, 2000, between VEF III FUNDING, LLC, a Delaware limited liability company, having an office c/o LendLease Real Estate Investments, Inc., 101 Arch Street, Boston, MA 02110 ("Landlord"), and INTERLEAF, INC., a Massachusetts corporation, having an address at 62 Fourth Avenue, Waltham, MA ("Tenant"). BACKGROUND        Landlord and Tenant are Landlord and Tenant, respectively, under a Lease dated March 21, 2000 (the "Lease"), covering certain space on the first, second, third and fourth floors of the building (the "Building") located at 400 Fifth Avenue, Waltham, MA (the "Original Premises"). The parties desire to add additional space on the second floor of the Building to the Original Premises under the Lease and to amend the Lease in certain other respects, all as hereinafter set forth. Capitalized terms not defined herein shall have the same meaning ascribed to them in the Lease. W I T N E S S E T H:        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:         1.    Section 2.2 of the Lease is hereby amended by deleting the provisions thereof and by substituting therefor the following: >      "Section 2.2.  Term.  TO HAVE AND TO HOLD for a term (hereinafter such > term plus any extensions hereof shall be referred to herein as the "Term" or > "term") beginning on the respective Term Commencement Dates described in > Section 1.1 of this Lease for the various components of the Premises and > continuing until September 30, 2006 (the "original term")."         2.    Effective on the "Additional Second Floor Premises Commencement Date" (defined herein), there shall be added to the Premises under the Lease the portion of the second floor of the Building shown as the "Additional Second Floor Premises" on the plan attached hereto as Exhibit A-1 (the "Additional Second Floor Premises"). The Additional Second Floor Premises consists of approximately 7,073 rentable square feet of space. All of the terms and provisions of the Lease (as amended hereby) shall be applicable to the Additional Second Floor Premises except: 1 --------------------------------------------------------------------------------  (i) the original term for the Additional Second Floor Premises shall be the period commencing on the Additional Second Floor Premises Commencement Date and ending on September 30, 2006; and (ii) the Annual Rent for the Additional Second Floor Premises shall be as is set forth in Section 6 hereof.         The "Additional Second Floor Premises Commencement Date" shall be the earlier of (i) the date that Tenant occupies the same for purposes of commencing its business operations, or (ii) the date that is forty-five (45) days after the date that Landlord substantially completes "Landlord's Work for the Additional Second Floor Premises" (as such term is defined herein), as certified in writing by Landlord's contractor.        3.    The Additional Second Floor Premises shall be leased to Tenant "as is", in its then present state of construction, finish and decoration, without any obligation for preparation or construction therein by Landlord for Tenant's occupancy or otherwise, except that Landlord shall complete the Building standard fireproofing program for the Additional Second Floor Premises ("Landlord's Work for the Additional Second Floor Premises"). Landlord agrees to use reasonable efforts to substantially complete construction of Landlord's Work for the Additional Second Floor Premises within forty-five (45) days after the existing tenant (i.e., Dome imaging systems, inc.) vacates the same in its entirety (which vacation date is currently scheduled for August 15, 2000). Landlord shall have no obligation to commence Landlord's Work for the Additional Second Floor Premises until the current tenant has vacated the Additional Second Floor Premises.         All alterations, improvements and additions by Tenant with respect to the Additional Second Floor Premises shall be subject to all applicable provisions of the Lease (as amended hereby).         4.    Effective as of the Additional Second Floor Premises Commencement Date, Section 1.1 of the Lease is hereby amended as follows: (i) By deleting the number "$66,575 per annum" from the term "Tenant's Estimated Electrical Charge" and by substituting therefor the number "$73,648 per annum"; (ii) By deleting the percentage "58.13%" from the term "Tenant's Proportionate Fraction" and by substituting therefor the percentage "64.30%".         5.    Landlord shall provide Tenant with a tenant improvement allowance in an amount not exceeding $84,876 in the aggregate (the "Additional Second Floor Premises Allowance") to reimburse Tenant for the costs incurred by Tenant in performing initial leasehold improvements to the Additional Second Floor Premises and for the other items described below in this Section 5, including but not limited to architectural and engineering 2 -------------------------------------------------------------------------------- consulting costs, moving costs, telecommunications equipment and installations and the purchase of office furniture, but subject, however, to the limitations described in the next paragraph.         The Additional Second Floor Premises Allowance shall be paid to Tenant (in increments of not less $25,000), upon the submission to Landlord of a written requisition with copies of invoices supporting the costs sought to be reimbursed and, if applicable, (a) lien waivers from Tenant's contractors and (b) a certificate from Tenant's architect certifying to the completion of the percentage of work sought to be reimbursed.  Landlord shall pay each such approved requisition within twenty (20) days of its receipt.  Notwithstanding the foregoing, Landlord shall only be obligated to pay such requisitions submitted by Tenant up to the aggregate amount of the Additional Second Floor Premises Allowance and only to the extent that the amount described in such requisitions shall be included in the budget for Tenant's work for the Additional Second Floor Premises that has been approved in writing by Landlord prior to September 15, 2000.  At least 50% of the Additional Second Floor Premises Allowance shall be expended for permanent leasehold improvements to the Additional Second Floor Premises, telecommunications wiring, equipment and installations, and architectural and engineering costs, and no more than 50% of the Additional Second Floor Premises Allowance shall be expended for moving costs, the purchase of office furniture and other consultant's costs.         In no event, however, shall Landlord be obligated (i) to make any payments to Tenant on account of the Additional Second Floor Premises Allowance prior to the Term Commencement Date for the Additional Second Floor Premises or (ii) to make any payments to Tenant on account of the Additional Second Floor Premises Allowance for requisitions received from Tenant after January 1, 2001, except if Tenant's failure to submit a requisition prior to January 1, 2001 shall be due to Landlord's inability to deliver the Additional Second Floor Premises by November 1, 2001.        6.    Commencing on Additional Second Floor Premises Commencement Date, in addition to the Annual Rent that Tenant is obligated to pay to Landlord for the Original Premises, Tenant agrees to pay to Landlord Annual Rent for the Additional Second Floor Premises as follows:  (a) For the period commencing on the Additional Second Floor Premises Commencement Date and ending on June 30, 2003: $190,971 per annum ($15,914.25 per month); and  (b) For the period commencing on July 1, 2003 and ending on September 30, 2006: $205,117 per annum ($17,093.08 per month).         7.    Simultaneously with the execution and delivery of this Amendment by Tenant, Tenant shall deposit an additional $15,914.25 with Landlord to be held by Landlord, together with the $299,587.50 that Landlord is currently holding, as the Security Deposit 3 -------------------------------------------------------------------------------- under the Lease so that, upon such delivery of such $15,914.25 amount to Landlord, the Security Deposit under the Lease shall be $315,501.75.         8.    Except as only expressly amended hereby, the Lease shall continue in full force and effect as heretofore.         WITNESS the execution hereof under seal as of the day and year first above written. LANDLORD:   VEF III FUNDING, LLC, a Delaware limited liability company   By: Value Enhancement Fund III, LLC,   a Georgia limited liability company,   its manager   By: Lend Lease Real Estate Investments, Inc., its manager   By: Name:   -------------------------------------------------------------------------------- Title:   TENANT:   INTERLEAF, INC.   By: -------------------------------------------------------------------------------- Name: Title: EXHIBIT A-1 [Attach Space Plan for Additional Second Floor Premises] 4 --------------------------------------------------------------------------------
FIRST AMENDMENT TO LEASE This first amendment to lease ("Amendment") is made this 23rd day of September, 2000 ("Effective Date") by and between Sobrato Interests III, a California limited partnership having an address at 10600 N. De Anza Blvd., Suite 200, Cupertino, California 95014 ("Landlord") and Siebel Systems, Inc., a Delaware corporation having its principal place of business at 1855 South Grant Street, San Mateo, CA 94402 California ("Tenant"). WITNESSETH WHEREAS Landlord and Tenant entered into a lease dated June 11, 1999 (the "Lease") for the premises ("Premises") located at 2207 Bridgepointe Parkway, San Mateo, California; and WHEREAS Landlord and Tenant wish to memorialize the Lease Commencement and Termination dates. NOW, THEREFORE , in order to effect the intent of the parties as set forth above and for good and valuable consideration exchanged between the parties, the Lease is amended as of the Effective Date as follows: The Lease Commencement date shall be September 18, 2000 The Lease Termination date shall be September 17, 2012 All defined terms shall have the same meanings as in the Lease, except as otherwise stated in this Amendment. Except as hereby amended, the Lease and all of the terms, covenants and conditions thereof shall remain unmodified and in full force and effect. In the event of any conflict or inconsistency between the terms and provisions of this First Amendment and the terms and provisions of the Lease, the terms and provisions of this First Amendment shall prevail. IN WITNESS WHEREOF , the parties hereto have set their hands to this Amendment as of the day and date first above written. Landlord Sobrato Interests III, a California limited partnership By:/s/ Its: General Partner Tenant Siebel Systems, Inc. a Delaware Corporation By:/s/ Its: Vice President, Facilities & Real Estate --------------------------------------------------------------------------------
EXHIBIT 10(o) -------------------------------------------------------------------------------- $1,500,000,000 5-YEAR AMENDED AND RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY among DELPHI AUTOMOTIVE SYSTEMS CORPORATION, The Several Lenders from Time to Time Parties Hereto BANK OF AMERICA, NATIONAL ASSOCIATION, BANK ONE, N.A., BARCLAYS BANK PLC, CITIBANK, N.A., DEUTSCHE BANK AG NEW YORK BRANCH, and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Syndication Agents and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of June 23, 2000   -------------------------------------------------------------------------------- CHASE SECURITIES INC., as Lead Arranger and Book Manager   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS             Page SECTION 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Definitional Provisions 18 SECTION 2. AMOUNT AND TERMS OF THE FACILITIES 19 2.1 Amount and Terms of the U.S. Commitments 19 2.2 Amounts and Terms of the Multicurrency Commitments 20 2.3 Competitive Borrowings 21 2.4 Terms of Swing Line Commitment 24 2.5 Extension of Termination Date 27 2.6 Termination or Reduction of Commitments 29 2.7 Prepayments 29 2.8 Conversion and Continuation Options 30 2.9 Minimum Amounts of Tranches 31 2.10 Repayment of Loans; Evidence of Debt 31 2.11 Interest Rates and Payment Dates 32 2.12 Facility Fee 34 2.13 Computation of Interest and Fees 34 2.14 Inability to Determine Interest Rate 35 2.15 Pro Rata Treatment and Payments 36 2.16 Illegality 37 2.17 Increased Costs 38 2.18 Taxes 39 2.19 Indemnity 40 2.20 Notice of Amounts Payable; Relocation of Lending Office; Mandatory Assignment 41 SECTION 3. LETTERS OF CREDIT 42 3.1 L/C Commitment 42 3.2 Procedure for Issuance of Letter of Credit 42 3.3 Fees and Other Charges 43 3.4 L/C Participations 43 3.5 Reimbursement Obligation of the Borrower 44 3.6 Obligations Absolute 44 3.7 Letter of Credit Payments 45 3.8 Applications 45 SECTION 4. REPRESENTATIONS AND WARRANTIES 45 4.1 Financial Condition 45 4.2 Corporate Existence; Compliance with Law 45 4.3 Corporate Power; Authorization; Enforceable Obligations 45 4.4 No Legal Bar; No Default 46 4.5 No Material Litigation 46 -i- --------------------------------------------------------------------------------               Page 4.6 Federal Regulations 46 4.7 Investment Company Act 46 4.8 ERISA 46 4.9 No Material Misstatements 46 4.10 Environmental Matters 47 4.11 Subsidiaries 47 4.12 Purpose of Loans 47 SECTION 5. CONDITIONS PRECEDENT 47 5.1 Conditions to Initial Extensions of Credit 47 5.2 Conditions to Each Extension of Credit 48 SECTION 6. AFFIRMATIVE COVENANTS 49 6.1 Financial Statements 49 6.2 Certificates; Other Information 49 6.3 Notices 50 6.4 Conduct of Business and Maintenance of Existence 50 6.5 Books and Records 50 6.6 Environmental Laws 51 SECTION 7. NEGATIVE COVENANTS 51 7.1 Consolidated Leverage Ratio 51 7.2 Indebtedness 51 7.3 Liens 51 7.4 Sale-Leasebacks 52 7.5 Merger, Consolidation, etc. 52 SECTION 8. EVENTS OF DEFAULT 52 SECTION 9. THE ADMINISTRATIVE AGENT 55 9.1 Appointment 55 9.2 Delegation of Duties 55 9.3 Exculpatory Provisions 55 9.4 Reliance by Administrative Agent 56 9.5 Notice of Default 56 9.6 Non-Reliance on Administrative Agent and Other Lenders 56 9.7 Indemnification 57 9.8 Administrative Agent in Its Individual Capacity 57 9.9 Successor Administrative Agent 57 9.10 Syndication Agents and Documentation Agent 58 SECTION 10. MISCELLANEOUS 58 10.1 Amendments and Waivers 58 10.2 Notices 59 10.3 No Waiver; Cumulative Remedies 60 10.4 Survival of Representations and Warranties 61 10.5 Payment of Expenses and Taxes 61 10.6 Successors and Assigns; Participations and Assignments 61 -ii- --------------------------------------------------------------------------------               Page 10.7 Adjustments 64 10.8 Loan Conversion/Participations 64 10.9 Counterparts 65 10.10 Severability 66 10.11 GOVERNING LAW 67 10.12 WAIVERS OF JURY TRIAL 67 10.13 Confidentiality 68 SCHEDULES I Commitments; Competitive Bid Lenders II Addresses for Notices III Administrative Schedule 4.11 Subsidiaries EXHIBITS A Competitive Bid Request B Invitation for Competitive Bids C Competitive Bid D Competitive Bid Accept/Reject Letter E Assignment and Acceptance F-1 Opinion of Drinker Biddle & Reath LLP, counsel for the Borrower F-2 Opinion of Simpson Thacher & Bartlett G Promissory Note for U.S. Revolving Credit Loans -iii- -------------------------------------------------------------------------------- AMENDED & RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY, dated as of June 23, 2000 (amending and restating the Competitive Advance and Revolving Credit Facility dated as of January 4, 1999), among DELPHI AUTOMOTIVE SYSTEMS CORPORATION, a Delaware corporation (the “Borrower”), the several banks and other financial institutions from time to time parties to this Agreement (the “Lenders”), BANK OF AMERICA, NATIONAL ASSOCIATION, BANK ONE, N.A., BARCLAYS BANK PLC, CITIBANK, N.A., DEUTSCHE BANK AG NEW YORK BRANCH, and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as syndication agents (collectively, the “Syndication Agents”), and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders hereunder (in such capacity, the “Administrative Agent”).         The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS        1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:         “ABR”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, the ABR shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.         “ABR Loans”: Loans the rate of interest applicable to which is based upon the ABR.         “Adjusted Aggregate Committed Outstandings”: with respect to each Lender, the Aggregate Total Outstandings of such Lender, plus the amount of any participating interests purchased by such Lender pursuant to subsection 10.8, minus the amount of any participating interests sold by such Lender pursuant to subsection 10.8.         “Administrative Schedule”: Schedule III, which contains interest rate definitions and administrative information in respect of each Available Foreign Currency.         “Aggregate Available Multicurrency Commitments”: as at any date of determination with respect to all Multicurrency Lenders, an amount in Dollars equal to the Available Multicurrency Commitments of all Multicurrency Lenders on such date. --------------------------------------------------------------------------------         “Aggregate Available U.S. Commitments”: as at any date of determination with respect to all U.S. Lenders, an amount in Dollars equal to the Available U.S. Commitments of all U.S. Lenders on such date.         “Aggregate Multicurrency Outstandings”: as at any date of determination with respect to any Multicurrency Lender, an amount in the applicable Available Foreign Currencies equal to the aggregate unpaid principal amount of such Lender’s Multicurrency Loans.         “Aggregate Total Outstandings”: as at any date of determination with respect to any Lender, an amount in Dollars equal to the sum of (a) the Aggregate U.S. Outstandings of such Lender and (b) the Dollar Equivalent of the Aggregate Multicurrency Outstandings of such Lender.         “Aggregate U.S. Commitments”: the aggregate amount of the U.S. Commitments of all the Lenders. As of the date of this Agreement, the Aggregate U.S. Commitments are U.S.$1,500,000,000.         “Aggregate U.S. Outstandings”: as at any date of determination with respect to any U.S. Lender, an amount in Dollars equal to the sum of (a) the aggregate unpaid principal amount of such U.S. Lender’s U.S. Revolving Credit Loans on such date, (b) such U.S. Lender’s U.S. Commitment Percentage of the aggregate unpaid principal amount of all Swing Line Loans denominated in Dollars on such date, (c) such U.S. Lender’s U.S. Commitment Percentage of the Dollar Equivalent of the aggregate unpaid principal amount of all Swing Line Loans denominated in Euro and Sterling on such date, (d) such U.S. Lender’s U.S. Commitment Percentage of the aggregate L/C Obligations and (e) such U.S. Lender’s U.S. Commitment Percentage of the Competitive Loans then outstanding.         “Agreement”: this Agreement, as amended, supplemented or otherwise modified from time to time.         “Alternate Swing Line Foreign Currencies”: Any available and freely-convertible non-Dollar currency other than Pounds Sterling and Euro, selected by the Borrower and approved by the Administrative Agent and all of the Swing Line Lenders.         “Alternate Swing Line Currency Cost of Funds Loan”: Swing Line Loans denominated in any Alternate Swing Line Foreign Currency the rate of interest applicable to which is based upon the Cost of Funds.         “Applicable Margin”: as defined in subsection 2.11(g).         “Application”: an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit.         “Assignee”: as defined in subsection 10.6(c). 2 --------------------------------------------------------------------------------         “Available Foreign Currencies”: Pounds Sterling, Euro, and any other available and freely-convertible non-Dollar currency selected by the Borrower and approved by the Administrative Agent and the Majority Multicurrency Lenders in the manner described in subsection 10.1(b).         “Available Multicurrency Commitment”: as at any date of determination with respect to any Multicurrency Lender (after giving effect to the making and payment of any U.S. Revolving Credit Loans required to be made on such date pursuant to subsection 2.1(c)), an amount in U.S. Dollars equal to the lesser of (a) the excess, if any, of (i) the amount of such Multicurrency Lender’s Multicurrency Commitment in effect on such date over (ii) the U.S. Dollar Equivalent of the Aggregate Multicurrency Outstandings of such Multicurrency Lender on such date and (b) the excess, if any, of (i) the amount of such Multicurrency Lender’s U.S. Commitment in effect on such date over (ii) the Aggregate Total Outstandings of such Multicurrency Lender on such date.         “Available U.S. Commitment”: as at any date of determination with respect to any U.S. Lender (after giving effect to the making and payment of any U.S. Revolving Credit Loans required to be made on such date pursuant to subsection 2.1(c)), an amount in Dollars equal to the excess, if any, of (a) the amount of such U.S. Lender’s U.S. Commitment in effect on such date over (b) the Aggregate Total Outstandings of such U.S. Lender on such date.         “Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).         “Borrowing”: a group of Loans of a single Type made by the Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have been accepted pursuant to subsection 2.3).         “Borrowing Date”: a date on which a Borrowing is made hereunder.         “Business Day”: (a) when such term is used in respect of a day on which a Loan in an Available Foreign Currency is to be made, a payment is to be made in respect of such Loan, a Spot Exchange Rate is to be set in respect of such Available Foreign Currency or any other dealing in such Available Foreign Currency is to be carried out pursuant to this Agreement, such term shall mean a London Banking Day which is also a day on which banks are open for general banking business in (x) the city which is the principal financial center of the country of issuance of such Available Foreign Currency (or, in the case of Multicurrency Loans and Swing Line Loans in Pounds Sterling, Paris) or (y) in the case of Euro only, Frankfurt am Main, Germany (or such other principal financial center as the Administrative Agent may from time to time designate for this purpose), and (b) when such term is used in any context in this Agreement (including as described in the foregoing clause (a), such term shall mean a day which, in addition to complying with any applicable requirements set forth in the foregoing clause (a), is a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, that when such term is used for the 3 --------------------------------------------------------------------------------   purpose of determining the date on which the Eurocurrency Rate is determined under this Agreement for any Multicurrency Loan denominated in Euro for any Interest Period therefor and for purposes of determining the first and last day of any such Interest Period, references in this Agreement to Business Days shall be deemed to be references to Target Operating Days.         “Chase”: The Chase Manhattan Bank.         “Closing Date”: the date hereof, provided that each of the conditions precedent set forth in subsection 5.1 shall have been satisfied.         “Code”: the Internal Revenue Code of 1986, as amended from time to time.         “Committed Outstandings Percentage”: on any date with respect to any Lender, the percentage which the Adjusted Aggregate Committed Outstandings of such Lender constitutes of the Adjusted Aggregate Committed Outstandings of all Lenders.         “Commitments”: the collective reference to the U.S. Commitments and the Multicurrency Commitments.         “Commitment Period”: as to any Lender, the period from and including the date hereof to but not including the Termination Date, as such date may be extended from time to time with respect to such Lender in accordance with subsection 2.5, or such earlier date on which the Commitments shall terminate as provided herein.         “Competitive Bid”: an offer by a Lender to make a Competitive Loan pursuant to subsection 2.3.         “Competitive Bid Accept/Reject Letter”: a notification made by the Borrower pursuant to subsection 2.3(f) in the form of Exhibit D.         “Competitive Bid Lenders”: the U.S. Lenders specified on Schedule I, as such Schedule is modified from time to time to add additional Competitive Bid Lenders with the consent of the Borrower, as being “Competitive Bid Lenders”.         “Competitive Bid Rate”: as to any Competitive Bid made by a U.S. Lender pursuant to subsection 2.3, (i) in the case of a Eurodollar Rate Competitive Loan, the Eurodollar Rate plus (or minus) the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the U.S. Lender making such Competitive Bid.         “Competitive Bid Request”: a request made pursuant to subsection 2.3(b) in the form of Exhibit A.         “Competitive Borrowing”: a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the U.S. Lender or U.S. Lenders whose Competitive 4 --------------------------------------------------------------------------------         Bids for such Borrowing have been accepted by a Borrower under the bidding procedure described in subsection 2.3.         “Competitive Loan”: a Loan (which shall be a Eurodollar Rate Competitive Loan or a Fixed Rate Loan denominated in Dollars) made by a U.S. Lender pursuant to the bidding procedure described in subsection 2.3.         “Confidential Information Memorandum”: the Confidential Information Memorandum dated May 2000 and furnished to the Lenders.         “Consolidated EBITDA”: for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense (other than interest expense or discount during such period attributable to Permitted Receivables Financing with an aggregate principal amount not in excess of $1,500,000,000), (c) amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (d) depreciation and amortization expense, (e) amortization of intangibles (including, but not limited to, goodwill) and organization costs and (f) any extraordinary, unusual or non-recurring non-cash expenses or losses, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income and (b) any extraordinary, unusual or non-recurring income or gains, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”) pursuant to any determination of the Consolidated Leverage Ratio, if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period may, at the option of the Borrower, be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this paragraph, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that involves the payment of consideration (including, without limitation, the assumption of debt) by the Borrower and its Subsidiaries in excess of $10,000,000.         “Consolidated Leverage Ratio”: as at the end of any fiscal quarter, the ratio of (a) Consolidated Total Debt on such day (other than any Permitted Receivables Financing outstanding on such date in an aggregate principal amount not to exceed $1,500,000,000 and any other Non-Recourse Debt not related to accounts receivable of the Borrower or any of its Subsidiaries) to (b) Consolidated EBITDA for the four fiscal quarter period ending on such day.         “Consolidated Net Income”: for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. 5 --------------------------------------------------------------------------------         “Consolidated Total Assets”: at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.         “Consolidated Total Debt”: at any date and without duplication, (i) the aggregate principal amount of (i) all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis and (ii) all guarantees by the Borrower or any of its Subsidiaries of Indebtedness on a consolidated basis of any other Person (other than the Borrower or a Subsidiary) at such date.         “Continuing Lenders”: as defined in subsection 2.5(a).         “Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.         “Conversion Date”: any date on which either (a) an Event of Default under Section 8(g) has occurred or (b) the Commitments shall have been terminated prior to the Termination Date and/or the Loans shall have been declared immediately due and payable, in either case pursuant to Section 8.         “Converted Loans”: as defined in subsection 10.8(a).         “Cost of Funds”: the rate of interest per annum maintained by the Swing Line Lender that has advanced or is owed the relevant amount as the rate of interest reasonably determined by such Swing Line Lender (after consultation with the Borrower, if practicable) to reflect the cost of funds in respect of which such determination is made.         “Default”: any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.         “Dollar Equivalent”: on any date of determination, with respect to any amount in any Available Foreign Currency or Alternate Swing Line Foreign Currency, the equivalent in Dollars of such amount, determined by the Administrative Agent using the Spot Exchange Rate with respect to such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, then in effect.         “Dollars” and “$”: dollars in lawful currency of the United States of America.         “ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.         “EMU Legislation”: legislative measures of the European Council (including without limitation European Council regulations) for the introduction of, changeover to or operation of the Euro. 6 --------------------------------------------------------------------------------         “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters relating to the environment.         “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.         “Euro” and “E”: the single currency of Participating Member States introduced in accordance with the provisions of Article 109(1)4 of the Treaty and, in respect of all payments to be made under this Agreement in Euro, means immediately available, freely transferable funds.         “Euro Cost of Funds Loan”: Swing Line Loans denominated in Euros the rate of interest applicable to which is based upon the Cost of Funds.         “Eurocurrency Rate”: with respect to each Interest Period pertaining to a Multicurrency Loan, the Eurocurrency Rate determined for such Interest Period and the Available Foreign Currency in which such Multicurrency Loan is denominated in the manner set forth in the Administrative Schedule.         “Eurocurrency Liabilities”: for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.         “Eurocurrency Reserve Rate”: with respect to each day during each Interest Period pertaining to a Multicurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurocurrency Rate -------------------------------------------------------------------------------- 1.00 — Eurocurrency Liabilities 7 --------------------------------------------------------------------------------         “Eurodollar Rate Borrowing”: a Borrowing comprised of Eurodollar Rate Loans.         “Eurodollar Rate Competitive Loan”: any Competitive Loan bearing interest at a rate determined by reference to the Eurodollar Rate.         “Eurodollar Rate Loan”: any Eurodollar Rate Competitive Loan or Eurodollar Revolving Credit Loan.         “Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Rate Loan, the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate Service as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate Service (or otherwise on such service), the “Eurodollar Rate” shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, the “Eurodollar Rate” shall instead be the rate per annum equal to the average (rounded upward to the nearest 1/100th of 1%) of the respective rates notified to the Administrative Agent by each of the Reference Lenders as the rate at which such Reference Lender is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Rate Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Rate Loan to be outstanding during such Interest Period.         “Eurodollar Reserve Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Rate -------------------------------------------------------------------------------- 1.00 — Eurocurrency Liabilities         “Eurodollar Revolving Credit Loan”: any U.S. Revolving Credit Loan bearing interest at a rate determined by reference to the Eurodollar Rate.         “Event of Default”: any of the events specified in Section 8; provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.         “Extended Termination Date”: as defined in subsection 2.5(a).         “Extension Date”: as defined in subsection 2.5(a).         “Extension Notice”: as defined in subsection 2.5(a). 8 --------------------------------------------------------------------------------         “Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day of such rates on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.         “Financial Officer”: with respect to any Person, the chief financial officer, principal accounting officer, a financial vice president, treasurer or assistant treasurer of such Person.         “First Lender”: as defined in subsection 10.8(c).         “Fixed Rate Borrowing”: a Borrowing comprised of Fixed Rate Loans.         “Fixed Rate Loan”: any Competitive Loan bearing interest at a fixed percentage rate per annum specified by the Lender making such Loan in its Competitive Bid.         “Funding Commitment Percentage”: as at any date of determination (after giving effect to the making and payment of any Loans made on such date pursuant to subsection 2.1(c)), with respect to any U.S. Lender, that percentage which the Available U.S. Commitment of such U.S. Lender then constitutes of the Aggregate Available U.S. Commitments.         “GAAP”: generally accepted accounting principles in the United States of America as in effect from time to time and as applied by the Borrower in the preparation of its most recent financial statements delivered pursuant to subsection 4.1(b); provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.         “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 government including, without limitation, the European Central Bank.         “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated 9 --------------------------------------------------------------------------------         biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.         “Indebtedness”: of any Person at any date, the amount outstanding on such date under notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (including, without limitation, indebtedness for borrowed money evidenced by a loan account).         “Intercompany Sale-Leasebacks”: Sale-Leasebacks involving leases between the Borrower and a Subsidiary or between Subsidiaries.         “Interest Payment Date”: (a) as to any ABR Loan, Euro Cost of Funds Loan or Sterling Cost of Funds Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and on the date such Loan is paid in full, (b) as to any Eurodollar Rate Loan, Fixed Rate Loan or Multicurrency Loan having an Interest Period of three months or 90 days, as the case may be, or less, the last day of the Interest Period applicable thereto and (c) as to any Eurodollar Rate Loan, Fixed Rate Loan or Multicurrency Loan, having an Interest Period longer than three months or 90 days, as the case may be, each day which is three months or 90 days, as the case may be, and any multiple thereof, after the first day of the Interest Period applicable thereto; provided that, in addition to the foregoing, each of (x) the date upon which both the Commitments have been terminated and the Loans have been paid in full and (y) the Termination Date shall be deemed to be an “Interest Payment Date” with respect to any interest which is then accrued hereunder.         “Interest Period”: (a) with respect to any Eurodollar Rate Loan or Multicurrency Loan:         (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Rate Loan or Multicurrency Loan and ending one, two, three or six (or if available to all the Lenders (or, in the case of Eurodollar Rate Competitive Loans, the Lender making such Loans) nine or twelve) months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and         (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Rate Loan or Multicurrency Loan and ending one, two, three or six (or if available to all the Lenders (or, in the case of Eurodollar Rate Competitive Loans, the Lender making such Loans) nine or twelve) months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and 10 --------------------------------------------------------------------------------         (b) with respect to any Fixed Rate Loan, the period commencing on the borrowing date with respect to such Fixed Rate Loan and ending such number of days thereafter (which shall be not less than seven days or more than 180 days after the date of such borrowing) as selected by the Borrower in its Competitive Bid Request given with respect thereto;         provided that all of the foregoing provisions relating to Interest Periods are subject to the following:           (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of an Interest Period pertaining to a Eurodollar Rate Loan or Multicurrency Loan, the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;           (2) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and           (3) any Interest Period applicable to a Eurodollar Rate Loan or Multicurrency Loan that would otherwise extend beyond the Termination Date shall end on the Termination Date.         “Invitation for Competitive Bids”: an invitation made by the Borrower pursuant to subsection 2.3(c) in the form of Exhibit B.         “Issuing Lender”: the collective reference to Chase or any of its affiliates, in its capacity as issuer of any Letter of Credit.         “L/C Commitment”: $250,000,000.         “L/C Fee Payment Date”: the last day of each March, June, September and December and the last day of the Commitment Period.         “L/C Obligations”: at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5.         “L/C Participants”: the collective reference to all the U.S. Lenders other than the Issuing Lender.         “Lender”: a U.S. Lender or a Multicurrency Lender, as the context shall require; collectively, the “Lenders.”         “Letters of Credit”: as defined in subsection 3.1(a). 11 --------------------------------------------------------------------------------         “Level I Status”: exists at any date if, at such date, the Borrower has senior unsecured long-term debt outstanding, without third-party credit enhancement, which is either rated A- or better by S&P or A3 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level II Status”: exists at any date if, at such date, Level I Status does not exist and the Borrower has senior unsecured long-term debt outstanding, without third-party credit enhancement, which is either rated BBB+ or better by S&P or Baa1 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level III Status”: exists at any date if, at such date, neither Level I Status nor Level II Status exists and the Borrower has senior unsecured long-term debt outstanding, without third party credit enhancement, which is either rated BBB or better by S&P or Baa2 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level IV Status”: exists at any date if, at such date, none of Level I Status, Level II Status or Level III Status exists and the Borrower has senior unsecured long-term debt outstanding, without third party credit enhancement, which is either rated BBB- or better by S&P or Baa3 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings 12 --------------------------------------------------------------------------------   of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level V Status”: exists at any date if, at such date, none of Level I Status, Level II Status, Level III Status or Level IV Status exists.         “Lien”: any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance.         “Loan”: a Competitive Loan, a U.S. Revolving Credit Loan, a Multicurrency Loan or a Swing Line Loan, as the context shall require; collectively, the “Loans.”         “Loans to be Converted”: as defined in subsection 10.8(a).         “London Banking Day”: any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.         “Majority Lenders”: (a) at any time prior to the termination of the U.S. Commitments, the Majority U.S. Lenders; and (b) at any time after the termination of the U.S. Commitments, Lenders whose Aggregate Total Outstandings aggregate more than 50% of the Aggregate Total Outstandings of all Lenders; provided that for purposes of this definition the Aggregate Total Outstandings of each Lender shall be adjusted up or down so as to give effect to any participations purchased or sold pursuant to subsection 10.8.         “Majority Multicurrency Lenders”: at any time, Multicurrency Lenders whose Multicurrency Commitment Percentages aggregate more than 50%.         “Majority U.S. Lenders”: at any time, U.S. Lenders whose U.S. Commitment Percentages aggregate more than 50%.         “Margin”: as to any Eurodollar Rate Competitive Loan, the margin to be added to or subtracted from the Eurodollar Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan.         “Material Adverse Effect”: a material adverse effect on (a) the financial condition of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or the rights or remedies of the Administrative Agent and the Lenders hereunder.         “Material Agreements”: the material contracts of the Borrower, as such term is defined in Item 601 of SEC Regulation S-K (excluding agreements with officers and directors) and included in Borrower’s most recently filed Form 10-K. 13 --------------------------------------------------------------------------------         “Moody’s”: Moody’s Investors Service, Inc. and its successors.         “Multicurrency Commitment”: as to any Multicurrency Lender at any time, its obligation to make Multicurrency Loans to the Borrower in an aggregate amount in Available Foreign Currencies of which the Dollar Equivalent does not exceed at any time outstanding the lesser of (a) the amount set forth opposite such Multicurrency Lender’s name in Schedule I under the heading “Multicurrency Commitment”, and (b) the U.S. Commitment of such Multicurrency Lender, in each case as such amount may be changed from time to time pursuant to the terms hereof. As of the date of this Agreement, the maximum aggregate amount of the Multicurrency Commitments of the Multicurrency Lenders is U.S.$750,000,000.         “Multicurrency Commitment Percentage”: as to any Multicurrency Lender at any time, the percentage which such Multicurrency Lender’s Multicurrency Commitment then constitutes of the aggregate Multicurrency Commitments (or, if the Multicurrency Commitments have terminated or expired, the percentage which (a) the Dollar Equivalent of the Aggregate Multicurrency Outstandings of such Multicurrency Lender at such time constitutes of (b) the Dollar Equivalent of the Aggregate Multicurrency Outstandings of all Multicurrency Lenders at such time).         “Multicurrency Lender”: each Lender having an amount greater than zero set forth opposite such Lender’s name in Schedule I under the heading “Multicurrency Commitment.”         “Multicurrency Loans”: as defined in subsection 2.2(a).         “Non-Extending Lenders”: as defined in subsection 2.5(a).         “Non-Multicurrency Lender”: each U.S. Lender which is not a Multicurrency Lender.         “Non-Recourse Debt”: all Indebtedness which, in accordance with GAAP, is not required to be recognized on a consolidated balance sheet of the Borrower as a liability.         “Note”: a promissory note, executed and delivered by the relevant Borrower with respect to its U.S. Revolving Credit Loans, substantially in the form of Exhibit G.         “Notice of Multicurrency Loan Borrowing”: with respect to a Multicurrency Loan, a notice from the Borrower in respect of such Loan, containing the information in respect of such Loan and delivered to the Person, in the manner and by the time, specified for a Notice of Multicurrency Loan Borrowing in respect of the currency of such Loan in the Administrative Schedule.         “Original Closing Date”: January 4, 1999.         “Other Lender”: as defined in subsection 10.8(c). 14 --------------------------------------------------------------------------------         “Participant”: as defined in subsection 10.6(b).         “Participating Member State”: each state as described in any EMU Legislation.         “Permitted Receivables Financing”: at any date of determination, the aggregate amount of any Non-Recourse Debt outstanding on such date relating to securitizations or other similar off-balance sheet financings of accounts receivable of the Borrower or any of its Subsidiaries.         “Person”: an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.         “Prime Rate”: the rate of interest per annum equal to the prime rate publicly announced by the majority of the Reference Lenders as its prime rate (or similar base rate) in effect at its principal office.         “Quotation Day”: in respect of the determination of the Eurocurrency Rate for any Interest Period for Multicurrency Loans in any Available Foreign Currency, the day on which quotations would ordinarily be given by prime banks in the London interbank market (or, if such Available Foreign Currency is Pounds Sterling, in the Paris interbank market) for deposits in such Available Foreign Currency for delivery on the first day of such Interest Period; provided, that if quotations would ordinarily be given on more than one date, the Quotation Day for such Interest Period shall be the last of such dates. On the date hereof, the Quotation Day in respect of any Interest Period for any Available Foreign Currency (other than Euros) is customarily the last London Banking Day prior to the beginning of such Interest Period which is (a) at least two London Banking Days prior to the beginning of such Interest Period and (b) a day on which banks are open for general banking business in the city which is the principal financial center of the country of issue of such Available Foreign Currency (and, in the case of Pounds Sterling, in Paris); and the Quotation Day in respect of any Interest Period for Euros is the day which is two Target Operating Days prior to the first day of such Interest Period.         “Reference Lenders”: The Chase Manhattan Bank, Bank of America, National Association, Citibank, N.A., Morgan Guaranty Trust Company and the Bank of New York.         “Refunded Swing Line Loans”: as defined in subsection 2.4(b).         “Refunding Date”: as defined in subsection 2.4(b).         “Register”: as defined in subsection 10.6(d).         “Reimbursement Obligation”: the obligation of the Borrower to reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under Letters of Credit. 15 --------------------------------------------------------------------------------         “Requested Multicurrency Loans”: as defined in subsection 2.1(c).         “Requirement of Law”: as to any Person, 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.         “Sale-Leasebacks”: as defined in subsection 7.4.         “S&P”: Standard & Poor’s Ratings Services and its successors.         “Significant Subsidiary”: as defined in Rule 1-02 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission and included in the Borrower’s most recently filed Form 10-K.         “Spot Exchange Rate”: with respect to any Available Foreign Currency or Alternate Swing Line Foreign Currency on a particular date, the rate at which such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, may be exchanged into Dollars in London, as set forth on the relevant page of the Telerate Screen applicable to such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, as reasonably determined by the Administrative Agent. In the event that such rate does not appear on any such page, the Spot Exchange Rate with respect to such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, such Spot Exchange Rate shall instead be determined by reference to the Administrative Agent’s spot rate of exchange quoted to prime banks in London in the London interbank market where its foreign currency exchange operations in respect of such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, are then being conducted, at or about noon, local time, at such date for the purchase of Dollars with such Available Foreign Currency or Alternate Swing Line Foreign Currency, as the case may be, for delivery on a spot basis; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted and no other methods for determining the Spot Exchange Rate can be determined as set forth above, the Administrative Agent may use any reasonable method it deems applicable (after consultation with the Borrower if practicable) to determine such rate, and such determination shall be conclusive absent manifest error.         “Status”: as to the Borrower, the existence of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status, as the case may be.         “Sterling” and “£”: pounds Sterling in lawful currency of the United Kingdom.         “Sterling Cost of Funds Loan”: Swing Line Loans denominated in Sterling the rate of interest applicable to which is based upon the Cost of Funds. 16 --------------------------------------------------------------------------------         “Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned by such Person, or by one or more Subsidiaries, or by such Person and one or more Subsidiaries. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.         “Swing Line Commitment”: the obligation of the Swing Line Lenders to make Swing Line Loans pursuant to subsection 2.4 in an aggregate principal amount for all Swing Line Loans of all Swing Line Lenders at any one time outstanding not to exceed $500,000,000.         “Swing Line Lender”: Chase or any other Lender or Lenders selected by the Borrower and acceptable to the Administrative Agent and such Lender, in its capacity as the lender of Swing Line Loans (collectively, the “Swing Line Lenders”).         “Swing Line Loans”: as defined in subsection 2.4(a).         “Swing Line Participation Amount”: as defined in subsection 2.4(b).         “Target Operating Day”: any day that is not (a) a Saturday or Sunday, (b) Christmas Day or New Year’s Day or (c) any other day on which the Trans-European Real-time Gross Settlement Operating System (or any successor settlement system) is not operating (as determined by the Administrative Agent).         “Termination Date”: June 23, 2005, as such date may be extended from time to time in accordance with subsection 2.5.         “Tranche”: the collective reference to Eurodollar Rate Loans or Multicurrency Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).         “Transferee”: as defined in subsection 10.6(f).         “Treaty”: the Treaty establishing the European Economic Community, being the Treaty of Rome of March 25, 1957 as amended by the Single European Act 1987 and the Maastricht Treaty (the Treaty on European Union) (which was signed on February 7, 1992 and came into force on November 1, 1993) and as may, from time to time, be further amended, supplemented or otherwise modified. 17 --------------------------------------------------------------------------------         “Type”: as to any U.S. Revolving Credit Loan, its nature as an ABR Loan or a Eurodollar Rate Loan, and as to any Competitive Loan, its nature as a Eurodollar Rate Competitive Loan or a Fixed Rate Loan.         “Uniform Customs”: in the case of (a) standby letters of credit, the International Standby Practices — ISP 98 (1998), International Chamber of Commerce Publication No. 590, as the same may be amended or revised from time to time and (b) commercial letters of credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended or revised from time to time.         “U.S. Commitment”: as to any U.S. Lender, the obligation of such U.S. Lender to make U.S. Revolving Credit Loans to the Borrower and participate in Swing Line Loans and Letters of Credit hereunder in an aggregate principal and/or stated amount at any one time outstanding not to exceed the Dollar amount set forth opposite such U.S. Lender’s name on Schedule I under the heading U.S. Commitment, as the same may be changed from time to time pursuant to the terms hereof.         “U.S. Commitment Percentage”: as to any U.S. Lender at any time, the percentage which such U.S. Lender’s U.S. Commitment then constitutes of the aggregate U.S. Commitments of all U.S. Lenders (or, if the U.S. Commitments have terminated or expired, the percentage which (a) the Aggregate U.S. Outstandings of such U.S. Lender at such time then constitutes of (b) the Aggregate U.S. Outstandings of all U.S. Lenders at such time).         “U.S. Lenders”: the banks and other financial institutions from time to time holding U.S. Commitments.         “U.S. Revolving Credit Loans”: as defined in subsection 2.1(a).         “Utilization”: as of the last day of any fiscal quarter of the Borrower, the percentage equivalent of a fraction (i) the numerator of which is the sum of (a) the average daily principal amount of Loans (or the Dollar Equivalent thereof) outstanding (after giving effect to any borrowing or payment on such date) during such quarter and (b) the average daily face amount of Letters of Credit outstanding during such quarter and (ii) the denominator of which is the average daily amount of the aggregate Commitments of all Lenders during such quarter, after giving effect to any reduction of the Commitments on such day. For purposes of subsection 2.11(f), if for any reason any Loans remain outstanding after termination of the Commitments, the Utilization for each day on or after the date of such termination shall be deemed to be greater than 33%.       1.2 Other Definitional Provisions. (a) Unless otherwise specified 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. 18 --------------------------------------------------------------------------------       (b) As used herein, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.       (c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.       (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF THE FACILITIES        2.1 Amount and Terms of the U.S. Commitments.       (a) U.S. Commitments. (i) Subject to the terms and conditions hereof, each U.S. Lender severally agrees to make revolving credit loans in Dollars (a “U.S. Revolving Credit Loan”) to the Borrower from time to time during the Commitment Period so long as after giving effect thereto (i) the Available U.S. Commitment of each U.S. Lender is greater than or equal to zero and (ii) the Aggregate Total Outstandings of all Lenders do not exceed the Aggregate U.S. Commitments. During the Commitment Period the Borrower may use the U.S. Commitments by borrowing, prepaying the U.S. Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.       (ii) The U.S. Revolving Credit Loans may from time to time be (A) Eurodollar Rate Loans, (B) ABR Loans or (C) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.1(b) and 2.8; provided that no U.S. Revolving Credit Loan shall be made as a Eurodollar Rate Loan after the day that is one month prior to the Termination Date.       (b) Procedure for U.S. Revolving Credit Borrowing. The Borrower may borrow U.S. Revolving Credit Loans under the U.S. Commitments during the Commitment Period on any Business Day; provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (i) three Business Days prior to the requested borrowing date, if all or any part of the requested U.S. Revolving Credit Loans are to be Eurodollar Rate Loans, or (ii) one Business Day prior to the requested borrowing date, otherwise), specifying (A) the amount to be borrowed, (B) the requested borrowing date, (C) whether the Borrowing is to be of Eurodollar Rate Loans, ABR Loans or a combination thereof and (D) if the Borrowing is to be entirely or partly of Eurodollar Rate Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Each Borrowing under the U.S. Commitments shall be in an amount equal to $10,000,000 or a multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify 19 -------------------------------------------------------------------------------- each Lender thereof. Each Lender will make an amount equal to its Funding Commitment Percentage of the principal amount of each Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 10.2 prior to 11:00 a.m., New York City time, on the borrowing date requested by the Borrower in funds immediately available to the Administrative Agent. Such Borrowing will then immediately be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the U.S. Lenders and in like funds as received by the Administrative Agent.       (c) Borrowings of U.S. Revolving Credit Loans and Refunding of Loans. If on any Borrowing Date on which the Borrower has requested the Multicurrency Lenders to make Multicurrency Loans (the “Requested Multicurrency Loans”), (i) the principal amount of the Requested Multicurrency Loans to be made by any Multicurrency Lender exceeds the Available Multicurrency Commitment of such Multicurrency Lender on such Borrowing Date (before giving effect to the making and payment of any Loans required to be made pursuant to this subsection 2.1(c) on such Borrowing Date) and (ii) the Dollar Equivalent of the amount of such excess is less than or equal to the aggregate Available U.S. Commitments of all Non- Multicurrency Lenders (before giving effect to the making and payment of any Loans pursuant to this subsection 2.1(c) on such Borrowing Date), each Non-Multicurrency Lender shall make a U.S. Revolving Credit Loan to the Borrower on such Borrowing Date, and the proceeds of such U.S. Revolving Credit Loans shall be simultaneously applied to repay outstanding U.S. Revolving Credit Loans of the Multicurrency Lenders in each case in amounts such that, after giving effect to (1) such borrowings and repayments and (2) the borrowing from the Multicurrency Lenders of the Requested Multicurrency Loans, the Committed Outstandings Percentage of each U.S. Lender will equal (as nearly as possible) its U.S. Commitment Percentage. To effect such borrowings and repayments, (x) not later than 12:00 Noon, New York City time, on such Borrowing Date, the proceeds of such U.S. Revolving Credit Loans shall be made available by each Non-Multicurrency Lender to the Administrative Agent at its office specified in subsection 10.2 in U.S. Dollars and in immediately available funds and the Administrative Agent shall apply the proceeds of such U.S. Revolving Credit Loans toward repayment of outstanding U.S. Revolving Credit Loans and/or Multicurrency Loans of the Multicurrency Lenders and (y) concurrently with the repayment of such Loans on such Borrowing Date, (I) the Multicurrency Lenders shall, in accordance with the applicable provisions hereof, make the Requested Multicurrency Loans in an aggregate amount equal to the amount so requested by the Borrower (but not in any event greater than the Aggregate Available Multicurrency Commitments after giving effect to the making of such repayment of any Loans on such Borrowing Date) and (II) the Borrower shall pay to the Administrative Agent for the account of the Lenders whose Loans to the Borrower are repaid on the Borrowing Date pursuant to this subsection 2.1(c) all interest accrued on the amounts repaid to the date of repayment, together with any amounts payable pursuant to subsection 2.19 in connection with such repayment. 20 --------------------------------------------------------------------------------        2.2 Amounts and Terms of the Multicurrency Commitments.       (a) Multicurrency Commitments. Subject to the terms and conditions hereof, each Multicurrency Lender severally agrees to make revolving credit loans (each, a “Multicurrency Loan”) in any Available Foreign Currency to the Borrower from time to time during the Commitment Period so long as after giving effect thereto (A) the Available Multicurrency Commitment of such Multicurrency Lender is greater than or equal to zero, (B) the Dollar Equivalent of the Aggregate Multicurrency Outstandings for all Multicurrency Lenders does not exceed $750,000,000 and (C) the Aggregate Total Outstandings of all Lenders do not exceed the Aggregate U.S. Commitments. During the Commitment Period, the Borrower may use the Multicurrency Commitments by borrowing, prepaying the Multicurrency Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.       (b) Procedure for Multicurrency Borrowing. The Borrower may request the Multicurrency Lenders to make Multicurrency Loans during the Commitment Period on any Business Day by delivering an irrevocable Notice of Multicurrency Loan Borrowing. Each borrowing under the Multicurrency Commitments shall be in an amount in an Available Foreign Currency of which the Dollar Equivalent is equal to at least $10,000,000 (or, if the then Aggregate Available Multicurrency Commitments are less than $10,000,000, such lesser amount). Upon receipt of any such Notice of Multicurrency Borrowing from the Borrower, the Administrative Agent shall promptly notify each Multicurrency Lender thereof. Not later than the funding time for the relevant Available Foreign Currency set forth in the Administrative Schedule, each Multicurrency Lender shall make an amount equal to its Multicurrency Commitment Percentage of the principal amount of Multicurrency Loans requested to be made on such Borrowing Date available to the Administrative Agent at the funding office for the relevant Available Foreign Currency set forth in the Administrative Schedule in the relevant Available Foreign Currency and in immediately available funds. The amounts made available by each Multicurrency Lender will then be made available on such Borrowing Date to the Borrower at the funding office for the relevant Available Foreign Currency set forth in the Administrative Schedule and in like funds as received by the Administrative Agent.        2.3 Competitive Borrowings.       (a) The Competitive Bid Option. In addition to the U.S. Revolving Credit Loans which may be made available pursuant to subsection 2.1, the Borrower may, as set forth in this subsection 2.3, request the U.S. Lenders to make offers to make Competitive Loans to the Borrower during the Commitment Period. The U.S. Lenders may, but shall have no obligation to, make such offers, and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this subsection 2.3.       (b) Competitive Bid Request. When the Borrower wishes to request offers to make Competitive Loans under this subsection 2.3, it shall transmit to the Administrative Agent a Competitive Bid Request to be received no later than 12:00 Noon (New York City time) on (x) the fourth Business Day prior to the date of Borrowing proposed therein, in the case of a Borrowing of Eurodollar Rate Competitive Loans or (y) the Business Day immediately preceding the date of Borrowing proposed therein, in the case of a Fixed Rate Borrowing, specifying: 21 --------------------------------------------------------------------------------         (i) the proposed date of Borrowing, which shall be a Business Day,         (ii) the aggregate principal amount of such Borrowing, which shall be $5,000,000 or a multiple of $1,000,000 in excess thereof,         (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period contained in subsection 1.1, and         (iv) whether the Borrowing then being requested is to be of Eurodollar Rate Competitive Loans or Fixed Rate Loans. A Competitive Bid Request that does not conform substantially to the format of Exhibit A may be rejected by the Administrative Agent in its sole discretion, and the Administrative Agent shall promptly notify the Borrower of such rejection. The Borrower may request offers to make Competitive Loans for more than one Interest Period in a single Competitive Bid Request. No Competitive Bid Request shall be given within three Business Days of any other Competitive Bid Request pursuant to which the Borrower has made a Competitive Borrowing.       (c) Invitation for Competitive Bids. Promptly after its receipt of a Competitive Bid Request (but, in any event, no later than 3:00 p.m., New York City time, on the date of such receipt) conforming to the requirements of paragraph (b) above, the Administrative Agent shall send to each of the Competitive Bid Lenders an Invitation for Competitive Bids which shall constitute an invitation by the Borrower to each such Lender to bid, on the terms and conditions of this Agreement, to make Competitive Loans pursuant to the Competitive Bid Request.       (d) Submission and Contents of Competitive Bids. (i) Each U.S. Lender to which an Invitation for Competitive Bids is sent may submit a Competitive Bid containing an offer or offers to make Competitive Loans in response to such Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this paragraph (d) and must be submitted to the Administrative Agent at its offices specified in subsection 10.2 not later than (x) 9:30 a.m. (New York City time) on the third Business Day prior to the proposed date of Borrowing, in the case of a Borrowing of Eurodollar Rate Competitive Loans or (y) 9:30 a.m. (New York City time) on the date of the proposed Borrowing, in the case of a Fixed Rate Borrowing; provided that any Competitive Bids submitted by the Administrative Agent in the capacity of a U.S. Lender may only be submitted if the Administrative Agent notifies the Borrower of the terms of the offer or offers contained therein not later than fifteen minutes prior to the deadline for the other U.S. Lenders. A Competitive Bid submitted by a U.S. Lender pursuant to this paragraph (d) shall be irrevocable.             (ii) Each Competitive Bid shall be in substantially the form of Exhibit C and shall specify:         (A) the date of the proposed Borrowing,         (B) the principal amount of the Competitive Loan for which each such offer is being made, which principal amount (w) may be greater than, equal to or less than the 22 --------------------------------------------------------------------------------   U.S. Commitment of the quoting U.S. Lender, (x) must be in a minimum principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof, (y) may not exceed the principal amount of Competitive Loans for which offers were requested and (z) may be subject to a limitation as to the maximum aggregate principal amount of Competitive Loans for which offers being made by such quoting U.S. Lender may be accepted,         (C) in the case of a Borrowing of Eurodollar Rate Competitive Loans, the Margin offered for each such Competitive Loan, expressed as a percentage (specified in increments of 1/10,000th of 1%) to be added to or subtracted from such base rate,           (D) in the case of a Fixed Rate Borrowing, the rate of interest per annum (specified in increments of 1/10,000th of 1%) offered for each such Competitive Loan, and           (E) the identity of the quoting U.S. Lender. A Competitive Bid may set forth up to five separate offers by the quoting U.S. Lender with respect to each Interest Period specified in the related Invitation for Competitive Bids. Any Competitive Bid shall be disregarded by the Administrative Agent if the Administrative Agent determines that it: (A) is not substantially in the form of Exhibit C or does not specify all of the information required by subsection 2.3(d)(ii); (B) contains qualifying, conditional or similar language (except for a limitation on the maximum principal amount which may be accepted); (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids or (D) arrives after the time set forth in subsection 2.3(d)(i).       (e) Notice to Borrower. The Administrative Agent shall promptly (and, in any event, by 10:00 a.m., New York City time) notify the Borrower, by telecopy, of all the Competitive Bids made (including all disregarded bids), the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. The Administrative Agent shall send a copy of all Competitive Bids (including all disregarded bids) to the Borrower for its records as soon as practicable after completion of the bidding process set forth in this subsection 2.3.       (f) Acceptance and Notice by Borrower. The Borrower may in its sole discretion, subject only to the provisions of this paragraph (f), accept or reject any Competitive Bid (other than any disregarded bid) referred to in paragraph (e) above. The Borrower shall notify the Administrative Agent by telephone, confirmed immediately thereafter by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it wishes to accept any or all of the bids referred to in paragraph (e) above not later than (x) 10:30 a.m. (New York City time) on the third Business Day prior to the proposed date of Borrowing, in the case of a Eurodollar Rate Competitive Loan or (y) 10:30 a.m. (New York City time) on the proposed date of Borrowing, in the case of a Fixed Rate Borrowing; provided that:         (i) the failure by the Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in paragraph (e) above; 23 --------------------------------------------------------------------------------         (ii) the aggregate principal amount of the Competitive Bids accepted by the Borrower may not exceed the lesser of (A) the principal amount set forth in the related Competitive Bid Request and (B) the excess, if any, of the Aggregate U.S. Commitments then in effect over the Aggregate Total Outstandings of all Lenders immediately prior to the making of such Competitive Loans (and after giving effect to the use of proceeds thereof),         (iii) the principal amount of each Competitive Borrowing must be $5,000,000 or a multiple of $1,000,000 in excess thereof,         (iv) unless there are any limitations contained in a quoting U.S. Lender’s Competitive Bid, the Borrower may not accept a Competitive Bid made at a particular Competitive Bid Rate if it has decided to reject any portion of a bid made at a lower Competitive Bid Rate for the same Interest Period, and         (v) the Borrower may not accept any Competitive Bid that is disregarded by the Administrative Agent pursuant to subsection 2.3(d)(ii) or that otherwise fails to comply with the requirements of this Agreement. A notice given by the Borrower pursuant to this paragraph (f) shall be irrevocable.       (g) Allocation by Administrative Agent. If offers are made by two or more U.S. Lenders with the same Competitive Bid Rates for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Competitive Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such U.S. Lenders as nearly as possible (in integral multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers.       (h) Notification of Acceptance. The Administrative Agent shall promptly (and, in any event, by 11:00 a.m., New York City time) notify each bidding U.S. Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted.       2.4 Terms of Swing Line Commitment.       (a) Swing Line Commitment. (i) Subject to the terms and conditions hereof, each Swing Line Lender agrees to make a portion of the credit otherwise available to the Borrower under the Commitments from time to time during the Commitment Period by making swing line loans in Dollars Euro, Sterling or any Alternate Swing Line Foreign Currency (“Swing Line Loans”) to the Borrower; provided that (A) the sum of (x) the aggregate principal amount of Swing Line Loans denominated in Dollars and (y) the Dollar Equivalent of the aggregate principal amount of Swing Line Loans denominated in Euro, Sterling and such Alternate Swing Line Foreign Currency, outstanding as at the date any Swing Line Loan is made shall not exceed the Swing Line Commitment then in effect (notwithstanding that the Swing Line Loans 24 -------------------------------------------------------------------------------- outstanding at any time, when aggregated with any Swing Line Lender’s other outstanding U.S. Revolving Credit Loans hereunder, may exceed the Swing Line Commitment then in effect) and (B) the Borrower shall not request, and no Swing Line Lender shall make, any Swing Line Loan if, after giving effect to the making of such Swing Line Loan, the Aggregate Available U.S. Commitments would be less than zero or the Aggregate Total Outstandings of all the Lenders would exceed the Aggregate U.S. Commitments; provided, further, that the Swing Line Lender shall not be required to (but it may) make a Swing Line Loan to refinance an outstanding Swing Line Loan. During the Commitment Period, the Borrower may use the Swing Line Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swing Line Loans shall be ABR Loans, Euro Cost of Funds Loans, Sterling Cost of Funds Loans or Alternate Swing Line Foreign Currency Cost of Funds Loans only.       (ii) The Borrower shall repay all outstanding Swing Line Loans on the Termination Date.       (b) Procedure for Swing Line Borrowing; Refunding of Swing Line Loans. (i) Whenever the Borrower desires that a Swing Line Lender make Swing Line Loans it shall give such Swing Line Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by such Swing Line Lender not later than 1:00 p.m., New York City time, in the case of Swing Line Loans denominated in Dollars, and 2:00 p.m., London time, in the case of Swing Line Loans denominated in Euro, Sterling or any Alternate Swing Line Foreign Currency (or such other time as the Administrative Agent and such Swing Line Lender may consent), on the proposed borrowing date), specifying (x) the amount and currency to be borrowed and (y) the requested borrowing date (which shall be a Business Day during the Commitment Period). A copy of each such notice shall be promptly furnished by the Borrower to the Administrative Agent. Subject to subsection 2.4(a), each borrowing under the Swing Line Commitment shall be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof, in the case of Swing Line Loans denominated in Dollars, E5,000,000 or a whole multiple of E1,000,000 in excess thereof, in the case of Swing Line Loans denominated in Euro, £5,000,000 or a whole multiple of £1,000,000 in excess thereof, in the case of Swing Line Loans denominated in Sterling and in the case of Swing Line Loans denominated in such Alternate Swing Line Foreign Currency, an amount in such Alternate Swing Line Foreign Currency of which the Dollar Equivalent is equal to or greater than $5,000,000. Not later than 3:00 p.m., New York City time, in the case of Swing Line Loans denominated in Dollars, and 4:00 p.m., London time, in the case of Swing Line Loans denominated in Euro, Sterling and such Alternate Swing Line Foreign Currency, on the borrowing date specified in a notice in respect of Swing Line Loans, such Swing Line Lender shall make available to the Administrative Agent at its office specified in subsection 10.2 an amount in immediately available funds equal to the amount of the Swing Line Loan to be made by such Swing Line Lender. The Administrative Agent shall make the proceeds of such Swing Line Loan available to the Borrower on such Borrowing Date by crediting the account of the Borrower on the books of such office in immediately available funds.       (ii) Subject to subsection 2.4(b)(vii), each Swing Line Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs such Swing Line Lender to act on its behalf), on one Business Day’s 25 -------------------------------------------------------------------------------- notice given by such Swing Line Lender no later than 12:00 Noon, New York City time, request each U.S. Lender to make, and each U.S. Lender hereby agrees to make, a U.S. Revolving Credit Loan, in an amount equal to such Lender’s Funding Commitment Percentage of the aggregate amount of the Swing Line Loans made by such Swing Line Lender (the “Refunded Swing Line Loans”) outstanding on the date of such notice, to repay such Swing Line Lender; provided, that unless any Swing Line Lender otherwise agrees in its sole discretion, any Swing Line Loan outstanding for five Business Days shall be automatically so refunded on such fifth Business Day. Each U.S. Lender shall make the amount of such U.S. Revolving Credit Loan available to the Administrative Agent at its office set forth in subsection 10.2 in immediately available funds, not later than 10:00 a.m., New York City time, one Business Day after the date of such notice. The proceeds of such U.S. Revolving Credit Loans shall be immediately applied by such Swing Line Lender to repay its Refunded Swing Line Loans.       (iii) If prior to the time a U.S. Revolving Credit Loan would have otherwise been made pursuant to subsection 2.4(b)(ii), one of the events described in Section 8(g) shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by a Swing Line Lender in its sole discretion, U.S. Revolving Credit Loans may not be made as contemplated by subsection 2.4(b)(ii), each U.S. Lender shall, on the date such U.S. Revolving Credit Loan was to have been made pursuant to the notice referred to in Section 2.4(b)(ii) (the “Refunding Date”), purchase for cash an undivided participating interest in an amount equal to (A) its Funding Commitment Percentage times (B) the aggregate principal amount of Swing Line Loans of each Swing Line Lender then outstanding which were to have been repaid with such U.S. Revolving Credit Loans (the “Swing Line Participation Amount”).       (iv) Whenever, at any time after a Swing Line Lender has received from any U.S. Lender such U.S. Lender’s Swing Line Participation Amount, such Swing Line Lender receives any payment on account of the Swing Line Loans of such Swing Line Lender, such Swing Line Lender will distribute to such U.S. Lender its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such U.S. Lender’s participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such U.S. Lender’s pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swing Line Loans then due); provided, however, that in the event that such payment received by such Swing Line Lender is required to be returned, such U.S. Lender will return to such Swing Line Lender any portion thereof previously distributed to it by such Swing Line Lender.       (v) Each U.S. Lender’s obligation to make the Loans referred to in subsection 2.4(b)(ii) and to purchase participating interests pursuant to subsection 2.4(b)(iii) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (A) any setoff, counterclaim, recoupment, defense or other right which such U.S. Lender or the Borrower may have against any Swing Line Lender, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5; (C) any adverse change in the condition (financial or otherwise) of the Borrower; (D) any breach of this Agreement by the Borrower or any other Lender; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 26 --------------------------------------------------------------------------------       (vi) Within two Business Days following the last day of each calendar month, each Swing Line Lender shall deliver to the Administrative Agent and the Borrower a statement showing the average daily principal amount of the Swing Line Loans outstanding during the calendar quarter most recently ended.       (vii) The Borrower hereby irrevocably and unconditionally authorizes each Swing Line Lender immediately prior to the time that any Swing Line Loan is to be refunded pursuant to subsection 2.4(b)(ii) or a participating interest is to be purchased pursuant to subsection 2.4(b)(iii) to convert into Dollars (at the actual exchange rate then available to it, provided that it shall use its reasonable best efforts to obtain a rate as least as favorable to the Borrower as the Spot Exchange Rate) all amounts then owing to it on account of any Swing Line Loan denominated in Euro, Sterling and any Alternate Swing Line Foreign Currency. Such Swing Line Lender and each U.S. Lender hereby irrevocably and unconditionally agrees that (A) no U.S. Lender shall have any obligation to make any U.S. Revolving Credit Loans pursuant to subsection 2.4(b)(ii) or purchase any participating interests in Swing Line Loans pursuant to subsection 2.4(b)(iii) on account of such Euro-denominated, Sterling-denominated or such Alternate Swing Line Foreign Currency-denominated Swing Line Loans until such time as such Swing Line Lender has effected the conversion described above and provided written notice to the Administrative Agent (which shall promptly forward such notice to the Lenders) of the amount of Dollars owing to it as a result of such conversion and (B) from and after the date upon which such conversion is effected, the obligations of the U.S. Lenders under clauses (ii) and (iii) of subsection 2.4(b) shall be satisfied only by the payment to such Swing Line Lender of such U.S. Lender’s U.S. Commitment Percentage of the amount of Dollars so notified to the Administrative Agent.       (viii) Subject to the terms of this Agreement, the Borrower may, at any time and from time to time, prepay a Euro Cost of Funds Loan in Euro, a Sterling Cost of Funds Loan in Sterling or any Alternate Swing Line Foreign Currency Cost of Funds Loan in such Alternate Swing Line Foreign Currency, other than with the proceeds of another Swing Line Loan.       2.5 Extension of Termination Date.       (a) The Borrower may, by written notice to the Administrative Agent (such notice being an “Extension Notice”) given at any time, from time to time but in any event, no later than sixty days prior to the Termination Date (the date of such notice, the “Notice Date”), request the Lenders to consider an extension of the then applicable Termination Date to a date specified in the Extension Notice (the “Extended Termination Date”). The Administrative Agent shall promptly transmit any Extension Notice to each Lender. Each Lender shall notify the Administrative Agent whether it wishes to extend the then applicable Termination Date no later than twenty days after the Notice Date, and any such notice given by a Lender to the Administrative Agent, once given, shall be irrevocable as to such Lender. The Administrative Agent shall promptly notify the Borrower of each Lender’s notice that it wishes to extend (each, an “Extension Acceptance Notice”). At the end of such twenty day period, the Borrower may, at its option, elect to extend the period in which Extension Acceptance Notices may be received for an additional twenty days. Any Lender which does not expressly notify the Administrative Agent 27 -------------------------------------------------------------------------------- during such twenty day period or forty day period, as the case may be, that it wishes to so extend the then applicable Termination Date shall be deemed to have rejected the Borrower’s request for extension of such Termination Date. Lenders consenting to extend the then applicable Termination Date are hereinafter referred to as “Continuing Lenders”, and Lenders declining to consent to extend such Termination Date (or Lenders deemed to have so declined) are hereinafter referred to as “Non-Extending Lenders”. If the Majority Lenders have elected (in their sole and absolute discretion) to so extend the Termination Date, the Administrative Agent shall notify the Borrower of such election by such Majority Lenders no later than five days after the date when Extension Acceptance Notices are due, and effective on the date of such notice by the Administrative Agent to the Borrower (the “Extension Date”), the Termination Date shall be automatically and immediately so extended to the Extended Termination Date. No extension will be permitted hereunder without the consent of the Majority Lenders and in no event shall the period from the Extension Date to the Extended Termination Date exceed five years. Upon the delivery of an Extension Notice and upon the extension of the Termination Date pursuant to this subsection 2.5, the Borrower shall be deemed to have represented and warranted on and as of the Notice Date and the Extension Date, as the case may be, that no Default or Event of Default has occurred and is continuing. Notwithstanding anything contained in this Agreement to the contrary, no Lender shall have any obligation to extend the Termination Date, and each Lender may at its option, unconditionally and without cause, decline to extend the Termination Date.       (b) If the Termination Date shall have been extended in accordance with subsection 2.5(a), all references herein to the “Termination Date” shall refer to the Extended Termination Date.       (c) If any Lender shall determine not to extend the Termination Date as requested by any Extension Notice given by the Borrower pursuant to subsection 2.5(a), the Commitment of such Lender shall terminate on the Termination Date without giving any effect to such proposed extension, and the Borrower shall on such date pay to the Administrative Agent, for the account of such Lender, the principal amount of, and accrued interest on, such Lender’s Loans, together with any amounts payable to such Lender pursuant to subsection 2.19 and any fees or other amounts owing to such Lender under this Agreement; provided that if the Borrower has replaced such Non-Extending Lender pursuant to subsection 2.5(d) below then the provisions of such subsection shall apply. The aggregate U.S. Commitments and/or the aggregate Multicurrency Commitments shall be reduced by the amount of the U.S. Commitment and/or the Multicurrency Commitment, as the case may be, of such Non-Extending Lender to the extent the U.S. Commitment and/or the Multicurrency Commitment, as the case may be, of such Non- Extending Lender has not been transferred to one or more Continuing Lenders pursuant to subsection 2.5(d) below.       (d) A Non-Extending Lender shall be obligated, at the request of the Borrower and subject to payment by the Borrower to the Administrative Agent for the account of such Non-Extending Lender of the principal amount of, and accrued interest on, such Lender’s Loans, together with any amounts payable to such Lender pursuant to subsection 2.19 and any fees or other amounts owing to such Lender under this Agreement, to transfer without recourse, representation or warranty (other than good title to its Loans) to such Non-Extending Lender, at any time prior to the Termination Date applicable to such Non-Extending Lender, all of its rights 28 -------------------------------------------------------------------------------- and obligations hereunder to another financial institution or group of financial institutions nominated by the Borrower and willing to participate in the facility in the place of such Non- Extending Lender; provided that, if such transferee is not a Lender, such transferee(s) satisfies all the requirements of this Agreement and the Administrative Agent shall have consented to such transfer, which consent shall not be unreasonably withheld. Each such transferee shall become a Continuing Lender hereunder in replacement of the Non-Extending Lender, with the Termination Date applicable to such Continuing Lender’s Commitments being the Extended Termination Date, and shall enjoy all rights and assume all obligations on the part of the Lenders set forth in this Agreement. Simultaneously with such transfer, each such transferee shall execute and deliver to the Administrative Agent a written agreement assuming all obligations of the Lenders set forth in this Agreement, which agreement shall be reasonably satisfactory in form and substance to the Administrative Agent.       (e) If the Termination Date shall have been extended in respect of the Continuing Lenders in accordance with subsection 2.5(a), any notice of borrowing pursuant to subsection 2.1(b), 2.2(b) or 2.3 specifying a Borrowing Date occurring after the Termination Date applicable to a Non-Extending Lender or requesting an Interest Period extending beyond such date (a) shall have no effect in respect of such Non-Extending Lender and (b) shall not specify a requested aggregate principal amount exceeding the Aggregate Available U.S. Commitment and/or the Aggregate Available Multicurrency Commitment (calculated on the basis of the U.S. Commitments and/or the Multicurrency Commitments, as the case may be, of the Continuing Lenders).       2.6 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the U.S. Commitments and/or the Multicurrency Commitments when no Loans or Letters of Credit are then outstanding or, from time to time, to reduce the unutilized portion of the U.S. Commitments and/or the Multicurrency Commitments. Any such reduction shall be in an amount equal to $10,000,000 or a multiple of $1,000,000 in excess thereof or the Dollar Equivalent thereof (or, if the unutilized portion of the U.S. Commitments and/or the Multicurrency Commitments is less than $10,000,000 or the Dollar Equivalent thereof, such lesser amount) and shall reduce permanently the U.S. Commitments and/or Multicurrency Commitments, as the case may be then in effect.       2.7 Prepayments. (a) The Borrower may, at any time and from time to time, prepay the U.S. Revolving Credit Loans, in whole or in part, without premium or penalty (but subject to the provisions of subsection 2.19), upon: at least two Business Days’ irrevocable notice to the Administrative Agent specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Rate Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each U.S. Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of $10,000,000 or a multiple of $1,000,000 in excess thereof. 29 --------------------------------------------------------------------------------       (b) Unless any Swing Line Lender otherwise agrees in its sole discretion, the Borrower shall prepay all Swing Line Loans then outstanding simultaneously with each Borrowing of U.S. Revolving Credit Loans and may prepay (without premium or penalty) any Swing Line Loans then outstanding upon one Business Day’s notice.       (c) The Borrower may at any time and from time to time prepay, without premium or penalty, the Multicurrency Loans, in whole or in part, upon at least three Business Days’ irrevocable notice to the Administrative Agent specifying the date and amount of prepayment. Upon the receipt of any such notice, the Administrative Agent shall promptly notify each Multicurrency Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments of Multicurrency Loans shall be in an aggregate principal amount of which the Dollar Equivalent is at least $10,000,000 or a whole multiple of $1,000,000 in excess thereof (or such lesser amount equal to the Dollar Equivalent of all Multicurrency Loans in any Available Foreign Currency then outstanding).       (d) If, at any time during the Commitment Period, for any reason the Aggregate Total Outstandings of all Lenders exceed the Aggregate U.S. Commitments then in effect by more than 5% for five consecutive Business Days, or the Aggregate Total Outstandings of any Lender exceeds the U.S. Commitment of such Lender then in effect by more than 5% for five consecutive Business Days, the Borrower shall, upon the request of the Administrative Agent, (i) immediately prepay the Swing Line Loans and the U.S. Revolving Credit Loans and/or (ii) immediately prepay the Multicurrency Loans, in an aggregate principal amount at least sufficient to reduce any such excess to 0%.       (e) Each prepayment of Loans pursuant to this subsection 2.7 shall be accompanied by accrued and unpaid interest on the amount prepaid to the date of prepayment and any amounts payable under subsection 2.19 in connection with such prepayment.       (f) Notwithstanding the foregoing, mandatory prepayments of U.S. Revolving Credit Loans or Multicurrency Loans that would otherwise be required pursuant to this subsection 2.7 solely as a result of fluctuations in Spot Exchange Rates from time to time shall only be required to be made pursuant to this subsection 2.7 on the last Business Day of each month on the basis of the Spot Exchange Rate in effect on such Business Day.       2.8 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Revolving Credit Loans to ABR Loans by giving the Administrative Agent at least one Business Day’s prior irrevocable notice of such election; provided that any such conversion of Eurodollar Revolving Credit Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Revolving Credit Loans by giving the Administrative Agent at least three Business Days’ prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Revolving Credit Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Revolving Credit Loans and ABR Loans may be converted as provided herein; provided that (i) no Loan 30 -------------------------------------------------------------------------------- may be converted into a Eurodollar Revolving Credit Loan when any Event of Default has occurred and is continuing and (ii) no Loan may be converted into a Eurodollar Revolving Credit Loan after the date that is one month prior to the Termination Date.       (b) Any Eurodollar Revolving Credit Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans; provided that: no Eurodollar Revolving Credit Loan may be continued as such (i) when any Event of Default has occurred and is continuing or (ii) after the date that is one month prior to the Termination Date; and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Eurodollar Revolving Credit Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period.       (c) Any Multicurrency Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving a Notice of Multicurrency Loan Continuation, provided, that if the Borrower shall fail (i) to give such Notice of Multicurrency Loan Continuation or (ii) provide at least 3 Business Days’ notice that such Loans will be repaid at the end of such Interest Period, such Multicurrency Loans shall automatically be continued for an Interest Period of one month.       2.9 Minimum Amounts of Tranches. All borrowings, conversions and continuations of U.S. Revolving Credit Loans and Multicurrency Loans (other than Competitive Bid Loans and Revolving Credit Loans into which Swing Line Loans were converted) hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, (i) the aggregate principal amount of the Eurodollar Rate Loans comprising each Tranche shall be equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof, (ii) the aggregate principal amount of the Multicurrency Loans comprising each Tranche shall be in an amount of which the Dollar Equivalent is at least $10,000,000 (determined at the time of borrowing or continuation), provided that Multicurrency Loans in any Tranche which were in such minimum amount at the times of borrowing may be continued as such at less than such minimum amount if such reduction is solely a result of currency fluctuations, and (iii) there shall not be more than 20 Tranches at any one time outstanding.       2.10 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to each Lender (i) on the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 8 or subsection 2.7), the unpaid principal amount of each Loan made by such Lender and (ii) on the last day of the applicable Interest Period, the unpaid principal amount of each Competitive Loan made by such Lender. The Borrower hereby further agrees to pay interest in immediately available funds at the office of the Administrative Agent on the unpaid principal amount of such Loans from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.11. Except as otherwise specified in this Agreement, amounts owing hereunder on 31 -------------------------------------------------------------------------------- account of principal and interest on Loans shall be paid in the currency in which such Loan was borrowed and amounts owing hereunder on account of fees shall be paid in Dollars.       (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the appropriate lending office of such Lender resulting from each Loan made by such lending office of such Lender from time to time, including the amounts of principal and interest payable and paid to such lending office of such Lender from time to time under this Agreement.       (c) The Administrative Agent shall maintain the Register pursuant to subsection 10.6(d), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each Loan made hereunder, and for U.S. Revolving Credit Loans, the Type of each Loan made and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.       (d) The entries made in the Register and accounts maintained pursuant to paragraphs (b) and (c) of this subsection 2.10 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.       (e) If, on any date on which the U.S. Lenders are obligated to make the Loans referred to in subsection 2.4(b)(ii) or purchase participating interests pursuant to subsection 2.4(b)(iii), the aggregate amount of such Loans or participating interests, as the case may be, is less than the amount of the related Swing Line Loans which are being refunded or in which participating interests are being purchased, as the case may be, because changes in currency exchange rates shall cause one or more of the U.S. Lenders to not have an Available U.S. Commitment, the Borrower shall on any such date repay such related Swing Line Loans by the amount of such difference.       2.11 Interest Rates and Payment Dates. (a) Each ABR Loan shall bear interest at a rate per annum equal to the ABR.       (b) The Loans comprising each Eurodollar Rate Borrowing shall bear interest at a rate per annum equal to (i) in the case of each Eurodollar Revolving Credit Loan, the Eurodollar Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin and (ii) in the case of each Eurodollar Rate Competitive Loan, the Eurodollar Rate for the Interest Period in effect for such Borrowing plus (or minus, as the case may be) the Margin offered by the Lender making such Loan and accepted by the Borrower pursuant to subsection 2.3. 32 --------------------------------------------------------------------------------       (c) Each Euro Cost of Funds Loan, Sterling Cost of Funds Loan and Alternate Swing Line Foreign Currency Loan shall bear interest at a rate per annum equal to the Cost of Funds for such Loan plus the Applicable Margin.       (d) Each Multicurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such Interest Period plus the Applicable Margin in effect for such day.       (e) Each Fixed Rate Loan shall bear interest at a rate per annum equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to subsection 2.3.       (f) Subject to the provisions of the following sentence, interest shall be payable in arrears on each Interest Payment Date; provided that interest accruing pursuant to paragraph (h) of this subsection 2.11 shall be payable from time to time on demand. The amount of interest on U.S. Revolving Credit Loans to be paid on any Interest Payment Date shall be the amount which would be due and payable if the Utilization for the period for which such interest is paid was less than 33%. On the first Business Day following the last day of each fiscal quarter of the Borrower and on the Termination Date (or, if earlier, on the date upon which both the Commitments are terminated and the Loans are paid in full), the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, an additional amount of interest equal to the difference (if any) between (i) the amount of interest which would have been payable during such fiscal quarter (or, in the case of the payment due on the Termination Date, the portion thereof ending on such date) after giving effect to the actual Utilization during such period and (ii) the amount of interest which actually was paid during such period.       (g) The “Applicable Margin” with respect to each Type of Eurodollar Revolving Credit Loan and each Multicurrency Loan at any date and with respect to each Euro Cost of Funds Loan, Sterling Cost of Funds Loan and Alternate Swing Line Foreign Currency Loan shall be the applicable percentage amount set forth in the table below based upon the Utilization and Status on such date:                                             Level I Level II Level III Level IV Level V Status Status Status Status Status -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- If Utilization is less than 33%: Eurodollar Rate Loans 0.3000 % 0.3650 % 0.4250 % 0.5750 % 0.6250 % Euro Cost of Funds 0.3000 % 0.3650 % 0.4250 % 0.5750 % 0.6250 % Loans Sterling Cost of Funds 0.3000 % 0.3650 % 0.4250 % 0.5750 % 0.6250 % Loans 33 --------------------------------------------------------------------------------                                             Level I Level II Level III Level IV Level V Status Status Status Status Status -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Alternate Swing Line 0.3000 % 0.3650 % 0.4250 % 0.5750 % 0.6250 % Foreign Currency Cost of Funds Loans ABR Loans 0 % 0 % 0 % 0 % 0 % Multicurrency Loans 0.3000 % 0.3650 % 0.4250 % 0.5750 % 0.6250 % If Utilization is equal to or greater than 33%: Eurodollar Rate Loans 0.4250 % 0.4900 % 0.5500 % 0.5750 % 0.6250 % Euro Cost of Funds 0.4250 % 0.4900 % 0.5500 % 0.5750 % 0.6250 % Loans Sterling Cost of Funds 0.4250 % 0.4900 % 0.5500 % 0.5750 % 0.6250 % Loans Alternate Swing Line 0.4250 % 0.4900 % 0.5500 % 0.5750 % 0.6250 % Foreign Currency Cost of Funds Loans ABR Loans 0 % 0 % 0 % 0 % 0 % Multicurrency Loans 0.4250 % 0.4900 % 0.5500 % 0.5750 % 0.6250%"       (h) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any facility fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection 2.11 plus 2% or (y) in the case of overdue interest, facility fee or other amount, the rate described in paragraph (a) of this subsection 2.11 plus 2%, in each case from the date of such non-payment until such amount is paid in full (as well after as before judgment). For purposes of this Agreement, principal shall be “overdue” only if not paid in accordance with the provisions of subsection 2.10.       2.12 Facility Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders, a facility fee in Dollars at the rate per annum equal to (a) for each day that the Borrower has Level I Status, 0.1000% of the aggregate Commitments on such day, (b) for each day that the Borrower has Level II Status, 0.1100% of the aggregate Commitments, (c) for each day that the Borrower has Level III Status, 0.1250% of the aggregate Commitments, (d) for each day that the Borrower has Level IV Status, 0.1750% of the aggregate Commitments and (e) for each day that the Borrower has Level V Status, 0.2500% of the aggregate 34 --------------------------------------------------------------------------------       Commitments. On the first Business Day following the last day of each fiscal quarter of the Borrower and on the Termination Date (or, if earlier, on the date upon which both the Commitments are terminated and the Loans are paid in full), the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, the portion of such facility fee which accrued during the fiscal quarter most recently ended (or, in the case of the payment due on the Termination Date, the portion thereof ending on such date). Such facility fee shall be based upon the aggregate Commitments of the Lenders from time to time, regardless of the Utilization from time to time thereunder.       2.13 Computation of Interest and Fees. (a) Interest on all Loans shall be computed on the basis of the actual number of days elapsed over a year of 360 days, except that interest on ABR Loans which are determined by reference to the Prime Rate shall be computed over a year of 365 or 366 days as appropriate (in each case including the first day but excluding the last day). Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. All fees shall be computed on the basis of a year composed of twelve 30-day months. At any time and from time to time upon request of the Borrower, (i) the Administrative Agent shall deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate applicable to U.S. Revolving Credit Loans pursuant to this Agreement and (ii) the relevant Swing Line Lender shall deliver to the Borrower a statement showing the quotations used by such Swing Line Lender in determining any interest rate applicable to Swing Line Loans made by such Swing Line Lender pursuant to this Agreement. Each change in the Applicable Margin applicable to Loans or the Facility Fee as a result of a change in the Borrower’s Status shall become effective on the date upon which such change in Status occurs.       (b) If any Reference Lender shall for any reason no longer have a Commitment, such Reference Lender shall thereupon cease to be a Reference Lender, and if, as a result thereof, there shall only be one Reference Lender remaining, the Borrower and the Administrative Agent (after consultation with the Lenders) shall, by notice to the Lenders, designate another Lender as a Reference Lender so that there shall at all times be at least two Reference Lenders.       (c) Each Reference Lender shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Lenders shall be unable or shall otherwise fail to supply such rates to the Administrative Agent upon its request, the rate of interest shall, subject to the provisions of subsection 2.14, be determined on the basis of the quotations of the remaining Reference Lenders.       2.14 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:     (a) the Administrative Agent shall have reasonably determined (which reasonable determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate or the Eurocurrency Rate, as the case may be, for such Interest Period, or 35 --------------------------------------------------------------------------------         (b) the Administrative Agent has received notice from the Majority U.S. Lenders that the Eurodollar Rate or Eurocurrency Rate, as the case may be, determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such U.S. Lenders of making or maintaining their Eurodollar Rate Loans or Multicurrency Loans, as the case may be, during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the U.S. Lenders as soon as practicable thereafter. Until such time as the Eurodollar Rate or the Eurocurrency Rate, as the case may be, can be determined by the Administrative Agent in the manner specified in the definitions of such terms in subsection 1.1, no further Eurodollar Rate Loans or Multicurrency Loans (with respect to the Available Foreign Currency for which the Eurocurrency Rate cannot be determined only) shall be continued as such at the end of the then current Interest Periods or (other than any Eurodollar Rate Loans or Multicurrency Loans previously requested and with respect to which the Eurodollar Rate or Eurocurrency Rate, as the case may be, was determined) shall be made, nor shall the Borrower have the right to convert ABR Loans into Eurodollar Rate Loans.       2.15 Pro Rata Treatment and Payments. (a) (i) Except as provided in subsection 2.1(c), each borrowing of U.S. Revolving Credit Loans by the Borrower from the U.S. Lenders hereunder shall be made pro rata according to the Funding Commitment Percentages of the U.S. Lenders in effect on the date of such borrowing. Each payment by the Borrower on account of any facility fee hereunder shall be allocated by the Administrative Agent among the U.S. Lenders in accordance with the respective amounts which such U.S. Lenders are entitled to receive pursuant to subsection 2.12. Any reduction of the U.S. Commitments of the U.S. Lenders shall be allocated by the Administrative Agent among the U.S. Lenders pro rata according to the U.S. Commitment Percentages of the U.S. Lenders. Except as provided in subsection 2.1(c) or subsection 2.7, each payment (other than any optional prepayment) by the Borrower on account of principal of and interest on the U.S. Revolving Credit Loans shall be allocated by the Administrative Agent pro rata according to the respective principal amounts thereof then due and owing to each U.S. Lender. Each optional prepayment by the Borrower on account of principal of or interest on the U.S. Revolving Credit Loans shall be allocated by the Administrative Agent pro rata according to the respective outstanding principal amounts thereof. Each payment by the Borrower on account of principal of and interest on any Borrowing of Competitive Loans shall be made pro rata among the Lenders participating in such Borrowing according to the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing. Each payment by the Borrower on account of principal of or interest on the Swing Line Loans shall be made pro rata according to the respective outstanding principal amounts of the Swing Line Loans then held by the Swing Line Lenders. All payments (including prepayments) to be made by the Borrower hereunder (other than with respect to Multicurrency Loans), whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 2:00 p.m., New York City time, or, in the case of Euro Cost of Funds Loans and Sterling Cost of Funds Loans, 2:00 p.m., London time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at the Administrative Agent’s office specified in subsection 10.2, in Dollars and in immediately available funds. Notwithstanding the foregoing, the failure by the Borrower to make a payment (or prepayment) prior to 12:00 Noon, New York City time or 2:00 p.m. London time, as the case may be, on the 36 -------------------------------------------------------------------------------- due date thereof shall not constitute a Default or Event of Default if such payment is made on such due date; provided, however, that any payment (or prepayment) made after such time on such due date shall be deemed made on the next Business Day for the purposes of interest and reimbursement calculations. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received.       (ii) Each borrowing of Multicurrency Loans by the Borrower shall be made, and any reduction of the Multicurrency Commitments shall be allocated by the Administrative Agent, pro rata according to the Multicurrency Commitment Percentages of the Multicurrency Lenders. Except as provided in subsection 2.7(d), each payment (including each prepayment) by the Borrower on account of principal of and interest on Multicurrency Loans shall be allocated by the Administrative Agent pro rata according to the respective principal amounts of the Multicurrency Loans then due and owing by the Borrower to each Multicurrency Lender. Except as otherwise provided in this Agreement, all payments (including prepayments) to be made by the Borrower hereunder in respect of Multicurrency Loans, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made at or before the payment time for the currency of such Multicurrency Loan set forth in the Administrative Schedule, on the due date thereof to the Administrative Agent, for the account of the Multicurrency Lenders, at the payment office for the currency of such Multicurrency Loan set forth in the Administrative Schedule, in the currency of such Multicurrency Loan and in immediately available funds. The Administrative Agent shall distribute such payments to the Multicurrency Lenders entitled to receive the same promptly upon receipt in like funds as received.       (iii) If any payment hereunder (other than payments on the Eurodollar Rate Loans, the Euro Cost of Funds Loans, the Sterling Cost of Funds Loans, the Alternate Swing Line Currency Cost of Funds Loans and the Multicurrency Loans) becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Rate Loan, a Euro Cost of Funds Loan, a Sterling Cost of Funds Loan or a Multicurrency Loan becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.       (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to the deadline for funding a Borrowing that such Lender will not make the amount that would constitute its share of such Borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the borrowing date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to (i) in the case of a borrowing of U.S. Revolving Credit Loans, the daily average Federal Funds 37 -------------------------------------------------------------------------------- Effective Rate and (ii) in the case of a borrowing of Multicurrency Loans, the interest rate reasonably determined by the Administrative Agent to reflect its cost of funds for the amount advanced by the Administrative Agent on behalf of such Lender, (in each such case) for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection 2.15 shall be conclusive in the absence of manifest error. If such Lender’s share of such Borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such borrowing date, the Administrative Agent shall be entitled to recover such amount with interest thereon at (x) the Federal Funds Effective Rate (in the case of a borrowing of U.S. Revolving Credit Loans) and (y) the Administrative Agent’s reasonable estimate of its average daily cost of funds plus the Applicable Margin applicable to Multicurrency Loans (in case of a borrowing of Multicurrency Loans), on demand, from the Borrower.       2.16 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Rate Loans, Multicurrency Loans, Euro Cost of Funds Loans, Sterling Cost of Funds Loans or Alternate Swing Line Currency Cost of Funds Loans as contemplated by this Agreement, such Lender shall give notice thereof to the Administrative Agent and the Borrower describing the relevant provisions of such Requirement of Law (and, if the Borrower shall so request, provide the Borrower with a memorandum or opinion of counsel of recognized standing (as selected by such Lender) as to such illegality), following which (a) the commitment of such Lender hereunder to make Eurodollar Rate Loans, Multicurrency Loans, Euro Cost of Funds Loans or Sterling Cost of Funds Loans, continue Eurodollar Rate Loans, Multicurrency Loans, Euro Cost of Funds Loans or Sterling Cost of Funds Loans as such and convert ABR Loans to Eurodollar Rate Loans shall forthwith be canceled, (b) such Lender’s Loans then outstanding as Eurodollar Rate Loans (including, without limitation, such Lender’s Eurodollar Rate Competitive Loans in the case of clause (ii), if any, shall be converted automatically to ABR Loans (i) on the respective last days of the then current Interest Periods with respect to such Loans or (ii) within such earlier period as required by law, (c) such Lender’s Multicurrency Loans shall be prepaid on the last day of the then current Interest Period with respect thereto or such earlier period as required by law and (d) such Lender’s Loans then outstanding as Euro Cost of Funds Loans and Sterling Cost of Funds Loans shall, at the Borrower’s option, either be due and payable in full or shall be converted into Dollars at the Spot Exchange Rate and shall be deemed to be made as a Swing Line Loan denominated in Dollars. If any such conversion or repayment of a Eurodollar Rate Loan, Multicurrency Loan, a Euro Cost of Funds Loan or a Sterling Cost of Funds Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.19.       2.17 Increased Costs. (a) If (i) there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loans or Letters of Credit or (ii) any reduction in any amount receivable in respect thereof, and such increased cost or reduced amount receivable is due to either: 38 --------------------------------------------------------------------------------         (x) the introduction of or any change in or in the interpretation of any law or regulation after the date hereof; or           (y) the compliance with any guideline or request made after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law), then (subject to the provisions of subsection 2.20) the Borrower shall from time to time, upon demand by such Lender pay such Lender additional amounts sufficient to compensate such Lender for such increased cost or reduced amount receivable.       (b) If any Lender shall have reasonably determined that (i) the applicability of any law, rule, regulation or guideline adopted after the date hereof pursuant to or arising out of the July 1988 paper of the Basle Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards,” or (ii) the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy affecting such Lender, or (iii) any change arising after the date hereof in the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or (iv) compliance by such Lender (or any lending office of such Lender), or any holding company for such Lender which is subject to any of the capital requirements described above, with any request or directive of general application issued after the date hereof regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of any such holding company as a direct consequence of such Lender’s obligations hereunder or under any Letter of Credit to a level below that which such Lender or any such holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s policies and the policies of such holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then (subject to the provisions of subsection 2.19) from time to time such Lender may request the Borrower to pay to such Lender such additional amounts as will compensate such Lender or any such holding company for any such reduction suffered, net of the savings (if any) which may be reasonably projected to be associated with such increased capital requirement. Any certificate as to such amounts which is delivered pursuant to subsection 2.20(a) shall, in addition to any items required by subsection 2.20(a), include the calculation of the savings (if any) which may be reasonably projected to be associated with such increased capital requirement; provided that in no event shall any Lender be obligated to pay or refund any amounts to the Borrower on account of such savings.       (c) In the event that any Governmental Authority shall impose any Eurocurrency Liabilities which increase the cost to any Lender of making or maintaining Eurodollar Rate Loans or Multicurrency Loans, then (subject to the provisions of subsection 2.20) the Borrower shall thereafter pay in respect of the Eurodollar Rate Loans or Multicurrency Loans, as the case may be, of such Lender a rate of interest based upon (i) for Eurodollar Rate Loans, the Eurodollar Reserve Rate (rather than the Eurodollar Rate) and (ii) for Multicurrency Loans, the Eurocurrency Reserve Rate (rather than the Eurocurrency Rate). From and after the delivery to 39 -------------------------------------------------------------------------------- the Borrower of the certificate required by subsection 2.20(a), all references contained in this Agreement to the (i) Eurodollar Rate shall be deemed to be references to the Eurodollar Reserve Rate with respect to each such affected Lender and (ii) the Eurocurrency Rate shall be deemed to be references to the Eurocurrency Reserve Rate with respect to each such affected Lender.       2.18 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes or any other tax based upon net income imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings (“Non-Excluded Taxes”) are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in or pursuant to this Agreement; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection 2.18. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection 2.18 shall survive the termination of this Agreement and the payment of all other amounts payable hereunder.       (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:         (i) deliver to the Borrower and the Administrative Agent (A) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, as the case may be, and (B) an Internal Revenue Service Form W-8BEN, or successor applicable form, as the case may be;         (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or 40 --------------------------------------------------------------------------------   certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and         (iii) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form W- 8BEN or W-8ECI, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8BEN, that it is entitled to an exemption from United States backup withholding tax. Each Person not incorporated under the laws of the United States of America or a state thereof that is an Assignee hereunder pursuant to subsection 10.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection 2.18.       2.19 Indemnity. Subject to the provisions of subsection 2.20(a), the Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or reasonable expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of any Loan hereunder after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Rate Loans, Multicurrency Loans, Euro Cost of Funds Loans or Sterling Cost of Funds Loans on a day which is not the last day of an Interest Period with respect thereto or (d) the making of a prepayment of Fixed Rate Loans at any time. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding the Applicable Margin or Margin included therein) over (ii) the amount of interest (as determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of all other amounts payable hereunder.       2.20 Notice of Amounts Payable; Relocation of Lending Office; Mandatory Assignment. (a) In the event that any Lender becomes aware that any amounts are or will be owed to it pursuant to subsection 2.16, 2.17, 2.18(a) or 2.19, then it shall promptly notify the Borrower thereof and, as soon as possible thereafter, such Lender shall submit to the Borrower a certificate indicating the amount owing to it and the calculation thereof. The amounts set forth in 41 -------------------------------------------------------------------------------- such certificate shall be prima facie evidence of the obligations of the Borrower hereunder; provided, however, that the failure of the Borrower to pay any amount owing to any Lender pursuant to subsection 2.16, 2.17, 2.18(a) or 2.19 shall not be deemed to constitute a Default or an Event of Default hereunder to the extent that the Borrower is contesting in good faith its obligation to pay such amount by ongoing discussions diligently pursued with such Lender or by appropriate proceedings.       (b) If a Lender claims any additional amounts payable pursuant to subsection 2.16, 2.17 or 2.18(a), it shall use its reasonable efforts (consistent with legal and regulatory restrictions) to avoid the need for paying such additional amounts, including changing the jurisdiction of its applicable lending office, provided that the taking of any such action would not, in the reasonable judgment of the Lender, be disadvantageous to such Lender.       (c) In the event that any Lender delivers to the Borrower a certificate in accordance with subsection 2.20(a) (other than a certificate as to amounts payable pursuant to subsection 2.19), or the Borrower is required to pay any additional amounts or other payments in accordance with subsection 2.16, 2.17 or 2.18(a) or any Lender fails to make its share of any Borrowing available in accordance with the terms hereof, the Borrower may, at its own expense and in its sole discretion, (i) require such Lender to transfer or assign, in whole or in part, without recourse (in accordance with subsection 10.6), all or part of its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans) to another Person (provided that the Borrower, with the full cooperation of such Lender, can identify a Person who is ready, willing and able to be an Assignee with respect to thereto) which shall assume such assigned obligations (which Assignee may be another Lender, if such Assignee Lender accepts such assignment) or (ii) during such time as no Default or Event of Default has occurred and is continuing, terminate the Commitment of such Lender and prepay all outstanding Loans (other than Competitive Loans) of such Lender; provided that (x) the Borrower or the Assignee, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans (other than Competitive Loans) made by it hereunder and (subject to subsection 2.19) all other amounts owed to it hereunder and (y) such assignment or termination of the Commitment of such Lender and prepayment of Loans does not conflict with any law, rule or regulation or order of any court or Governmental Authority.   SECTION 3. LETTERS OF CREDIT       3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other U.S. Lenders set forth in subsection 3.4(a), agrees to issue letters of credit (“Letters of Credit”) in Dollars for the account of the Borrower on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall not issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Aggregate Available U.S. Commitments would be less than zero or the Aggregate Total Outstandings of all the Lenders would exceed the Aggregate U.S. Commitments. Letters of Credit may be either standby letters of credit or 42 -------------------------------------------------------------------------------- commercial letters of credit. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above), provided, however, that any Letter of Credit which is a commercial letter of credit shall expire no later than 360 days after its date of issuance.       (b) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York.       (c) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.       3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender and the Administrative Agent at their respective addresses for notices specified herein (or to such other address provided by such Issuing Lender) an Application therefor, completed to the reasonable satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the U.S. Lenders, notice of the issuance of each Letter of Credit (including the amount thereof).       3.3 Fees and Other Charges. (a) The Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate equal to (i) the Applicable Margin then in effect with respect to Eurodollar Rate Loans times (ii) the average daily undrawn face amount of all such Letters of Credit, shared ratably among the U.S. Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the Issuing Lender for its own account a fronting fee at a rate to be agreed upon between the Borrower and the Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date.       (b) In addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary reasonable costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under or amending any 43 -------------------------------------------------------------------------------- Letter of Credit or normal and customary reasonable costs and expenses as are incurred or charged by the Issuing Lender in otherwise administering any Letter of Credit.       3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s U.S. Commitment Percentage in the Issuing Lender’s obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount equal to such L/C Participant’s U.S. Commitment Percentage of the amount of such draft, or any part thereof, that is not so reimbursed.       (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to subsection 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of such amount, times the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.       (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.       3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to reimburse the Issuing Lender not later than the next Business Day following each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any 44 -------------------------------------------------------------------------------- Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other reasonable costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section from the date such amounts were paid by the Issuing Lender (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate set forth in subsection 2.11(h).       3.6 Obligations Absolute. The Borrower’s obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower’s Reimbursement Obligations under subsection 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged (subject to the immediately succeeding sentence), or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender 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, except for errors or omissions resulting from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower.       3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.       3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. 45 --------------------------------------------------------------------------------   SECTION 4. REPRESENTATIONS AND WARRANTIES,       To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that:       4.1 Financial Condition. The Borrower has heretofore furnished to each Lender a copy of the audited consolidated financial statements of the Borrower for the fiscal years ended December 31, 1998 and December 31, 1999 and unaudited consolidated financial statements of the Borrower for the quarterly period ended March 31, 2000 . Such financial statements present fairly the financial condition and results of operations of the Borrower and its consolidated Subsidiaries as of, and for the fiscal years and fiscal quarters ended on, such dates in accordance with GAAP (subject, in the case of such quarterly statements, to normal year-end audit adjustments). Other than as disclosed in the Borrower’s 10-K dated February 9, 2000 or in the Confidential Information Memorandum, between December 31, 1999 and the Closing Date, there has been no development or event which has had a Material Adverse Effect.       4.2 Corporate Existence; Compliance with Law. The Borrower (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that all failures to be duly qualified and in good standing could not, in the aggregate, have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.       4.3 Corporate Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform this Agreement and the Applications and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of this Agreement and the Applications. No consent or authorization of any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or the Applications. This Agreement has been, and each Application will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each Application when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).       4.4 No Legal Bar; No Default. The execution, delivery and performance of this Agreement, the Applications, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues 46 -------------------------------------------------------------------------------- pursuant to any such Requirement of Law or Contractual Obligation, except to the extent that all such violations and creation or imposition of Liens could not, in the aggregate, have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.       4.5 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues as of the Closing Date (a) with respect to this Agreement or any of the actions contemplated hereby, or (b) which involves a probable risk of an adverse decision which would materially restrict the ability of the Borrower to comply with its obligations under this Agreement.       4.6 Federal Regulations. No part of the proceeds of any Loans will be used for “buying,” “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors.       4.7 Investment Company Act. The 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.       4.8 ERISA. The Borrower is in compliance with all material provisions of ERISA, except to the extent that all failures to be in compliance could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.       4.9 No Material Misstatements. No report, financial statement or other written information furnished by or on behalf of such Borrower to the Administrative Agent or any Lender pursuant to subsection 4.1 or subsection 6.1(a) contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were, are or will be made, not misleading, except to the extent that the facts (whether misstated or omitted) do not result in a Material Adverse Effect. No report, financial statement or other written information furnished by or on behalf of the Borrower for inclusion in the Confidential Information Memorandum contained as of the Closing Date any material misstatement of fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that the facts (whether misstated or omitted) do not result in a Material Adverse Effect. Any forward-looking information contained in the Confidential Information Memorandum is based upon good faith judgment believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such information may differ from the projected results set forth therein by a material amount.       4.10 Environmental Matters. Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse 47 -------------------------------------------------------------------------------- Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.       4.11 Subsidiaries. The Subsidiaries listed on Schedule 4.11 constitute all the Subsidiaries of the Borrower on the date hereof which are “significant subsidiaries” within the meaning of Regulation S-X of the U.S. Securities and Exchange Commission (other than as set forth in such schedule).       4.12 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower for its general corporate purposes including transactions with its Subsidiaries.   SECTION 5. CONDITIONS PRECEDENT       5.1 Conditions to Initial Extensions of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit, of the following conditions precedent:         (a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered (including, without limitation, by way of a telecopied signature page) by a duly authorized officer of the Borrower and each Lender.         (b) Secretary’s Certificate. The Administrative Agent shall have received a certificate of the Secretary or Assistant Secretary of the Borrower, in form and substance satisfactory to the Administrative Agent, which certificate shall (i) certify as to the incumbency and signature of the officers of the Borrower executing this Agreement (with the President or a Vice President of the Borrower attesting to the incumbency and signature of the Secretary or Assistant Secretary providing such certificate), (ii) have attached to it a true, complete and correct copy of each of the certificate of incorporation and by-laws of the Borrower or a statement that there have been no changes since those previously delivered in connection with the Original Closing Date, (iii) have attached to it a true and correct copy of the resolutions of the Board of Directors of the Borrower or a duly authorized committee thereof or a duly authorized officer hereof, which resolutions shall authorize the execution, delivery and performance of this Agreement and the borrowings by the Borrower hereunder and (iv) certify that, as of the date of such certificate (which shall not be earlier than the date thereof), none of such certificate of incorporation, by-laws or resolutions shall have been amended, supplemented, modified, revoked or rescinded.         (c) Fees. All fees payable by the Borrower to Chase Securities Inc., the Administrative Agent or any Lender on the Closing Date and all expenses payable under subsection 10.5 for which invoices have been received before the Closing Date shall have been paid. 48 --------------------------------------------------------------------------------         (d) Legal Opinions. The Administrative Agent shall have received, (i) the executed legal opinion of Drinker Biddle & Reath LLP, counsel to the Borrower, substantially in the form of Exhibit F-1 and (ii) the executed legal opinion of Simpson Thacher & Bartlett, counsel to the Administrative Agent, substantially in the form of Exhibit F-2. The Borrower hereby instructs the counsel referenced in clause (i) to deliver its opinion for the benefit of the Administrative Agent and each of the Lenders.         (e) No Material Adverse Effect. Other than as disclosed in the Borrower’s 10-K dated February 9, 2000 or in the Confidential Information Memorandum, since December 31, 1999, no development or event shall have occurred that has had or could reasonably be expected to have a Material Adverse Effect. The Administrative Agent shall notify the Borrower and each Lender promptly after the satisfaction of the foregoing conditions.             5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including, without limitation, its initial extension of credit and any Competitive Loan to be made by it) is subject to the satisfaction of the following conditions:         (a) Notice of Borrowing. The Administrative Agent shall have received a notice of borrowing, as required by subsection 2.1 or 2.3, as the case may be or, in the case of a Letter of Credit, an Application as required by subsection 3.2.         (b) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to this Agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent any such representation and warranty specifically relates to an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier date.         (c) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. Each borrowing by and Letter of Credit issued on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such Loan or Letter of Credit that the conditions contained in this subsection 5.2 have been satisfied. 49 -------------------------------------------------------------------------------- SECTION 6. AFFIRMATIVE COVENANTS             The Borrower hereby agrees that, so long as the Commitments remain in effect, or any amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall:             6.1 Financial Statements. Furnish to each Lender:         (a) as soon as available, but in any event within 110 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year; and         (b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year; all such financial statements shall be complete and correct in all material respects and shall be prepared in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).             6.2 Certificates; Other Information. Furnish to:         (a) each Lender, concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and 6.1(b), a certificate of a Financial Officer (i) stating that, to the best of such Officer’s knowledge, (A) such financial statements present fairly the financial condition and results of operations of the Borrower and its Subsidiaries for the period referred to therein (subject, in the case of interim statements, to normal year-end audit adjustments) and (B) during such period the Borrower has performed all of its covenants and other agreements contained in this Agreement to be performed by it, and that no Default or Event of Default has occurred, except as specified in such certificate, and (ii) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the provisions of subsection 7.1 on the date of such financial statements;         (b) each Lender, within 15 days after the same become public, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; 50 --------------------------------------------------------------------------------         (c) the Administrative Agent, within ten Business Days after the occurrence thereof, written notice of any change in Status; provided that the failure to provide such notice shall not delay or otherwise affect any change in the Applicable Margin or other amount payable hereunder which is to occur upon a change in Status pursuant to the terms of this Agreement; and         (d) the Administrative Agent, promptly, such additional financial and other information as the Administrative Agent, on behalf of any Lender, may from time to time reasonably request and that is reasonably related to such Lender’s credit analysis of the Borrower and which request does not impose an unreasonable burden on the Borrower to satisfy.             6.3 Notices. Promptly give notice to the Administrative Agent and each Lender of (a) the occurrence of any Default or Event of Default, accompanied by a statement of a Financial Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto and (b) so long as the Borrower is not subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, (i) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any affiliate thereof that could reasonably be expected to result in a Material Adverse Effect and (ii) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.             6.4 Conduct of Business and Maintenance of Existence. (a) Continue to engage in its principal line of business as now conducted by it, (b) preserve, renew and keep in full force and effect its corporate existence and (c) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its principal line of business, except, in any such case, as otherwise permitted pursuant to subsection 7.5 or to the extent that failure to do so would not have a Material Adverse Effect.             6.5 Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.             6.6 Environmental Laws. Except as could not in the aggregate reasonably be expected to result in a Material Adverse Effect:         (a) comply with all applicable Environmental Laws, and obtain and comply with and maintain any and all permits, licenses or other approvals required by applicable Environmental Laws; and         (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. 51 -------------------------------------------------------------------------------- SECTION 7. NEGATIVE COVENANTS             The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder:             7.1 Consolidated Leverage Ratio. The Borrower shall not, directly or indirectly, permit the Consolidated Leverage Ratio to exceed 3.25 to 1.0 at the end of any fiscal quarter.             7.2 Indebtedness. The Borrower shall not, directly or indirectly, permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness or any guarantee of Indebtedness (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings), except Indebtedness and guarantees in an aggregate principal amount at any one time outstanding, which when combined with (but without duplication) (i) the aggregate outstanding principal amount of obligations secured by a Lien upon any of the property or revenues of the Borrower or any of its Subsidiaries at such time (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings) and (ii) the aggregate amount of Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date and other than Intercompany Sale-Leasebacks), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 6.1(a).             7.3 Liens. The Borrower shall not nor shall it permit any Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings), except Liens at any one time outstanding with respect to which the aggregate outstanding principal amount of the obligations secured thereby, which when combined with (but without duplication) (i) the aggregate principal amount of Indebtedness and guarantees of Indebtedness of any Subsidiary outstanding at such time (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings) and (ii) the aggregate amount of Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date and other than Intercompany Sale-Leasebacks), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 6.1(a).             7.4 Sale-Leasebacks. The Borrower shall not nor shall it permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of any property owned by the Borrower or any Subsidiary (except for Intercompany Sale-Leasebacks), which property has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person (“Sale-Leasebacks”), except for 52 -------------------------------------------------------------------------------- Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date) in an aggregate amount, which when combined with (but without duplication) (i) the aggregate outstanding principal amount of obligations secured by a Lien upon any of the property or revenues of the Borrower or any of its Subsidiaries at the time of entering into any such Sale- Leaseback (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings) and (ii) the aggregate principal amount of Indebtedness and guarantees of Indebtedness of any Subsidiary outstanding at such time (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 6.1(a).             7.5 Merger, Consolidation, etc. The Borrower shall not, directly or indirectly, merge or consolidate with any other Person, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or sell or convey all or substantially all of its assets to any Person unless, in the case of mergers and consolidations, (a) the Borrower shall be the continuing corporation and (b) immediately before and immediately after giving effect to such merger or consolidation, no Default or Event of Default shall have occurred and be continuing. SECTION 8. EVENTS OF DEFAULT             If any of the following events shall occur and be continuing:         (a) The Borrower shall (i) fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms hereof or (ii) fail to pay any interest on any Loan or any Reimbursement Obligation or any other amount which is payable hereunder and (in the case of this clause (ii) only) such failure shall continue unremedied for more than five Business Days after written notice thereof has been given to the Borrower by the Administrative Agent or the Majority Lenders; or         (b) Any representation or warranty made or deemed made by the Borrower in Section 4 or any certified statement furnished pursuant to subsection 6.2(b) shall prove to have been incorrect on or as of the date made or deemed made or certified if the facts or circumstances incorrectly represented or certified result in a Material Adverse Effect; or         (c) The Borrower shall default in the observance of the agreement contained in subsection 6.3(a) or subsection 6.4(a) or (b) or Section 7; or         (d) The Borrower shall default in the observance or performance of any other agreement contained in this Agreement (other than as provided in paragraphs (a), (b) and (c) of this Section 8), and such default shall continue unremedied for a period of 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or the Majority Lenders; or 53 --------------------------------------------------------------------------------         (e) The Borrower or any Significant Subsidiary shall default in any payment of $50,000,000 or more of principal of or interest on any Indebtedness or in the payment of $50,000,000 or more on account of any guarantee in respect of Indebtedness, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or guarantee was created; or         (f) Any event or condition occurs that results in any Indebtedness or any guarantee of Indebtedness of the Borrower or any of its Significant Subsidiaries of an aggregate principal amount of $50,000,000 or more becoming due in full or payable in full prior to the scheduled maturity of such Indebtedness or guarantee or that requires the prepayment, repurchase, redemption or defeasance thereof in full, prior to the scheduled maturity of such Indebtedness or guarantee (other than pursuant to any voluntary prepayments, customary due-on-sale clause or any provision requiring prepayment of such Indebtedness based on excess cash flow, permitted asset sales or permitted debt or equity issuances, in each case contained in the terms of such Indebtedness); provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or         (g) (i) The Borrower or any of its Significant Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Significant Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Significant Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) there shall be commenced against the Borrower or any of its Significant Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 90 days from the entry thereof; or         (h) One or more judgments or decrees shall (i) be entered against the Borrower, (ii) not have been vacated, discharged, satisfied, stayed or bonded pending appeal within 60 days from the entry thereof and (iii) involve a liability (not paid or fully covered by insurance) of either (A) $40,000,000 or more, in the case of any single judgment or decree or (B) $100,000,000 or more in the aggregate, in the case of all such judgments and decrees; or 54 --------------------------------------------------------------------------------         (i) The Borrower or any of its Significant Subsidiaries shall default in the performance of any of its obligations under, or otherwise fail to observe or perform any covenant, condition or agreement contained in, any of the Material Agreements, to the extent the consequences of any such default or failure could reasonably be expected to result in a Material Adverse Effect; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (g) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 8, presentment, demand, protest and all other notices of any kind are hereby expressly waived.             With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, such further documents and instruments as the Administrative Agent may reasonably request to evidence the creation and perfection of the within security interest in such cash collateral account. 55 -------------------------------------------------------------------------------- SECTION 9. THE ADMINISTRATIVE AGENT             9.1 Appointment. Each Lender hereby irrevocably designates and appoints Chase as the Administrative Agent of such Lender under this Agreement, and each such Lender irrevocably authorizes Chase, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent.             9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.             9.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or for any failure of the Borrower to perform its obligations hereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower.             9.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the Lender specified in the Register with respect to any amount owing hereunder as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall 56 -------------------------------------------------------------------------------- first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Lenders (or, to the extent that this Agreement expressly requires a higher percentage of Lenders, such higher percentage), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the obligations owing by the Borrower hereunder.             9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly notify the Borrower (unless the Borrower shall have delivered such notice to the Administrative Agent) and then give notice thereof to the Lenders (provided that the failure to notify the Borrower shall not impair any of the rights of the Administrative Agent and the Lenders with respect to the events and circumstances specified in such notice). The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.             9.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 57 --------------------------------------------------------------------------------             9.7 Indemnification. The U.S. Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective U.S. Commitment Percentages in effect on the date on which indemnification is sought under this subsection 9.7 (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their U.S. Commitment Percentages immediately prior to such date of payment in full), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the amounts owing hereunder) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct. The Administrative Agent shall have the right to deduct any amount owed to it by any Lender under this subsection 9.7 from any payment made by it to such Lender hereunder and shall provide notice of such calculation to such Lender. The agreements in this subsection 9.7 shall survive the payment of the Loans and all other amounts payable hereunder.             9.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity.             9.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 90 days’ notice to the Lenders and the Borrower and following the appointment of a successor Administrative Agent in accordance with the provisions of this subsection 9.9. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Majority Lenders shall appoint from among the Lenders willing to serve as Administrative Agent a successor Administrative Agent for the Lenders, which successor Administrative Agent shall be approved by the Borrower (which approval shall not be unreasonably withheld), whereupon such successor Administrative Agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor Administrative Agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the obligations owing hereunder. If no successor agent has accepted appointment as Administrative Agent by the date that is 90 days following a retiring Administrative Agent’s notice of resignation, the retiring 58 -------------------------------------------------------------------------------- Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.             9.10 Syndication Agents and Documentation Agent. Neither of the Syndication Agents nor the Documentation Agent shall have any duties or responsibilities hereunder in their capacities as such. SECTION 10. MISCELLANEOUS             10.1 Amendments and Waivers. (a) Neither this Agreement, nor any terms hereof may be amended, supplemented or modified except in accordance with the provisions of this subsection 10.1. The Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (i) enter into with the Borrower written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of the Lenders or of the Borrower hereunder or (ii) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (A) reduce the principal amount of any Loan or L/C Obligation, or reduce the stated rate of any interest or fee payable hereunder, or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender’s Commitment, in each case without the consent of each Lender directly affected thereby, or (B) amend, modify or waive any provision of this subsection 10.1 or reduce the percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, in each case without the written consent of all the Lenders or reduce the percentages specified in the definitions of “Majority U.S. Lenders” with the written consent of all the U.S. Lenders or “Majority Multicurrency Lenders” without the written consent of all of the Multicurrency Lenders, or (C) amend, modify or waive any provision of Section 9 or any other provision of this Agreement governing the rights or obligations of the Administrative Agent without the written consent of the then Administrative Agent, or (D) amend, modify or waive any provision of subsection 2.4 without the written consent of the Swing Line Lenders at such time; or (E) amend, modify or waive any provision of Section 3 without the written consent of the Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the obligations owing hereunder. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 59 --------------------------------------------------------------------------------             (b) In addition to amendments effected pursuant to the foregoing paragraph (a), Schedule III may be amended as follows:               (i) (A) to change administrative information contained therein (other than any interest rate definition, funding time, payment time or notice time contained therein) or (B) to add Available Foreign Currencies (and related interest rate definitions and administrative information) with the approval of the Majority Multicurrency Lenders, in each case, upon execution and delivery by the Borrower and the Administrative Agent of a written amendment providing for such amendment.               (ii) to conform any funding time, payment time or notice time contained therein to then-prevailing market practices, upon execution and delivery by the Borrower and the Administrative Agent of a written amendment providing for such amendment.               (iii) to change any interest rate definition contained therein, upon execution and delivery by the Borrower, all the Multicurrency Lenders and the Administrative Agent of a written amendment providing for such amendment.             (c) The Administrative Agent shall give prompt notice to each U.S. Lender of any amendment effected pursuant to subsection 10.1(b).             10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or four days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule II in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the obligations owing hereunder:       The Borrower: Delphi Automotive Systems Corporation 5725 Delphi Drive Troy, Michigan 48098 Attention: Treasurer Telecopy: (248) 813-2590 Telephone: (248) 813-2592 The Administrative Agent: with respect to Loans denominated in Dollars and other matters: The Chase Manhattan Bank The Loan and Agency Services Group One Chase Manhattan Plaza 8th Floor New York, New York 10081 Attention: Lenora Kiernan Telecopy: (212) 552-5650 60 --------------------------------------------------------------------------------       Telephone: (212) 552-7309 and in the case of and with respect to Loans denominated in Available Foreign Currencies and Swing Line Loans denominated in Euro, Sterling or any Alternate Swing Line Foreign Currency: The Chase Manhattan Bank Trinity Tower 9 Thomas Moore Street London, EY91T Attention: Steven Hurford Telecopy: 011-44-171-777-2367 Telephone: 011-44-171-777-2347 with a copy to: The Chase Manhattan Bank 270 Park Avenue 47(th) Floor New York, New York 10017 Attention: Richard Duker Telecopy: (212) 972-9854 Telephone: (212) 270-3057 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.1(b), 2.2(b), 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 3.2 shall not be effective until received.             10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.             10.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.             10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses reasonably incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, disbursements and other reasonable charges of counsel to the Administrative Agent, (b) to pay or 61 -------------------------------------------------------------------------------- reimburse each Lender and the Administrative Agent for all its reasonable costs and expenses reasonably incurred in connection with the enforcement of any rights under this Agreement, including, without limitation, the reasonable fees, disbursements and other reasonable charges of counsel to the Administrative Agent and to the several Lenders (other than those incurred in connection with the compliance by the relevant Lender with the provisions of subsection 2.20(a)), and (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay by the Borrower in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind or nature whatsoever (it being understood that this shall not include the fees and disbursements of counsel to any of the Lenders (other than Chase) in connection with (i) their review of this Agreement prior to the Closing Date or (ii) prior to the occurrence of a Default or an Event of Default, any amendment or waiver to this Agreement or any assignment to another Lender pursuant to the terms hereof) with respect to the execution, delivery, enforcement, performance and administration of this Agreement (all the foregoing in this clause (d), collectively, the “indemnified liabilities”); provided that the Borrower shall have no obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or any such Lender. The agreements in this subsection 10.5 shall survive repayment of the Loans and all other amounts payable hereunder.             10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the obligations owing hereunder and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.             (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (“Participants”) participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder; provided that such Lender shall have given prior written notice to the Borrower of the identity of such Participant. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any obligation owing to it hereunder for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of this Agreement, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final maturity of 62 -------------------------------------------------------------------------------- the Loans, in each case to the extent subject to such participation. The Borrower hereby agrees that each Participant shall be entitled to the benefits of subsections 2.17, 2.18 and 2.19 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.             (c) In addition to assignments pursuant to subsection 2.5(d), any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof (other than to an affiliate of a Lender, if such assignment would result in increased costs to the Borrower) or, with the consent of the Borrower (which shall not be unreasonably withheld), the Administrative Agent, the Issuing Lender and the Swing Line Lenders, to an additional bank or financial institution (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower, the Administrative Agent, the Issuing Lender and the Swing Line Lenders) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, (i) if any U.S. Lender assigns a part of its rights and obligations under this Agreement in respect of its U.S. Revolving Credit Loans and/or U.S. Commitment to an Assignee, such U.S. Lender shall assign proportionate interests in (A) its participations in the Swing Line Loans and Letters of Credit and other rights and obligations hereunder in respect of the Swing Line Loans and Letters of Credit to such Assignee and (B) Multicurrency Loans and Multicurrency Commitments (provided, that with the consent of the Borrower and the Administrative Agent, a Lender may assign portions of its U.S. Commitment without assigning a proportionate share of its Multicurrency Commitment if either (x) such proportionate share of such Multicurrency Commitment shall be assumed by another Lender or (y) if the Borrower so agrees, such proportionate share of such Multicurrency Commitment shall be terminated) and (ii) unless the Borrower and the Administrative Agent otherwise consent, any such assignment to an Assignee which is not a Lender (before giving effect to such assignment) or an affiliate thereof shall be in a minimum amount of $5,000,000. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of (and be) a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding anything to the contrary contained herein, any Lender may sell, transfer, assign or grant participations in all or any part of the Competitive Loans made by it.             (d) The Administrative Agent shall maintain at its address referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in 63 -------------------------------------------------------------------------------- the Register shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection and copying by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall provide a copy of the Register to the Borrower on a monthly basis.             (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) together with payment by the Lender to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the assigning Lender, its Assignee and the Borrower.             (f) The Borrower authorizes each Lender to disclose to any prospective Participant, any Participant or any prospective Assignee (each, a “Transferee”) any and all financial information in such Lender’s possession concerning the Borrower and its affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to all Lenders by or on behalf of the Borrower in connection with their respective credit evaluations of the Borrower and its affiliates prior to becoming a party to this Agreement; provided that (i) such Transferee has executed and delivered to the Borrower a written confidentiality agreement substantially in the form of that which has been executed and delivered by each Lender prior to the date hereof and (ii) in the case of any information other than that contained in the Confidential Information Memorandum, the Borrower has been informed of the identity of such Transferee and has consented to the disclosure of such information thereto. Nothing contained in this subsection 10.6(f) shall be deemed to prohibit the delivery to any Transferee of any financial information which is otherwise publicly available.             (g) Nothing herein shall prohibit any Lender from pledging or assigning all or any portion of its Loans to any Federal Reserve Bank in accordance with applicable law. In order to facilitate such pledge or assignment, the Borrower hereby agrees that, upon request of any Lender at any time and from time to time after the Borrower has made its initial borrowing hereunder, the Borrower shall provide to such Lender, at the Borrower’s own expense, a Note evidencing the U.S. Revolving Credit Loans owing to such Lender.             10.7 Adjustments. If any Lender (a “benefitted Lender”) shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(g), or otherwise), such that it has received aggregate payments or collateral on account of its Loans or the Reimbursement Obligations owing to it in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Loans which are 64 -------------------------------------------------------------------------------- then due and payable, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender’s Loans or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.             10.8 Loan Conversion/Participations. (a) On the Conversion Date, if the ratio of (i) the aggregate amount of the Multicurrency Loans, the U.S. Revolving Credit Loans and the Swing Line Participation Amounts of the Multicurrency Lenders plus the L/C Obligations owed to the Multicurrency Lenders to (ii) the aggregate amount the Multicurrency Loans, the U.S. Revolving Credit Loans and the Swing Line Participation Amounts of all Lenders plus the L/C Obligations owed to the all Lenders exceeds the U.S. Commitment Percentage of all Multicurrency Lenders (immediately prior to the termination of the Commitment), then the excess amount (the “Excess Loans”) shall be subject to the following adjustments;   (A) To the extent that on the Conversion Date any Multicurrency Lender has any U.S. Revolving Credit Loans outstanding or has any Swing Line Participation Amounts denominated in Dollars, each Non-Multicurrency Lender severally unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Multicurrency Lenders’ U.S. Revolving Credit Loans then outstanding and Swing Line Participation Amounts denominated in Dollars in an amount as may be necessary to cause each Lender’s interest in the aggregate amount of all Loans (other than the Competitive Bid Loans, if any) and L/C Obligations after giving effect to the purchase contemplated by this clause (A) to be equal to its U.S. Commitment Percentage (immediately before the termination of the Commitments) or as near thereto as practicable; provided that the aggregate amount purchased by all Non-Multicurrency Lenders shall not exceed the lesser of (1) the Excess Loans and (2) the total aggregate amount of all L/C Obligations owed to Multicurrency Lenders plus all Multicurrency Lenders’ U.S. Revolving Credit Loans and Swing Line Participation Amounts denominated in Dollars.   (B) To the extent that there remain any Excess Loans not purchased by the Non- Multicurrency Lenders pursuant to the preceding clause (A) (the “Loans to be Converted”) and to the extent not otherwise prohibited by a Requirement of Law or otherwise, all Loans to be Converted shall be converted into Dollars (calculated on the basis of the relevant Spot Exchange Rates as of the Business Day immediately preceding the Conversion Date) (“Converted Loans”), and each Non-Multicurrency Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Converted Loans in such amounts as may be necessary to cause each Lender’s interest in the aggregate amount of all Loans (other than the Competitive Bid Loans, if any) after giving effect to the purchase contemplated by this clause (B) to be equal to its U.S. Commitment Percentage (immediately before the termination of the Commitments). 65 --------------------------------------------------------------------------------   (C) Each U.S. Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amounts of its participation(s), and the proceeds of such participation(s) shall be distributed by the Administrative Agent to each Lender from which a participating interest is being purchased in the amount(s) provided for in the preceding clauses (A) and (B). All Converted Loans shall bear interest at the rate which would otherwise be applicable to ABR Loans.             (b) If, for any reason, the Loans to be Converted, may not be converted into Dollars in the manner contemplated by paragraph (a) of this subsection 10.8, (i) the Administrative Agent shall determine the Dollar Equivalent of the Loans to be Converted, (calculated on the basis of the Spot Exchange Rate as of the Business Day immediately preceding the date on which such conversion would otherwise occur pursuant to paragraph (a) of this subsection 10.8), (ii) effective on such Conversion Date, each Non-Multicurrency Lender severally, unconditionally and irrevocably agrees that it shall purchase in Dollars a participating interest in such Loans to be Converted, in an amount equal to the amount it would have purchased pursuant to clause (B) of paragraph (a) above. Each Non-Multicurrency Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amount(s) of its participation(s), and the proceeds of such participation(s) shall be distributed by the Administrative Agent to each relevant Lender in the amount(s) provided for in the preceding sentence.             (c) If any Non-Excluded Taxes are required to be withheld from any amounts payable by a Lender (the “First Lender”) to another Lender (the “Other Lender”) in connection with its participating interest in any Converted Loan, the Borrower, with respect to the relevant Loans made to it, shall be required to pay increased amounts to the Other Lender receiving such payments from the First Lender but only to the extent the Borrower would have been required under subsection 2.18 to pay such increased amounts if the Borrower had made such payments with respect to the participating interest directly to the Other Lender; provided, however, that the Borrower shall not be required to pay any such amounts to the Other Lender that is not organized under the laws of the United States of America or a state thereof if such Other Lender fails to comply with the requirements of paragraph (b) of subsection 2.18.             (d) Each Non-Multicurrency Lender’s obligation to purchase participating interests pursuant to subsection 10.8(a) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (A) any setoff, counterclaim, recoupment, defense or other right which such Lender or the Borrower may have against any Lender, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 5; (C) any adverse change in the condition (financial or otherwise) of the Borrower; (D) any breach of this Agreement by the Borrower or any other Lender; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.             (e) The Borrower consents to the purchases set forth in paragraphs (a) and (b) of this subsection. 66 --------------------------------------------------------------------------------             10.9 Counterparts. (a) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.             (b) By its signature hereto, each Lender hereby agrees that this Agreement shall become effective immediately upon the execution and delivery on June 23, 2000 by the Borrower and the Administrative Agent of this Agreement. In the event that this Agreement has not been duly executed and delivered by each Person listed on the signature pages hereto (other than the Borrower and the Administrative Agent, with respect to which the execution and delivery of this Agreement shall be a condition precedent to its effectiveness) on or before the date upon which this Agreement becomes effective in accordance with the immediately preceding sentence, this Agreement shall nevertheless become effective with respect to those Persons who have executed and delivered it on or before such effective date and those Persons who have not executed and delivered it (such Persons, the “Non-Executing Banks”) shall be deemed not to be Lenders hereunder.             (c) On the date of effectiveness of this Agreement, the Borrower may (after consultation with the Administrative Agent) designate one or more Lenders (the “Designated Lenders”) to assume the Commitments which would have been held by the Non-Executing Banks and, if the Designated Lenders agree to assume such Commitments, (i) Schedules I and II shall be deemed to be amended to reflect such increase in the respective Commitment of each Designated Lender and the omission of each Non-Executing Bank as a Lender hereunder and (ii) the respective Commitment of each Designated Lender shall be deemed to be such increased amount for all purposes hereunder.             (d) Notwithstanding anything to the contrary contained herein, (i) the Commitment of a Lender shall not be increased (without the prior written consent of such Lender) as a result of the failure of any other Person to execute and deliver this Agreement or otherwise and (ii) in no event shall the aggregate Commitments of all Lenders exceed $1,500,000,000.             10.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.             10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.             10.12 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND 67 -------------------------------------------------------------------------------- UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.             10.13 Confidentiality. Each of the Administrative Agent, the Issuing Lender and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this subsection, to any Assignee of or Participant in, or any prospective Assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this subsection or (ii) becomes available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this subsection shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 68 --------------------------------------------------------------------------------       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.     DELPHI AUTOMOTIVE SYSTEMS CORPORATION By:___________________________________________ Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By:___________________________________________ Name: Title: BANK OF AMERICA, NATIONAL ASSOCIATION, as Syndication Agent and as a Lender By:___________________________________________ Name: Title: BANK ONE, N.A., as Syndication Agent and as a Lender By:___________________________________________ Name: Title: BARCLAYS BANK PLC, as Syndication Agent and as a Lender By:___________________________________________ Name: Title: CITIBANK, N.A., as Syndication Agent and as a Lender By:___________________________________________ Name: Title: 69 --------------------------------------------------------------------------------     DEUTSCHE BANK AG NEW YORK BRANCH, as Syndication Agent By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as a Lender By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Syndication Agent and as a Lender By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED By:___________________________________________ Name: Title: BANCA COMMERCIALE ITALIANA — NEW YORK BRANCH By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: 70 --------------------------------------------------------------------------------     BANCA DI ROMA By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: FLEETBOSTON, N.A By:___________________________________________ Name: Title: THE BANK OF NEW YORK By:___________________________________________ Name: Title: THE BANK OF NOVA SCOTIA By:___________________________________________ Name: Title: BANK OF TOKYO — MITSUBISHI TRUST COMPANY By:___________________________________________ Name: Title: BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: CREDIT INDUSTRIEL ET COMMERCIAL By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: 71 --------------------------------------------------------------------------------     COMERICA BANK By:___________________________________________ Name: Title: COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: CREDIT LYONNAIS, CHICAGO BRANCH By:___________________________________________ Name: Title: DAI ICHI KANGYO BANK LTD By:___________________________________________ Name: Title: FIRST UNION NATIONAL BANK By:___________________________________________ Name: Title: BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH By:___________________________________________ Name: Title: KBC BANK N.V By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: 72 --------------------------------------------------------------------------------     KEYBANK NATIONAL ASSOCIATION By:___________________________________________ Name: Title: HSBC BANK USA By:___________________________________________ Name: Title: HSBC BANK PLC By:___________________________________________ Name: Title: NATIONAL WESTMINSTER BANK PLC NEW YORK BRANCH By:___________________________________________ Name: Title: NATIONAL WESTMINSTER BANK PLC NASSAU BRANCH By:___________________________________________ Name: Title: THE NORTHERN TRUST COMPANY By:___________________________________________ Name: Title: THE SANWA BANK, LTD NEW YORK BRANCH By:___________________________________________ Name: Title: SOCIETE GENERALE By:___________________________________________ Name: Title: TORONTO DOMINION (TEXAS), INC By:___________________________________________ Name: Title: 73 --------------------------------------------------------------------------------     ABN AMRO BANK N.V By:___________________________________________ Name: Title: By:___________________________________________ Name: Title: ARAB BANKING CORPORATION (B.S.C.) NEW YORK BRANCH By:___________________________________________ Name: Title: THE NORINCHUKIN BANK, NEW YORK BRANCH By:___________________________________________ Name: Title: 74
EXHIBIT 10.3i TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 22, 2000 between Harcourt General, Inc. and James Levy (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 22, 2000 (the "Effective Date") and shall remain in effect until June 21, 2002 (the "Term"); provided, however, that commencing with June 22, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that, following such period (but in no event after Executive has reached 65), the Company shall continue to provide Executive and Executive's spouse and dependents, medical and life insurance coverage (excluding Executive Medical) comparable to the Company's medical and life insurance coverage provided to Executive and at the same cost to Executive as during the period of years following the Termination Date; provided, further, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B. e. Retiree Medical. Following Executive's entitlement to continued activeemployee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool. In the event of a Change of Control, Executive shall be entitled to a 7.27% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. 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, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and 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 Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty 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 the Gross-Up Payment required to be paid. 7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10. 11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company. 15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive. 16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement on the 22nd day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ James Levy                   EXECUTIVE Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); or (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice. Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 50% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1. Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive's age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females. 3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name __________________________________ Date Signed
EXHIBIT 10.1 FIRST AMENDMENT TO RIGHTS AGREEMENT             This FIRST AMENDMENT, dated as of October 10, 2000, is by and between AutoZone, Inc., a Nevada corporation (the "Company"), and First Chicago Trust Company of New York, a New York corporation (the "Rights Agent").             WHEREAS, the Company and the Rights Agent entered into a Rights Agreement dated as of March 21, 2000 (the "Rights Agreement"); and             WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company desires to amend the Rights Agreement as set forth below.             NOW, THEREFORE, the Rights Agreement is hereby amended as follows:         1. Amendment of Section 7.1.             Section 7.1 is amended by changing the Final Expiration Date in clause (i) from March 21, 2010 to October 20, 2000.         2. Effectiveness.             This First Amendment shall be deemed effective as of October 20, 2000 as if executed by both parties hereto on such date. Except as amended hereby, the Rights Agreement shall remain in full force and effect and shall otherwise be unaffected hereby.         3. Miscellaneous.             This First Amendment shall be deemed to be a contract made under the laws of the state of Nevada and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. This First Amendment may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. If any term, provision, covenant or restriction of this First Amendment is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this First Amendment shall remain in full force and effect and shall in no way be affected, impaired or invalidated.             IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the date and year first above written. AUTOZONE, INC. By: /s/ Robert J. Hunt Name: Robert J. Hunt Title: Executive Vice President By: /s/ Harry L. Goldsmith Name: Harry L. Goldsmith Title: Secretary     FIRST CHICAGO TRUST COMPANY OF NEW YORK By: /s/ John H. Ruocco Name: John H. Ruocco Title: Account Manager
EX-10.22 4 espp.htm EMPLOYEE STOCK PURCHASE PLAN Employee Stock Purchase Plan MARKETWATCH.COM, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN As Adopted July 12, 2000 1. Establishment of Plan. MarketWatch.com, Inc. (the "Company") proposes to grant options for purchase of the Company's Common Stock to eligible employees of the Company and its Participating Subsidiaries (as hereinafter defined) pursuant to this Employee Stock Purchase Plan (this "Plan"). For purposes of this Plan, "Parent Corporation" and "Subsidiary" shall have the same meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). "Participating Subsidiaries" are Parent Corporations or Subsidiaries that the Board of Directors of the Company (the "Board") designates from time to time as corporations that shall participate in this Plan. The Company intends this Plan to qualify as an "employee stock purchase plan" under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. A total of 500,000 shares of the Company's Common Stock is reserved for issuance under this Plan. In addition, on each January 1, the aggregate number of shares of the Company's Common Stock reserved for issuance under the Plan shall be increased automatically by a number of shares purchased under the Plan in the preceding calendar year; provided that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Such number shall be subject to adjustments effected in accordance with Section 14 of this Plan. 2. Purpose. The purpose of this Plan is to provide eligible employees of the Company and Participating Subsidiaries with a convenient means of acquiring an equity interest in the Company through payroll deductions, to enhance such employees' sense of participation in the affairs of the Company and Participating Subsidiaries, and to provide an incentive for continued employment. 3. Administration. This Plan shall be administered by the Compensation Committee of the Board (the "Committee"). Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all participants. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. 4. Eligibility. Any employee of the Company or the Participating Subsidiaries is eligible to participate in an Offering Period (as hereinafter defined) under this Plan except the following: (a) employees who are not employed by the Company or a Participating Subsidiary prior to the beginning of such Offering Period; (b) employees who are customarily employed for twenty (20) hours or less per week; (c) employees who are customarily employed for five (5) months or less in a calendar year; (d) employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries; and (e) individuals who provide services to the Company or any of its Participating Subsidiaries as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes. 5. Offering Dates. The offering periods of this Plan (each, an "Offering Period") shall be of six (6) months duration commencing on February 15 and August 15 of each year and ending on August 14 and February 14 of each year during which payroll deductions of the participants are accumulated under this Plan. The first business day of each Offering Period is referred to as the "Offering Date". The last business day of each Offering Period is referred to as the "Purchase Date". The Committee shall have the power to change the Offering Dates, the Purchase Dates and the duration of Offering Periods without stockholder approval if such change is announced prior to the relevant Offering Period, or prior to such other time period as specified by the Committee. 6. Participation in this Plan. Eligible employees may become participants in an Offering Period under this Plan on the first Offering Date after satisfying the eligibility requirements by delivering a subscription agreement to the Company's Human Resource Department (the "Human Resource Department") Company prior to such Offering Date, or such other time period as specified by the Committee. Notwithstanding the foregoing, the Committee may set a later time for filing the subscription agreement authorizing payroll deductions for all eligible employees with respect to a given Offering Period. An eligible employee who does not deliver a subscription agreement to the Human Resource Department by such date after becoming eligible to participate in such Offering Period shall not participate in that Offering Period or any subsequent Offering Period unless such employee enrolls in this Plan by filing a subscription agreement with the Human Resource Department prior to such Offering Date, or such other time period as specified by the Committee. Once an employee becomes a participant in an Offering Period, such employee will automatically participate in the Offering Period commencing immediately following the last day of the prior Offering Period unless the employee withdraws or is deemed to withdraw from this Plan or terminates further participation in the Offering Period as set forth in Section 11 below. Such participant is not required to file any additional subscription agreement in order to continue participation in this Plan. 7. Grant of Option on Enrollment. Enrollment by an eligible employee in this Plan with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such employee of an option to purchase on the Purchase Date up to that number of shares of Common Stock of the Company determined by dividing (a) the amount accumulated in such employee's payroll deduction account during such Offering Period by (b) the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Offering Date (but in no event less than the par value of a share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Purchase Date (but in no event less than the par value of a share of the Company's Common Stock), provided, however, that the number of shares of the Company's Common Stock subject to any option granted pursuant to this Plan shall not exceed the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date. The fair market value of a share of the Company's Common Stock shall be determined as provided in Section 8 below. 8. Purchase Price. The purchase price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of: (a) The fair market value on the Offering Date; or (b) The fair market value on the Purchase Date. For purposes of this Plan, the term "Fair Market Value" means, as of any date, the value of a share of the Company's Common Stock determined as follows: (a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination; (b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading; (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination; or (d) if none of the foregoing is applicable, by the Board in good faith. 9. Payment Of Purchase Price; Changes In Payroll Deductions; Issuance Of Shares. (a) The purchase price of the shares is accumulated by regular payroll deductions made during each Offering Period. The deductions are made as a percentage of the participant's compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. Compensation shall mean all W-2 cash compensation, including, but not limited to, base salary, wages, commissions, overtime and shift premiums, provided, however, that for purposes of determining a participant's compensation, any election by such participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code shall be treated as if the participant did not make such election. Payroll deductions shall commence on the first payday of the Offering Period and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan. (b) A participant may increase or decrease the rate of payroll deductions during an Offering Period by filing with the Human Resource Department a new authorization for payroll deductions, in which case the new rate shall become effective for the next payroll period commencing after the Human Resource Department's receipt of the authorization and shall continue for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, but not more than one (1) change may be made effective during any Offering Period. A participant may increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing with the Human Resource Department a new authorization for payroll deductions prior to the beginning of such Offering Period, or prior to such other time period as specified by the Committee. (c) A participant may reduce his or her payroll deduction percentage to zero during an Offering Period by filing with the Human Resource Department a request for cessation of payroll deductions. Such reduction shall be effective beginning with the next payroll period after the Human Resource Department's receipt of the request and no further payroll deductions will be made for the duration of the Offering Period. Payroll deductions credited to the participant's account prior to the effective date of the request shall be used to purchase shares of Common Stock of the Company in accordance with Section (e) below. A participant may not resume making payroll deductions during the Offering Period in which he or she reduced his or her payroll deductions to zero. (d) All payroll deductions made for a participant are credited to his or her account under this Plan and are deposited with the general funds of the Company. No interest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. (e) On each Purchase Date, so long as this Plan remains in effect and provided that the participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the participant wishes to withdraw from that Offering Period under this Plan and have all payroll deductions accumulated in the account maintained on behalf of the participant as of that date returned to the participant, the Company shall apply the funds then in the participant's account to the purchase of whole shares of Common Stock reserved under the option granted to such participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The purchase price per share shall be as specified in Section 8 of this Plan. Any cash remaining in a participant's account after such purchase of shares shall be refunded to such participant in cash, without interest; provided, however that any amount remaining in such participant's account on a Purchase Date which is less than the amount necessary to purchase a full share of Common Stock of the Company shall be carried forward, without interest, into the next Offering Period, as the case may be. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the participant, without interest. No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date. (f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the participant's benefit representing the shares purchased upon exercise of his or her option. (g) During a participant's lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The participant will have no interest or voting right in shares covered by his or her option until such option has been exercised. 10. Limitations on Shares to be Purchased. (a) No participant shall be entitled to purchase stock under this Plan at a rate which, when aggregated with his or her rights to purchase stock under all other employee stock purchase plans of the Company or any Subsidiary, exceeds $25,000 in fair market value, determined as of the Offering Date (or such other limit as may be imposed by the Code) for each calendar year in which the employee participates in this Plan. The Company shall automatically suspend the payroll deductions of any participant as necessary to enforce such limit provided that when the Company automatically resumes such payroll deductions, the Company must apply the rate in effect immediately prior to such suspension. (b) No participant shall be entitled to purchase more than the Maximum Share Amount (as defined below) on any single Purchase Date. Prior to the commencement of any Offering Period or prior to such time period as specified by the Committee, the Committee may, in its sole discretion, set a maximum number of shares which may be purchased by any employee at any single Purchase Date (hereinafter the "Maximum Share Amount"). Until otherwise determined by the Committee, there shall be no Maximum Share Amount. If a new Maximum Share Amount is set, then all participants must be notified of such Maximum Share Amount prior to the commencement of the next Offering Period. The Maximum Share Amount shall continue to apply with respect to all succeeding Purchase Dates and Offering Periods unless revised by the Committee as set forth above. (c) If the number of shares to be purchased on a Purchase Date by all employees participating in this Plan exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a participant's option to each participant affected. (d) Any payroll deductions accumulated in a participant's account which are not used to purchase stock due to the limitations in this Section 10 shall be returned to the participant as soon as practicable after the end of the applicable Offering Period, without interest. 11. Withdrawal. (a) Each participant may withdraw from an Offering Period under this Plan by signing and delivering to the Human Resource Department a written notice to that effect on a form provided for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee. (b) Upon withdrawal from this Plan, the accumulated payroll deductions shall be returned to the withdrawn participant, without interest, and his or her interest in this Plan shall terminate. In the event a participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for payroll deductions in the same manner as set forth in Section 6 above for initial participation in this Plan. 12. Termination of Employment. Termination of a participant's employment for any reason, including retirement, death or the failure of a participant to remain an eligible employee of the Company or of a Participating Subsidiary, immediately terminates his or her participation in this Plan. In such event, the payroll deductions credited to the participant's account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest. For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Subsidiary in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. 13. Return of Payroll Deductions. In the event a participant's interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the participant all payroll deductions credited to such participant's account. No interest shall accrue on the payroll deductions of a participant in this Plan. 14. Capital Changes. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each option under this Plan which has not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under this Plan but have not yet been placed under option (collectively, the "Reserves"), as well as the price per share of Common Stock covered by each option under this Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from a stock split or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of any consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Committee, whose determination shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee. The Committee may, in the exercise of its sole discretion in such instances, declare that this Plan shall terminate as of a date fixed by the Committee and give each participant the right to purchase shares under this Plan prior to such termination. In the event of (i) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the options under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all participants), (ii) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (iii) the sale of all or substantially all of the assets of the Company or (iv) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, the Plan will continue with regard to Offering Periods that commenced prior to the closing of the proposed transaction and shares will be purchased based on the Fair Market Value of the surviving corporation's stock on each Purchase Date, unless otherwise provided by the Committee consistent with pooling of interests accounting treatment. The Committee may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, or in the event of the Company being consolidated with or merged into any other corporation. 15. Nonassignability. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect. 16. Reports. Individual accounts will be maintained for each participant in this Plan. Each participant shall receive promptly after the end of each Offering Period a report of his or her account setting forth the total payroll deductions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Offering Period, as the case may be. 17. Notice of Disposition. Each participant shall notify the Company in writing if the participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the "Notice Period"). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company's transfer agent to notify the Company of any transfer of the shares. The obligation of the participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates. 18. No Rights to Continued Employment. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Subsidiary, or restrict the right of the Company or any Participating Subsidiary to terminate such employee's employment. 19. Equal Rights And Privileges. All eligible employees shall have equal rights and privileges with respect to this Plan so that this Plan qualifies as an "employee stock purchase plan" within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company, the Committee or the Board, be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan. 20. Notices. All notices or other communications by a participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 21. Term; Stockholder Approval. After this Plan is adopted by the Board, this Plan will become effective on August 15, 2000. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares pursuant to this Plan shall occur prior to such stockholder approval. This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) ten (10) years from the adoption of this Plan by the Board. 22. Designation of Beneficiary. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under this Plan in the event of such participant's death subsequent to the end of an Offering Period but prior to delivery to him of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under this Plan in the event of such participant's death prior to a Purchase Date. (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such participant's death, the Company shall deliver such shares or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 23. Conditions Upon Issuance of Shares; Limitation on Sale of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. 24. Applicable Law. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of California. 25. Amendment or Termination of this Plan. The Board may at any time amend, terminate or extend the term of this Plan, except that any such termination cannot affect options previously granted under this Plan, nor may any amendment make any change in an option previously granted which would adversely affect the right of any participant, nor may any amendment be made without approval of the stockholders of the Company obtained in accordance with Section 21 above within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. Notwithstanding the foregoing, the Board may make such amendments to the Plan as the Board determines to be advisable, if the continuation of the Plan or any Offering Period would result in financial accounting treatment for the Plan that is different from the financial accounting treatment in effect on the date this Plan is adopted by the Board.
EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT This Executive Employment Agreement (“Agreement”) made effective as of the 17th day of July, 2000, by and between NetRadio Corporation, a Minnesota corporation (“Company”) and Stephen Holderman (“Executive”). WHEREAS, the Executive desires to become employed by the Company on the terms set forth in this Agreement; and WHEREAS, the Company desires to employ the Executive on the terms set forth in this Agreement. NOW THEREFORE, in consideration of the foregoing premises, mutual covenants and obligations contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1.       Employment. Subject to the terms and conditions of this Agreement, the Company hereby employs Executive, and Executive hereby accepts employment with the Company, as its Executive Vice President of Sales and Marketing. Executive agrees to devote substantially all of his working time and to give his best effort to performing his duties on behalf of Company. Company agrees not to transfer Executive to another position during the term of this Agreement without Executive’s consent. 2.       Term. Unless sooner terminated as provided herein, the term of Executive’s employment hereunder is two (2) years from the date of execution of this Agreement (the “Employment Period”). This Agreement may be renewed after the Employment Period by mutual written agreement between Executive and Company. 3.       Compensation. During the Employment Period, Executive’s compensation shall be as follows:   3.1. Salary. The Company will pay to Executive a base salary of $175,000 per calendar year, prorated for partial calendar years. Executive’s salary will be paid in semi-monthly installments or in accordance with the general practices of the Company. In no event will Executive’s salary be reduced unless such reduction is part of a general reduction in the base salary for all executive officers of the Company implemented as a result of financial difficulties experienced by the Company.     3.2. Guaranteed Bonus. The Company will pay Executive a guaranteed annual bonus of $35,000 during each year of the Employment Period, with the payments to be made as follows:         (i) Year One: $5,000 upon Executive’s commencement of employment, and payments of $7,500 at 3-month intervals until the total of $35,000 has been paid; and   --------------------------------------------------------------------------------         (ii) Year Two: payments of $8,750 at 3-month intervals until the total of $35,000 has been paid.   3.3. Incentive Compensation. Executive will be paid commission on cash-based advertising sales as follows: Executive will receive a 4% commission on new cash-based advertising revenue, and 2% commission on cash-based advertising revenue from companies which have previously placed ads with Company. Executive will receive commissions on all cash-based advertising sales, and not just sales generated by his direct or indirect efforts. Commissions will be deemed earned when the payment is received by the Company, with payment to be made in the month following receipt of payment by the Company. The term “cash based advertising revenue” excludes “barter” arrangements in which the Company receives something other than cash in exchange for placing advertisements.     3.4. Fringe Benefits. Executive will be entitled to participate in and to receive benefits under such benefit plans as the Company may establish and maintain from time to time during the term hereof and for which Executive qualifies, subject, however, to the Company’s right to amend, supplement or terminate such plans at any time in its sole discretion.     3.5. Vacation. Executive will be entitled to 20 days of paid vacation per calendar year of Executive’s employment hereunder, pro-rated for partial calendar years.     3.6. Stock Options. Executive will be granted 150,000 nonqualified options for shares of NetRadio common stock, subject to the terms of the separate Nonqualified Stock Option Agreement between the Company and Executive entered into in connection with and in consideration of Executive’s commencement of employment with the Company (the “Stock Option Agreement”). Those shares shall vest according to the following schedule, provided Executive remains employed with the Company on the scheduled vesting date: 50,000 shares shall vest on the first anniversary date of Executive’s employment; 50,000 shares shall vest on the second anniversary date of Executive’s employment; and 50,000 shares shall vest on the third anniversary date of Executive’s employment; however, if Executive’s employment is not continued after the Employment Period, and provided Executive has not been terminated pursuant to Section 4.1 below, the 50,000 shares which would have otherwise vested on Executive’s third anniversary date shall vest on the final day of the Employment Period. The strike price for all shares granted to Executive hereunder shall be the market value the date the option is approved by the Company’s Board of Directors. If there is any inconsistency between the language of this Agreement and the Stock Option Agreement with respect to stock options, the terms of the Stock Option Agreement shall control.     3.7. Expenses. The Company will reimburse Executive for all reasonable business expenses incurred in performing services hereunder, upon Executive’s presentation to the Company from time to time of itemized accounts describing such expenditures, all in accordance with the Company’s policy in effect from time to time with respect to the reimbursement of business expenses. 2 --------------------------------------------------------------------------------   3.8 Withholding. All payments to Executive under this Agreement will be subject to applicable withholding for federal and state income taxes, FICA contributions and other required deductions. 4.       Termination. This Agreement may be terminated as follows:   4.1 By the Company for Company Cause. The Company may terminate this Agreement for Company Cause upon Executive’s breach of this Agreement, as defined below. Except as to Sections 4.1(ii), 4.1(iii) and 4.1(iv) below, the Company shall give Executive sixty (60) days advance written notice of such termination, which notice shall be via registered mail, return receipt requested, and which shall describe in detail the acts or omissions which the Company believes constitute such breach. The Company shall not be allowed to terminate this Agreement pursuant to Section 4.1(i) if Executive is able to cure such breach within sixty (60) days following delivery of such notice. However, in no event shall a breach of the provisions of Sections 4.1(ii), 4.1(iii) and 4.1(iv) be subject to cure. Acts or omissions which constitute a breach of this Agreement constituting “Company Cause” shall be limited to the following:         (i) Refusal of the Executive to perform the Executive’s reasonable duties hereunder or substantial and habitual neglect by Executive of his obligations under this Agreement which is not remedied by Executive within sixty (60) days after his receipt of written notice; (ii) Gross misconduct of Executive which is materially detrimental to the Company; (iii) Any fraud, theft or embezzlement by Executive of the Company’s assets; or (iv) The commission of any other unlawful or criminal act which is punishable as a felony or any crime involving dishonesty.   4.2 Death. Subject to the provisions of Section 5, this Agreement shall terminate upon Executive’s death.     4.3 Total Disability. Subject to the provisions of Section 5, this Agreement shall terminate upon Executive’s Total Disability defined to mean that Executive is unable to perform the essential duties of his position, either with or without reasonable accommodation, for a period of 180 days.     4.4 By Executive for Executive Cause. Executive shall have the right to terminate this Agreement upon thirty (30) days written notice to the Company upon the occurrence, without Executive’s consent, of any one or more of the following events, provided that Executive shall not have the right to terminate this Agreement if the Company is able to cure such event within thirty (30) days following delivery of such notice:         (i) Executive is removed without his consent as Executive Vice President of Sales and Marketing of the Company and such removal is not pursuant to Section 4.1 hereof; 3 --------------------------------------------------------------------------------          (ii) Executive’s duties as Executive Vice President of Sales and Marketing are reduced to such an extent as to constitute a constructive removal of Executive from the position of Executive Vice President of Sales and Marketing; or  (iii) The Company requires Executive to be based anywhere other than within 50 miles of the Minneapolis/St. Paul, Minnesota metropolitan statistical area, except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Executive has typically undertaken on behalf of NetRadio Corporation prior to the date of this Agreement.   4.5. Remedies for Breach. Nothing in this section shall limit any legal remedies available to Executive for breach of this contract provided. 5.       Consequences of Termination of Agreement.   5.1. Death. In the event that this Agreement is terminated due to Executive’s death, Executive’s estate shall be paid, in addition to any amount due Executive under any other document or agreement with the Company:          (i) His base salary through the end of the month in which his death occurred;  (ii) Any commissions owning to Executive for sales which were made prior to the time of death, to be paid in accordance with paragraph 3.3 of this Agreement;  (iii) His accrued but unpaid vacation days for the year in which his death occurred; and  (iv) Any unpaid expense reimbursement.   5.2. Total Disability. In the event that this Agreement is terminated due to Executive’s Total Disability, Executive shall receive:          (i) His base salary through the end of the sixth (6th) month which defines the Total Disability;  (ii) Any commissions owing to Executive for sales which were made prior to the end of the sixth (6th) month which defines the Total Disability, be paid in accordance with paragraph 3.3 of this Agreement;  (iii) His accrued but unpaid vacation days for the year in which such Total Disability occurred;  (iv) Any unpaid expense reimbursement; and 4 --------------------------------------------------------------------------------          (v) Any stock options which are scheduled to vest prior to the end of the sixth (6th) month which defines the Total Disability shall vest as scheduled.   5.3. Termination by the Company for Company Cause or by Executive Without Executive Cause. If Executive is terminated pursuant to Section 5.1 hereof, or if Executive voluntarily terminates his employment prior to the end of the Employment Period (and such termination is not pursuant to Section 5.5) the Company shall pay to Executive:          (i) His base salary through the termination date and commissions owing for sales which were made prior to the termination date to be paid in accordance with paragraph 3.3 of this Agreement; and  (ii) Any unpaid expense reimbursement   5.4. Termination by Executive for Executive Cause or by the Company Without Company Cause. If Executive terminates this Agreement for Executive Cause, or if the Company terminates this Agreement other than in accordance with Section 4.1 hereof, the Company shall pay or distribute to Executive:          (i) His base salary, bonus and any other payments or distributions to which, but for such termination, Executive would have been entitled under Section 3 hereof for the remaining term of the Employment Period, paid in regular installments according to the Company’s then current standard payroll practices;  (ii) Any commissions which, but for such termination, Executive would have been paid during the remainder of the Employment Period;  (iii) His accrued but unpaid vacation days through the date of termination;  (iv) Any unpaid expense reimbursement; and  (v) All unvested stock options previously granted to Executive shall immediately vest 6.       Change in Control.   6.1. Effect of Termination Due To Change in Control. If, after or due to a “change in control” (as that term is defined below), and prior to the expiration of the Employment Period, Executive’s employment is terminated for any reason, Executive is entitled to the following compensation and benefits:          (i) Executive will receive severance payments for the remainder of the employment period, in an amount equal to remaining salary and bonuses outlined in Paragraph 3 herein, with such payments to be made in the same manner as if Executive had remained employed hereunder; 5 --------------------------------------------------------------------------------          (ii) All unvested stock options previously granted to Executive shall immediately vest;  (iii) Executive shall receive payment for his accrued but unpaid vacation days remaining for the employment period; and  (iv) Any unpaid expense reimbursement   6.2. Change in Control. For purposes of this Section 6.2, the term “Change in Control” shall mean (a) the sale, lease, exchange or other transfer of all or substantially all of the assets of the Company (in one transaction or in a series of related transactions) to a corporation that is not controlled by the Company, (b) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, or (c) a change in control of the Company of a nature that would be required to be reported (assuming such event has not been previously reported) in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the effective date of this Agreement, pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred at such time as (d) any Person becomes after the date of this Agreement the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at election of directors or (e) individuals who constitute the board of directors of the Company on the date of this Agreement cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors comprising the board of directors of the Company on the date of this Agreement (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection of such nomination) shall be, for the purposes of this clause (e), considered as though such person were a member of the board of directors of the Company on the date of this Agreement. 7.        Ownership of Properties; Confidentiality; Restrictive Covenants.   7.1 Confidential Information. Executive will not, during his employment or at any time after termination of his employment, make available or divulge to any person, firm, corporation or other entity any information of or regarding Company or any of Company’s affiliates, or any confidential information pertaining to the business of any customer or supplier of Company, specifically including, but not limited to, any and all versions of Company’s proprietary computer software (including source code and object code, hardware, firmware and related documentation), content development, production and programming strategies, technical information pertaining to Company’s products and services including product data, product specifications, diagrams, flow charts, drawings, test results, processes, inventions, research projects and product development, trade secrets, customer lists and customer information, supplier lists and supplier information, purchasing techniques, advertising strategies, business policies, business plans, financial information including costs 6 --------------------------------------------------------------------------------   information, profits, sales information, accounting and unpublished financial information, methods of operation, marketing programs and methods, customer price lists, information concerning Company’s current and former employees including their compensation, strengths, weaknesses and skills, information submitted to Company by its customers, suppliers, employees, consultants or co-ventures, or any other confidential or secret information concerning the business and affairs of Company or any of its affiliates that is not generally known to the public (hereafter, collectively referred to as “Confidential Information”).   7.2 Prohibition Against Use of Confidential Information. Executive will not, during or subsequent to the termination of Executive’s employment under this Agreement, use or disclose other than in connection with Executive’s employment with the Company, any Confidential Information to any person not employed by the Company or not authorized by the Company to receive such Confidential Information. The obligations contained in Section 7 will survive as long as the Company in its sole judgement considers the information to be Confidential Information.   7.3 Return of Proprietary Property. Executive agrees that all property in Executive’s possession belonging to the Company including, without limitation, all documents, reports, manuals, memoranda, electronic data, computer printouts, customer lists, Company credit cards, keys, products, access cards, Company automobiles and all other property relating to the business of the Company are the exclusive property of the Company, even if the Executive authored, developed, created or assisted in authoring, developing or creating such property. Executive shall return to the Company all such documents and property which are in Executive’s possession or subject to Executive’s control, and all copies of any of the foregoing immediately upon termination of Executive’s employment or at such earlier time as the Company may reasonably request.   7.4 Restrictive Covenants. During the term of Executive’s employment with Company, and for a period of six (6) months thereafter, Executive will not:          (i) Own, manage, operate or control, or participate in the ownership, management, operation or control of, or be employed by, or act as a consultant or advisor to or be connected in any manner with, any corporation, person, firm or other entity that is competitive with the Company. Nothing herein will prevent Executive from owning any percentage of a publicly-traded company, provided it does not compete with the Company;  (ii) Solicit customers, or the business of any person, firm, corporation or other entity who shall have been a customer or account of Company or any of Company’s affiliates while Executive was employed by Company for the purpose of selling to such customer or account any product or service similar to or which competes with any product or service which shall have been sold by Company or any of Company’s affiliates during Executive’s employment with Company; 7 --------------------------------------------------------------------------------          (iii) Induce or attempt to induce any employee of or consultant to Company to do any of the foregoing or to discontinue such person’s association with Company; or  (iv) During Executive’s employment with Company, Executive shall not engage in any business activity that is competitive with Company’s business activities. Further, during Executive’s employment with Company, Executive shall not engage in any other activities that conflict with Company’s best interests   7.5 Acknowledgment of Outside Interests. The parties acknowledge that Executive may provide consultation from time to time, and/or sit on the board of directors of the following entities, and agree that such activity shall not violate the terms of this Agreement, provided that Executive continues to devote substantially all of his time and to give his best effort to performing his duties on behalf of Company:          (i) Asylum Associates, Ltd., and its successors and assigns (which produces humor-related apparel and gift items);  (ii) Sam & John’s Cookie Company (which produces humor-related apparel and gift items); and  (iii) Pacificnet.com 8.       Miscellaneous.   8.1 Successors and Assigns. This Agreement is binding on and inures to the benefit of the Company’s successors and assigns, provided, however, that this Agreement may not be assigned by any of the parties hereto without the prior written consent of each of the parties hereto. This Agreement shall be binding upon and inure to the benefit of any successor of the Company, including a purchaser of either the stock or assets of the Company, and any such successor shall absolutely and unconditionally assume all of the Company’s obligations hereunder.   8.2 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.   8.3 Construction. Wherever possible, each provision of this Agreement will be interpreted so that it is valid under the applicable law. If any provision of this Agreement is to any extent invalid under the applicable law, that provision will still be effective to the extent it remains valid. The remainder of this Agreement also will continue to be valid, and the entire Agreement will continue to be valid in other jurisdictions. 8 --------------------------------------------------------------------------------   8.4 Waivers. No failure or delay by either the Company or Executive in exercising any right or remedy under this Agreement will waive any provision of this Agreement, nor will any single or partial exercise by either the Company or Executive of any right or remedy under this Agreement preclude either of them from otherwise or further exercising these rights or remedies, or any other rights or remedies granted by any law or any related document.   8.5 Captions. The headings in this Agreement are for convenience of reference only and do not affect the interpretation of this Agreement.   8.6 Modification/Entire Agreement. This Agreement may not be altered, modified or amended except by an instrument in writing signed by all of the parties hereto. No person, whether or not an officer, agent, employee or representative of any party, has made or has any authority to make for or on behalf of that party any agreement, representation, warranty, statement, promise, arrangement or understanding not expressly set forth in this Agreement or in any other document executed by the parties concurrently herewith. This Agreement and all other documents executed by the parties concurrently herewith, including the Stock Option Agreement, constitute the entire agreement between the parties on the subject matters contained herein and supersedes all express or implied, prior or concurrent, with respect to the subject matter hereof.   8.7 Governing Law. The laws of the State of Minnesota shall govern the validity, construction and performance of this Agreement. Courts in the State of Minnesota shall be the exclusive forum for resolving any disputes relating to this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   EXECUTIVE:   /s/ STEVE HOLDERMAN -------------------------------------------------------------------------------- Stephen Holderman   NETRADIO CORPORATION   By: /s/ EDWARD TOMECHKO -------------------------------------------------------------------------------- Edward Tomechko Its: President & CEO 9
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.32 NET LEASE AGREEMENT     THIS NET LEASE AGREEMENT ("Lease"), is made as of this 22nd day of August, 2000, by and between Opus Northwest, L.L.C., a Delaware limited liability company ("Landlord") and Merix Corporation, an Oregon corporation ("Tenant"). WITNESSETH:     Landlord, for and in consideration of the rents, covenants and agreements hereinafter reserved, mentioned and contained on the part of Tenant, its successors and assigns, to be paid, kept, observed and performed, has leased, rented, let and demised, and by these presents does lease, rent, let and demise unto Tenant, and Tenant does hereby take and hire, upon and subject to the conditions and limitations hereinafter expressed, all that parcel of land situated in the City of Wood Village, County of Multnomah and State of Oregon described in Exhibit "A" attached hereto and made a part hereof, together with any appurtenant easements described in said Exhibit "A" (the "Land"), together with all improvements located on and to be constructed thereon (the "Improvements"). The Land and the Improvements are hereinafter referred to as the "Demised Premises." The Demised Premises are subject to the matters listed on the attached Exhibit "B" (the "Permitted Encumbrances") and all applicable laws, rules, ordinances, statutes, regulations, and other governmental requirements (collectively, "Laws"). The structures located upon and being a part of the Demised Premises which are constructed for human occupancy or for storage of goods, merchandise, equipment, or other personal property are collectively called the "Building." ARTICLE I TERM OF LEASE     Section 1.1  Term of Lease.  The initial term of this Lease shall commence on 120 days after the date on which Landlord's Improvements (defined in Section 21.2(a)) are Substantially Completed, as defined in Section 21.2 (l), but no earlier than July 9, 2001, and shall end ten (10) years thereafter (the "Commencement Date"). The initial term of the Lease, as set forth above, is sometimes hereinafter referred to as the "Initial Term." Any reference to the term of this Lease or similar reference shall be a reference to the Initial Term together with any renewal terms (if any) of this Lease or any extensions to or modifications of the Initial Term. Tenant shall not be liable to Landlord for the payment of Basic Rent (as hereinafter defined), Additional Rent (as hereinafter defined), or the payment of any other obligation to be paid by Tenant (except as set forth in Section 21.2) until the Rent Commencement Date as defined in Section 2.3. ARTICLE II CONSTRUCTION OF IMPROVEMENTS     Section 2.1  Landlord's Improvements.  Landlord agrees to construct Landlord's Improvements described on the Outline Plans which are attached hereto and made a part hereof as Exhibit "C" ("Landlord's Improvements") and as provided in Section 21.2. The cost of Landlord's Improvements shall be paid for as provided in Section 21.2. Landlord's Improvements shall be constructed in a good and workmanlike manner in accordance with the Outline Plans and Landlord agrees to complete the construction thereof in accordance with the applicable building code and all other applicable laws, codes, rules, and regulations as they are interpreted and enforced by the governmental bodies having jurisdiction thereof as of the date of Landlord's building permit for Landlord's Improvements. 1 --------------------------------------------------------------------------------     Section 2.2  Excused Delays.  Landlord shall diligently proceed with the construction of the Landlord's Improvements and Substantially Complete the same on or before March 9, 2001 (the "Target Date"); provided, however, if delay is caused or contributed to by any Tenant Delay or by Force Majeure (as defined in Section 21.2(l)), then the time of completion of said construction and the Target Date shall be extended for the additional time caused by such delay. Such delays are each hereinafter referred to as an "Excused Delay." If Landlord's Improvements are not Substantially Completed by the Target Date and if any delay in Substantial Completion of Landlord's Improvements is caused in whole or in part by any Tenant Delay (as defined below), the Commencement Date and the Rent Commencement Date shall be one day earlier for each day, or partial day, of delay in Substantial Completion of Landlord's Improvements caused by any Tenant Delay. If Landlord's Improvements are not Substantially Completed by the Target Date as such date is extended by Excused Delays (the "Actual Target Date"), then the Rent Commencement Date shall be extended by the number of days as follows: (a) the same number of days as there are between the Actual Target Date and the date on which Landlord's Improvements are Substantially Completed, up to and including the 30th day following the Actual Target date; plus (b) twice number of days as there are between the 31st day following the Actual Target Date and the date on which Landlord's Improvements are Substantially Completed, up to and including the 60th day following the Actual Target Date; plus (c) three times the number of days as there are between the 61st day following the Actual Target Date and the date on which Landlord's Improvements are Substantially Completed.     Section 2.3  Possession of Demised Premises.  Tenant shall be responsible for Landlord's increased cost of labor and materials if any, and loss of rent as provided in Section 2.2, arising out of delay in the completion of the Demised Premises caused by any Tenant Delay. Tenant shall not have any right to possession or use of the Demised Premises until the date upon which the Demised Premises are Substantially Completed and ready for occupancy by Tenant. If Tenant occupies any portion of the Demised Premises prior to Substantial Completion of the Landlord's Improvements, the terms of this Lease shall apply to such occupancy or use of the Demised Premises by Tenant. Basic Rent, Additional Rent, and the payment of other obligations to be paid by Tenant shall commence on the Commencement Date (the "Rent Commencement Date"). Tenant shall be allowed to install its machinery, equipment, fixtures and other personal property on the Demised Premises (which are not part of the Tenant's Improvements) during the final stages of completion of construction and as permitted by Landlord from time to time after Substantial Completion of Landlord's Improvements provided that Tenant does not thereby interfere with the completion of construction or occasion any labor dispute as a result of such installations and provided further that Tenant does hereby agree to assume all risk of loss or damage to such machinery, equipment, fixtures and other personal property, and to indemnify, defend and hold harmless Landlord from any loss or damage to such machinery, equipment, fixtures and personal property, and all liability, loss or damage arising from any injury to the property of Landlord, or its contractors, subcontractors or materialmen, and any death or personal injury to any person or persons to the extent arising out of such installations, except for liability, loss or damage caused by Landlord's negligence or willful misconduct or that of its contractors, employees, and agents. Delay in putting Tenant in possession of the Demised Premises shall not serve to extend the Initial Term of this Lease or to make Landlord liable for any damages arising therefrom, except as expressly provided in Section 2.2. Landlord agrees to use reasonable efforts to coordinate Landlord's work with Tenant's installations so long as Tenant's installations do not interfere with or delay construction of Landlord's Improvements or Tenant's Improvements.     Landlord shall be obligated to deliver possession of the Demised Premises to Tenant in accordance with the provisions of Section 2.2 and Section 21.2 if Tenant has executed and delivered this Lease in a form acceptable to Landlord on or before August 25, 2000, and there is no Tenant Delay. Each day between August 25, 2000, and the date on which Tenant executes and delivers this Lease to Landlord shall be a day of Tenant Delay. 2 --------------------------------------------------------------------------------     Section 2.4  Repair and Maintenance.  Save and except for the one year guaranty against defective items occasioned by poor workmanship and/or materials referred to in Section 21.2 below, and Landlord's obligations described in Section 8.1, below, Tenant upon commencement of the term shall have and hold the Demised Premises as the same shall then be without any liability or obligation on the part of Landlord for making any alterations, improvements or repairs of any kind in or about the Demised Premises for the term of this Lease, or any extension or renewal thereof, and Tenant agrees to maintain the Demised Premises and all parts thereof in a good and sufficient state of repair as required by the provisions of this Lease. ARTICLE III BASIC RENT     Section 3.1  Basic Rent.  In consideration of the leasing of the Demised Premises and the construction of the Landlord's Improvements referred to in Article II hereof, Tenant covenants to pay Landlord, without previous demand therefor and without any right of setoff or deduction whatsoever, except as expressly provided in this Lease, at the office of Landlord at: Opus Northwest Management, L.L.C. Agent for Opus Northwest, L.L.C. 10350 Bren Road West Minnetonka, MN 55343 or at such other place as Landlord may from time to time designate in writing, rent, payable monthly, in advance, commencing on the Rent Commencement Date and continuing on the first day of each calendar month thereafter for the succeeding months during the balance of the Initial Term in accordance with the following schedule: Time Period --------------------------------------------------------------------------------   Monthly Rent -------------------------------------------------------------------------------- Rent Commencement Date through 36th Month   $ 41,850.00 37th Month through 60th Month   $ 45.616.00 61st Month through 96th Month   $ 48,353.49 97th Month through 120th Month   $ 52,705.30     The rent provided for in this Section 3.1 is hereinafter called the "Basic Rent."     Section 3.2  Basic Rent Adjustment.  If the Initial Term of this Lease does not commence on the first day of a calendar month or end on the last day of a calendar month, the installment of Basic Rent for the partial calendar month at the commencement or the termination of the term shall be prorated on the basis of the number of days within such calendar month.     Section 3.3  Additional Rent.  The Basic Rent shall be absolutely net to Landlord so that this Lease shall yield, net to Landlord, the Basic Rent specified in Section 3.1 in each year of the term of this Lease and that all impositions, insurance premiums, utility charges, maintenance, repair and replacement expenses, all expenses relating to compliance with laws, and all other costs, fees, charges, expenses, reimbursements and obligations of every kind and nature whatsoever relating to the Demised Premises (excepting only Landlord's portion of the proration of real estate taxes and special assessments for the first and last years of the term of this Lease referred to in Section 5.1, certain taxes of Landlord referred to in the last sentence of Section 5.3 of this Lease, Landlord's obligations set forth in Section 8.1, and Landlord's costs to comply with its obligations under the Lease and the Construction Warranty described in Section 21.2) which may arise or become due during the term or by reason of events occurring during the term of this Lease shall be paid or discharged by Tenant when and as due. In the event Tenant fails to pay or discharge any imposition, insurance premium, utility charge, maintenance repair or replacement expense which it is obligated to pay or discharge, Landlord 3 -------------------------------------------------------------------------------- may, but shall not be obligated to pay the same, after giving Tenant ten business days' prior written notice and an opportunity to cure, and in that event Tenant shall reimburse Landlord therefor within 30 days of invoice and pay the same as additional rent (all such items being sometimes hereinafter collectively referred to as "Additional Rent"), and Tenant hereby agrees to indemnify, defend and save Landlord harmless from and against such impositions, insurance premiums, utility charges, maintenance, repair and replacement expenses, all expenses relating to compliance with Laws, and all other costs, fees, charges, expenses, reimbursements and obligations above referred to.     Sectin 3.4  Delinquent Payments.  Except as expressly set forth in this Lease, all payments of Basic Rent and Additional Rent shall be payable without previous demand therefor and without any right of setoff or deduction whatsoever, and in case of nonpayment of any item of Additional Rent by Tenant when the same is due, Landlord shall have, in addition to all its other rights and remedies, all of the rights and remedies available to Landlord under the provisions of this Lease or by law in the case of nonpayment of Basic Rent. The performance and observance by Tenant of all the terms, covenants, conditions and agreements to be performed or observed by Tenant hereunder shall be performed and observed by Tenant at Tenant's sole cost and expense. Any installment of Basic Rent or Additional Rent or any other charges payable by Tenant under the provisions hereof which shall not be paid when due or within ten days thereafter shall bear interest at an annual rate equal to two percentage points per annum in excess of the published "prime rate" or "base rate" of interest charged by Norwest Bank Minneapolis, N.A. (or similar institution if said Bank shall cease to exist or to publish such a prime rate) from the date when the same is due hereunder until the same shall be paid, but in no event in excess of the maximum lawful rate permitted to be charged by Landlord against Tenant. Said rate of interest is sometimes hereinafter referred to as the "Maximum Rate of Interest."     In addition, any installment of Basic Rent or Additional Rent or any other charges payable by Tenant under the provisions hereof which shall not be paid when due and which remain unpaid ten days thereafter shall be subject to a late payment fee of five (5%) of the unpaid amount.     Section 3.5  Independent Obligations.  Except as expressly set forth in this Lease, the covenants and obligations of Tenant to pay Basic Rent and Additional Rent hereunder shall be independent from any obligations, warranties or representations, express or implied, if any, of Landlord herein contained.     Section 3.6  Security Deposit.  Contemporaneously with the execution hereof, Tenant shall pay to Landlord the sum of ninety-four thousand five hundred fifty-five and No/100 Dollars ($94,555.00) (the "Security Deposit"). The Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that such deposit shall not be considered an advance payment of Basic Rent or Additional Rent or a measure of Landlord's damages in case of default by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to make good any arrearages of Basic Rent, Additional Rent and any other damage, injury, expense or liability caused to Landlord by such event of default. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. So long as no Event of Default occurs, Landlord shall return one-half of the Security Deposit to Tenant after the end of the fifth year of the Term. Provided there exists no Event of Default hereunder, any remaining balance of the Security Deposit shall be returned by Landlord to Tenant upon expiration or earlier termination of this Lease. If Landlord transfers its interest in the Demised Premises during the term of this Lease, Landlord may assign the Security Deposit to the transferee and thereafter shall have no further liability for the return of the Security Deposit.     Section 3.7  Letter of Credit.  As an alternative to providing the Security Deposit described in Section 3.6, Tenant may provide a Letter of Credit if the Letter of Credit is provided in strict accordance with the provisions of this Section 3.7. 4 --------------------------------------------------------------------------------     3.7.1  Definitions.  For purposes of this Section 3.7, the following terms shall have the following definitions:     3.7.1.1  "Draw Event" means each of the following events:     (a)  the occurrence of any one or more of the following: (i) Tenant's filing of a petition under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or Tenant's making a general assignment or general arrangement for the benefit of creditors, (ii) the filing of an involuntary petition under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, or the filing of a petition for adjudication of bankruptcy or for reorganization or rearrangement, by or against Tenant and such filing not being dismissed within 60 days, (iii) the entry of an order for relief under any chapter of the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted, (iv) the appointment of a "custodian," as such term is defined in the Bankruptcy Code (or of an equivalent thereto under any federal, state or foreign bankruptcy or insolvency statute now existing or hereafter enacted), for Tenant, or the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease and possession not being restored to Tenant within 60 days, or (v) the subjection of all or substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease to attachment, execution or other judicial seizure and such subjection not being discharged within 60 days; or     (b)  the failure of Tenant, not less than 60 days prior to the stated expiration date of the Letter of Credit then in effect, to cause an extension, renewal or replacement issuance of the Letter of Credit, at the reduced amount, if any, applicable under Section 3.7.2, to be effected, which extension, renewal or replacement issuance will be made by the L/C Bank, and, except as expressly provided in Section 3.7.2, will otherwise meet all of the requirements of the initial Letter of Credit under this Section 3.7, which failure will be an Event of Default under this Lease; or     (c)  the failure of Tenant to make any payment of Basic Rent, of any monthly installment of Tenant's Share of Expenses or of any other Additional Rent monetary obligation within the time periods required by this Lease; or     (d)  the occurrence of any other Event of Default under this Lease.     3.7.1.2  "Draw Proceeds" means the proceeds of any draw or draws made by Landlord under the Letter of Credit, together with any and all interest accruing thereon.     3.7.1.3  "L/C Bank" means US Bank, or another United States bank which is acceptable to Landlord, in Landlord's sole and absolute discretion, which has a branch office located in Portland, Oregon.     3.7.1.4  "Letter of Credit" means that certain one-year irrevocable letter of credit, in the amount of $94,555.00, issued by the L/C Bank, as required under Section 3.7.2 and, as extended, renewed, replaced or modified from time to time in accordance with this Lease, which letter of credit will be in substantially the same form as attached EXHIBIT "D."     3.7.2  Amount of Letter of Credit; Permitted Reductions.  If Tenant does not deliver the Security Deposit, then upon execution of this Lease, Tenant shall cause the Letter of Credit, in the amount of $94,955.00, to be issued by the L/C Bank in favor of Landlord, and its successors, assigns and transferees. Tenant shall cause the Letter of Credit to remain in full force and effect during the entire Term, in accordance with this Section 3.7. The specific requirements for the Letter of Credit and the rights of Landlord to make draws thereon will be as set forth in this 5 -------------------------------------------------------------------------------- Section 3.7. Subject to this Section 3.7, but anything else in this Lease to the contrary notwithstanding, all of Tenant's rights and all of Landlord's obligations under this Lease are strictly contingent on Tenant's causing the Letter of Credit to remain in full force and effect during the entire Term; provided, however, that so long as there has not occurred any Event of Default or Draw Event, the amount of the Letter of Credit may be reduced after the end of the fifth year of the Term of this Lease, by an amount equal to $47,277.50.     3.7.3  Letter of Credit Draw Events; Payment and Holding of Draw Proceeds.  Immediately upon, and at any time or from time to time after, the occurrence of any one or more Draw Events, Landlord will have the unconditional right to draw on the Letter of Credit, in the full amount thereof or in any lesser amount or amounts as Landlord may determine, in its sole and absolute discretion, in accordance with this Section 3.7. Upon the payment to Landlord of the Draw Proceeds, Landlord will hold the Draw Proceeds in its own name and for its own account, without liability for interest, and as security for the performance by Tenant of Tenant's covenants and obligations (theretofore or thereafter arising) under this Lease, and will be entitled to use and apply any and all of the Draw Proceeds from time to time solely to compensate Landlord hereunder. Among other things, it is expressly understood that the Draw Proceeds will not be considered an advance payment of Basic Rent or Additional Rent or a measure of Landlord's damages resulting from any Event of Default hereunder (past, present or future). Further, immediately upon the occurrence of any one or more Draw Events, Landlord may, from time to time and without prejudice to any other remedy, use the Draw Proceeds (whether from a contemporaneous or prior draw on the Letter of Credit) to the extent necessary to make good any arrearages of Basic Rent or Additional Rent, to pay to Landlord any and all amounts to which Landlord is entitled in connection with the pursuit of any one or more of its remedies hereunder, and to compensate Landlord for any and all other damage, injury, expense or liability caused to Landlord by any and all such Events of Default. Any delays in Landlord's draw on the Letter of Credit or in Landlord's use of the Draw Proceeds as provided in this Section 3.7 will not constitute a waiver by Landlord of any of its rights hereunder with respect to the Letter of Credit or the Draw Proceeds. Following any such application of the Draw Proceeds, Tenant will pay to Landlord on demand the cash amount so applied in order to restore the Draw Proceeds to the full amount thereof immediately prior to such application. Under no circumstances will Landlord be liable for any indirect, consequential, special or punitive damages incurred by Tenant in connection with any draw by Landlord of any Draw Proceeds, Landlord's liability being limited to the reimbursement of costs and expenses as and to the extent expressly provided in this Section 3.7. Nothing in this Lease or in the Letter of Credit will confer upon Tenant any property rights or interests in any Draw Proceeds; provided, however, that upon the expiration or earlier termination of this Lease, and so long as there then exist no Draw Events or Events of Default hereunder, Tenant will then be entitled to the return of any remaining unapplied balance of the Draw Proceeds then held by Landlord, and the Letter of Credit itself (if and to the extent not previously drawn in full).     3.7.4.  Restrictions on Tenant Actions; Waiver of Rights.  Notwithstanding any contrary term or provision of this Lease, Tenant will not take any action, or cause or permit any person or entity to take any action, and Tenant hereby irrevocably waives any and all rights which it may otherwise have at law or in equity, to enjoin, interfere with, restrict or limit, in any way whatsoever, any demand or draw by Landlord or any payment to Landlord under the Letter of Credit. If Tenant, or any person or entity on Tenant's behalf or at Tenant's discretion, brings any proceeding or action to enjoin, interfere with, restrict or limit, in any way whatsoever, any one or more draws, demands or payments under the Letter of Credit, Tenant will be liable for any and all direct, indirect, consequential, special and punitive damages resulting therefrom or arising in connection therewith, including, without limitation, attorneys' fees and costs. 6 --------------------------------------------------------------------------------     3.7.5.  Transferability.  If Landlord transfers its interest in the Demised Premises, or any portion thereof, during the Term, Landlord may assign or transfer the Letter of Credit and any and all Draw Proceeds then held by Landlord to the transferee and thereafter will have no further liability with respect to the Letter of Credit or the Draw Proceeds, including, without limitation, any liability for the return of the Letter of Credit. Tenant will be solely responsible for any and all fees or costs (whether payable to the L/C Bank or otherwise) in order to effect such assignment or transfer of the Letter of Credit, and any failure by Tenant to pay the same will not affect the transferability thereof. ARTICLE IV USE OF DEMISED PREMISES     Section 4.1  Permitted Use.  The Demised Premises including all buildings or other improvements hereafter erected upon the same shall be used for manufacturing, heavy industrial and related uses, office, storage, shipping, clean rooms, and for no other use except as first approved by Landlord in writing, which approval shall not be unreasonably withheld, conditioned, or delayed. Tenant shall not use or occupy the same, or knowingly permit them to be used or occupied, contrary to any statute, rule, order, ordinance, requirement or regulation or other Law applicable thereto, or in any manner which would violate any certificate of occupancy affecting the same, or which would make void or voidable any insurance then in force with respect thereto or which would make it impossible to obtain fire or other insurance thereon required to be furnished hereunder by Tenant, or which would cause structural injury to the improvements or cause the value of the Demised Premises, or any portion thereof, substantially to diminish (reasonable wear and tear excepted), or which would constitute a public or private nuisance or waste or would violate any Hazardous Materials Laws (as defined in Section 9.5), and Tenant agrees that it will promptly, upon discovery of any such use, take all necessary steps to compel the discontinuance of such use.     Section 4.2  Preservation of Demised Premises.  Tenant shall not use, suffer, or permit the Demised Premises, or any portion thereof, to be used by Tenant, any third party or the public in such manner as might impair Landlord's title to the Demised Premises, or any portion thereof, or in such manner as is likely to cause a claim or claims of adverse usage or adverse possession by the public, as such, or third persons, or of implied dedication of the Demised Premises, or any portion thereof. Nothing in this Lease contained and no action or inaction by Landlord shall be deemed or construed to mean that Landlord has granted to Tenant any right, power or permission to do any act or make any agreement that may create, or give rise to or be the foundation for any such right, title, interest, lien, charge or other encumbrance upon the estate of Landlord in the Demised Premises.     Section 4.3  Acceptance of Demised Premises.  Except as provided in Section 21.2 of this Lease, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Demised Premises or the Building or with respect to the suitability or fitness of either for the conduct of Tenant's business or for any other purpose and Tenant accepts the Demised Premises in an "as is" condition. Tenant shall comply with the Permitted Encumbrances and any other recorded covenants, easements, conditions, and restrictions affecting the Demised Premises and the Building which are recorded during the Lease Term and which are approved by Tenant, which approval shall not be unreasonably withheld or delayed. ARTICLE V PAYMENT OF TAXES, ASSESSMENTS, ETC.     Article 5.1  Payment of Impositions.  Tenant covenants and agrees to pay during the term of this Lease, commencing on the Rent Commencement Date, as Additional Rent, before any fine, penalty, interest or cost may be added thereto for the nonpayment thereof, all real estate taxes, special assessments, water rates and charges, sewer rates and charges, including any sum or sums payable for 7 -------------------------------------------------------------------------------- present or future sewer or water capacity, charges for public utilities, street lighting, excise levies, licenses, permits, inspection fees, other governmental charges, and all other charges or burdens of whatsoever kind and nature (including costs, fees, and expenses of complying with any restrictive covenants or similar agreements to which the Demised Premises are subject) incurred in the use, occupancy, ownership, operation, leasing or possession of the Demised Premises, without particularizing by any known name or by whatever name hereafter called, and whether any of the foregoing be general or special, ordinary or extraordinary, foreseen or unforeseen (all of which are sometimes herein referred to as "Impositions"), which at any time during the term may have been or may be assessed, levied, confirmed, imposed upon, or become a lien on the Demised Premises, or any portion thereof, or any appurtenance thereto, rents or income therefrom, and such easements or rights as may now or hereafter be appurtenant or appertain to the use of the Demised Premises. Beginning on the Rent Commencement Date, Tenant shall pay all special (or similar) assessments for public improvements or benefits which, during the term of this Lease shall be laid, assessed, levied or imposed upon or become payable or become a lien upon the Demised Premises, or any portion thereof; provided, however, that if by law any special assessment is payable (without default) or, at the option of Tenant, may be paid (without default) in installments (whether or not interest shall accrue on the unpaid balance of such special assessment), Tenant may pay the same, together with any interest accrued on the unpaid balance of such special assessment in installments as the same respectively become payable and before any fine, penalty, interest or cost may be added thereto for the nonpayment of any such installment and the interest thereon. Tenant shall pay all special assessments or installments thereof (including interest accrued thereon), whether heretofore or hereafter laid, assessed, levied or imposed upon the Demised Premises, or any portion thereof, which are due and payable during the term of this Lease beginning on the Rent Commencement Date. Landlord shall pay all installments of special assessments (including interest accrued on the unpaid balance) which are payable prior to the Rent Commencement Date and after the termination date of the term of this Lease. Tenant shall pay all real estate taxes, whether heretofore or hereafter levied or assessed upon the Demised Premises, or any portion thereof, which are due and payable during the term of this Lease. Landlord shall pay all real estate taxes which are payable prior to the Rent Commencement Date. Provisions herein to the contrary notwithstanding, Landlord shall pay that portion of the real estate taxes and installments of special assessments due and payable in respect to the Demised Premises during the year the term commences and the year in which the term ends which the number of days in said year not within the term of this Lease bears to 365, and Tenant shall pay the balance of said real estate taxes and installments of special assessments during said years.     Article 5.2  Tenant's Right to Contest Impositions.  Tenant shall have the right at its own expense to contest the amount or validity, in whole or in part, of any Imposition by appropriate proceedings diligently conducted in good faith, but only after payment of such Imposition, unless such payment, or a payment thereof under protest, would operate as a bar to such contest or interfere materially with the prosecution thereof, in which event, notwithstanding the provisions of Section 5.l hereof, Tenant may postpone or defer payment of such Imposition if neither the Demised Premises nor any portion thereof would, by reason of such postponement or deferment, be in danger of being forfeited or lost. Upon the termination of any such proceedings, Tenant shall pay the amount of such Imposition or part thereof, if any, as finally determined in such proceedings, the payment of which may have been deferred during the prosecution of such proceedings, together with any costs, fees, including attorney's fees, interest, penalties, fines and other liability in connection therewith. Tenant shall be entitled to the refund of any Imposition, penalty, fine and interest thereon received by Landlord which have been paid by Tenant or which have been paid by Landlord but for which Landlord has been previously reimbursed in full by Tenant. Landlord shall not be required to join in any proceedings referred to in this Section 5.2 unless the provisions of any law, rule or regulation at the time in effect shall require that such proceedings be brought by or in the name of Landlord, in which event Landlord shall join in such proceedings or permit the same to be brought in Landlord's name upon compliance with such 8 -------------------------------------------------------------------------------- reasonable conditions as Landlord may reasonably require. Landlord shall not ultimately be subject to any liability for the payment of any fees, including attorney's fees, costs and expenses in connection with such proceedings. Tenant agrees to pay all such reasonable fees (including reasonable attorney's fees), costs and expenses within 30 days of invoice, to make reimbursement to Landlord for such payment.     Article 5.3  Levies and Other Taxes.  If, at any time during the term of this Lease, any method of taxation shall be such that there shall be levied, assessed or imposed on Landlord, or on the Basic Rent or Additional Rent, or on the Demised Premises or on the value of the Demised Premises, or any portion thereof, a capital levy, sales or use tax, gross receipts tax or other tax on the rents received therefrom, or a franchise tax, or an assessment, levy or charge measured by or based in whole or in part upon such rents or value, Tenant covenants to pay and discharge the same, it being the intention of the parties hereto that the rent to be paid hereunder shall be paid to Landlord absolutely net without deduction or charge of any nature whatsoever foreseeable or unforeseeable, ordinary or extraordinary, or of any nature, kind or description, except as in this Lease otherwise expressly provided. Nothing in this Lease contained shall require Tenant to pay any municipal, state or federal net income or excess profits taxes assessed against Landlord, or any municipal, state or federal capital levy, estate, succession, inheritance or transfer taxes of Landlord, or corporation franchise taxes imposed upon any corporate owner of the fee of the Demised Premises.     Article 5.4  Evidence of Payment.  Upon Landlord's request, Tenant covenants to furnish Landlord, within 30 days after the date upon which any Imposition or other tax, assessment, levy or charge is payable by Tenant, official receipts of the appropriate taxing authority, or other appropriate proof satisfactory to Landlord, evidencing the payment of the same.     Article 5.5  Escrow for Taxes and Assessments.  At Landlord's written demand after any Event of Default and for as long as such Event of Default is uncured, Tenant shall pay to Landlord the known or estimated yearly real estate taxes and assessments payable with respect to the Demised Premises in monthly payments equal to one-twelfth of the known or estimated yearly real estate taxes and assessments next payable with respect to the Demised Premises. From time to time Landlord may re-estimate the amount of real estate taxes and assessments, and in such event Landlord shall notify Tenant, in writing, of such re-estimate and fix future monthly installments for the remaining period prior to the next tax and assessment due date in an amount sufficient to pay the re-estimated amount over the balance of such period after giving credit for payments made by Tenant on the previous estimate. If the total monthly payments made by Tenant pursuant to this Section 5.5 shall exceed the amount of payments necessary for said taxes and assessments, such excess shall be credited on subsequent monthly payments of the same nature; but if the total of such monthly payments so made under this paragraph shall be insufficient to pay such taxes and assessments when due, then Tenant shall pay to Landlord such amount as may be necessary to make up the deficiency. Payment by Tenant of real estate taxes and assessments under this section shall be considered as performance of such obligation under the provisions of Section 5.1 hereof.     Section 5.6  Landlord's Right to Contest Impositions.  In addition to the right of Tenant under Section 5.2 to contest the amount or validity of Impositions, Landlord shall also have the right, but not the obligation, to contest the amount or validity, in whole or in part, of any Impositions not contested by Tenant, by appropriate proceedings conducted in the name of Landlord or in the name of Landlord and Tenant. If Landlord elects to contest the amount or validity, in whole or in part, of any Impositions, such contests by Landlord shall be at Landlord's expense, provided, however, that if the amounts payable by Tenant for Impositions are reduced (or if a proposed increase in such amounts is avoided or reduced) by reason of Landlord's contest of Impositions, Tenant shall reimburse Landlord for costs incurred by Landlord in contesting Impositions, but such reimbursements shall not be in excess of the amount saved by Tenant by reason of Landlord's actions in contesting such Impositions. 9 -------------------------------------------------------------------------------- ARTICLE VI INSURANCE     Sectin 6.1  Tenant's Insurance Obligations.  Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect during the term of this Lease, commencing with the date that rental (full or partial) commences, policies of insurance covering the Improvements constructed, installed or located on the Demised Premises naming the Landlord, as an additional insured, against (a) loss or damage by fire; (b) loss or damage from such other risks or hazards now or hereafter embraced by an "Extended Coverage Endorsement," including, but not limited to, windstorm, hail, explosion, vandalism, riot and civil commotion, damage from vehicles, smoke damage, water damage and debris removal; (c) loss for flood if the Demised Premises are in a designated flood or flood insurance area; (d) loss for damage by earthquake if the Demised Premises are located in an earthquake-prone area; (e) loss from so-called explosion, collapse and underground hazards; and (f) loss or damage from such other risks or hazards of a similar or dissimilar nature which are now or may hereafter be customarily insured against with respect to improvements similar in construction, design, general location, use and occupancy to the Improvements. At all times, such insurance coverage shall be in an amount equal to 100% of the then "full replacement cost" of the Improvements. "Full Replacement Cost" shall be interpreted to mean the cost of replacing the improvements without deduction for depreciation or wear and tear, and it shall include a reasonable sum for architectural, engineering, legal, administrative and supervisory fees connected with the restoration or replacement of the Improvements in the event of damage thereto or destruction thereof. If a sprinkler system shall be located in the Improvements, sprinkler leakage insurance shall be procured and continuously maintained by Tenant at Tenant's sole cost and expense. For the period prior to the date when full or partial rental commences hereunder Landlord, at its sole cost and expense, shall maintain in full force and effect, on a completed value basis, insurance coverage on the Building on Builder's Risk or other comparable coverage.     Section 6.2  Insurance Coverage.  During the term of this Lease, Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect the following insurance coverage:     (a) Comprehensive general liability insurance against any loss, liability or damage on, about or relating to the Demised Premises, or any portion thereof, with limits of not less than Five Million Dollars ($5,000,000.00) combined single limit, per occurrence and aggregate, coverage on an occurrence basis. Any such insurance obtained and maintained by Tenant shall name Landlord as an additional insured therein and shall be obtained and maintained from and with a reputable and financially sound insurance company authorized to issue such insurance in the state in which the Demised Premises are located. Such insurance shall specifically insure (by contractual liability endorsement) Tenant's obligations under Section 20.3 of this Lease.     (b) Boiler and pressure vessel (including, but not limited to, pressure pipes, steam pipes and condensation return pipes) insurance, provided the Building contains a boiler or other pressure vessel or pressure pipes. Landlord shall be named as an additional insured in such policy or policies of insurance.     (c) Such other insurance and in such amounts as may from time to time be reasonably required by Landlord, against other insurable hazards which at the time are commonly insured against in the case of premises and/or buildings or improvements similar in construction, design, general location, use and occupancy to those on or appurtenant to the Demised Premises.     The insurance set forth in this Section 6.2 shall be maintained by Tenant at not less than the limits set forth herein until reasonably required to be changed from time to time by Landlord, in writing, whereupon Tenant covenants to obtain and maintain thereafter such protection in the amount or 10 -------------------------------------------------------------------------------- amounts so required by Landlord. Landlord agrees not to change such limits more often than once every seven years and only if commercially reasonable.     Section 6.3  Insurance Provisions.  All policies of insurance required by Section 6.l shall provide that the proceeds thereof shall be payable to Landlord and if Landlord so requests shall also be payable to any contract purchaser of the Demised Premises and the holder of any mortgages now or hereafter becoming a lien on the fee of the Demised Premises, or any portion thereof, as the interest of such purchaser or holder appears pursuant to a standard named insured or mortgagee clause. Tenant shall not, on Tenant's own initiative or pursuant to request or requirement of any third party, take out separate insurance concurrent in form or contributing in the event of loss with that required in Section 6.1 hereof, unless Landlord is named therein as an additional insured with loss payable as in said Section 6.l provided. Tenant shall immediately notify Landlord whenever any such separate insurance is taken out and shall deliver to Landlord original certificates evidencing the same.     Each policy required under this Article VI shall have attached thereto (a) an endorsement that such policy shall not be cancelled or materially changed without at least 15 days prior written notice to Landlord, and (b) an endorsement to the effect that the insurance as to the interest of Landlord shall not be invalidated by any act or neglect of Landlord or Tenant except for arson committed by Landlord. All policies of insurance shall be written in companies reasonably satisfactory to Landlord and licensed in the state in which the Demised Premises are located. Such certificates of insurance shall be in a form reasonably acceptable to Landlord, shall be delivered to Landlord upon commencement of the term and prior to expiration of such policy, new certificates of insurance, shall be delivered to Landlord not less than 20 days prior to the expiration of the then current policy term.     Section 6.4  Waiver of Subrogation.  Tenant shall cause to be inserted in the policy or policies of insurance required by this Section 6.1 hereof a so-called "Waiver of Subrogation Clause" as to Landlord. Tenant hereby waives, releases and discharges Landlord, its agents and employees from all claims whatsoever arising out of loss, claim, expense or damage to or destruction covered or coverable by insurance required under this Section 6.1 or actually carried whether or not required by this Lease, notwithstanding that such loss, claim, expense or damage may have been caused by Landlord, its agents or employees, and Tenant agrees to look to the insurance coverage only in the event of such loss. Landlord hereby waives, releases and discharges Tenant, its agents and employees from all claims whatsoever arising out of loss, claim, expense or damage to or destruction actually paid for by insurance required under this Section 6.1 or actually carried whether or not required by this Lease, notwithstanding that such loss, claim, expense or damage may have been caused by Tenant, its agents or employees, and Landlord agrees to look to the insurance coverage only in the event of such loss so long as Tenant fully insures all such losses, claims, expenses, damage, and destruction as required by this Lease.     Section 6.5  Tenant's Personal Property.  Tenant shall bear the risk or maintain insurance coverage (including loss of use and business interruption coverage) upon Tenant's business and upon all personal property of Tenant or the personal property of others kept, stored or maintained on the Demised Premises against loss or damage by fire, windstorm or other casualties or causes for such amount as Tenant may desire, and Tenant agrees that such policies shall contain a waiver of subrogation clause as to Landlord. Landlord shall not be responsible for the loss of or damage to any such items.     Section 6.6  Unearned Premiums.  Upon expiration of the term of this Lease, the unearned premiums upon any insurance policies or certificates thereof lodged with Landlord by Tenant shall, subject to the provisions of Article XIII hereof, be payable to Tenant, provided that Tenant shall not then be in an Event of Default.     Section 6.7  Blanket Insurance Coverage.  Nothing in this Article shall prevent Tenant from taking out insurance of the kind and in the amount provided for under the preceding paragraphs of 11 -------------------------------------------------------------------------------- this Article under a blanket insurance policy or policies (certificates thereof reasonably satisfactory to Landlord shall be delivered to Landlord) which may cover other properties owned or operated by Tenant as well as the Demised Premises; provided, however, that any such policy of blanket insurance of the kind provided for shall (a) specify therein the amounts thereof exclusively allocated to the Demised Premises or Tenant shall furnish Landlord and the holder of any fee mortgage with a written statement from the insurers under such policies specifying the amounts of the total insurance exclusively allocated to the Demised Premises, and (b) not contain any clause which would result in the insured thereunder being required to carry any insurance with respect to the property covered thereby in an amount not less than any specific percentage of the Full Replacement Cost of such property in order to prevent the insured therein named from becoming a co-insurer of any loss with the insurer under such policy; and further provided, however, that such policies of blanket insurance shall, as respects the Demised Premises, contain the various provisions required of such an insurance policy by the foregoing provisions of this Article VI. ARTICLE VII UTILITIES     Section 7.1  Payment of Utilities.  From and after the Rent Commencement Date, Tenant will pay, when due, all charges of every nature, kind or description for utilities furnished to the Demised Premises or chargeable against the Demised Premises, including all charges for water, sewage, heat, gas, light, garbage, electricity, telephone, steam, power, or other public or private utility services. Prior to the Rent Commencement Date, Tenant shall pay for all utilities or services at the Demised Premises used by it or its agents, employees or contractors as reasonably allocated by Landlord.     Section 7.2  Additional Charges.  In the event that any charge or fee is required after the Commencement Date by the state in which the Demised Premises are located, or by any agency, subdivision, or instrumentality thereof, or by any utility company furnishing services or utilities to the Demised Premises, as a condition precedent to furnishing or continuing to furnish utilities or services to the Demised Premises, such charge or fee shall be deemed to be a utility charge payable by Tenant. The provisions of this Section 7.2 shall include, but not be limited to, any charges or fees for present or future water or sewer capacity to serve the Demised Premises, any charges for the underground installation of gas or other utilities or services, and other charges relating to the extension of or change in the facilities necessary to provide the Demised Premises with adequate utility services. In the event that Landlord has paid any such charge or fee after the Commencement Date, Tenant shall reimburse Landlord for such utility charge within 30 days of invoice. Nothing contained in this Section 7.2 shall be construed to relieve Landlord of the obligation to finish Landlord's Improvements described in Exhibit "C." ARTICLE VIII REPAIRS     Section 8.1  Tenant's Repairs.  Save and except for the one-year guaranty against defective materials and workmanship or other guaranties provided for in Section 2.4 hereof, and the completion of incomplete items provided for in Section 2.5 hereof, Tenant, at its sole cost and expense, throughout the term of this Lease, shall take good care of the Demised Premises (including any improvements hereafter erected or installed on the Land), and shall keep the same in good order, condition and repair, and irrespective of such guaranty shall make and perform all routine maintenance thereof and all necessary repairs thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, of every nature, kind and description. When used in this Article VIII, "repairs" shall include all necessary replacements, renewals, alterations, additions and betterments; provided, however, if (a) Tenant properly, regularly, and continuously maintains the roof, Building, foundation, and load-bearing walls in good condition, (b) the roof structure or the structural 12 -------------------------------------------------------------------------------- elements of the foundation, exterior walls, or load-bearing walls (each a "Structural Item") fail, or otherwise require replacement, and (c) such failure or need is not due to Tenant's use, Tenant's alterations, or casualty, then Landlord agrees to replace the Structural Item as necessary. The costs, fees and expenses of any such replacement (each a "Replacement Cost") shall be amortized on a straight-line basis over the useful life of the replaced item, as reasonably determined by Landlord, using applicable guidelines provided by GAAP, taking into account interest at the rate of 8% per annum. Tenant shall pay Landlord equal monthly payments of the monthly amortized amount of the Replacement Cost, with interest as provided in this Section, beginning 30 days after Landlord's invoice and continuing on the first day of each calendar month thereafter throughout the Term of the Lease, as it may be extended. All repairs made by Tenant shall be at least equal in quality to the original work and shall be made by Tenant in accordance with all laws, ordinances and regulations whether heretofore or hereafter enacted. The necessity for or adequacy of maintenance and repairs shall be measured by the standards which are appropriate for improvements of similar construction and class, provided that Tenant shall in any event make all repairs necessary to avoid any structural damage or other damage or injury to the Improvements.     Section 8.2  Maintenance.  Tenant, at its sole cost and expense, shall take good care of, repair and maintain all driveways, pathways, roadways, sidewalks, curbs, spur tracks, parking areas, loading areas, landscaped areas, entrances and passageways in good order and repair and shall promptly remove all accumulated snow, ice and debris from any and all driveways, pathways, roadways, sidewalks, curbs, parking areas, loading areas, entrances and passageways, and keep all portions of the Demised Premises, including areas appurtenant thereto, in a clean and orderly condition free of snow, ice, dirt, rubbish, debris and unlawful obstructions.     Section 8.3  Tenant's Waiver of Claims Against Landlord.  Except as expressly set forth in Section 8.1 and Section 21.2 of this Lease, Landlord shall not be required to furnish any services or facilities or to make any repairs or alterations in, about or to the Demised Premises or any improvements hereafter erected thereon. Tenant hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Demised Premises and all improvements hereafter erected thereon, and Tenant hereby waives any rights created by any law now or hereafter in force to make repairs to the Demised Premises or improvements hereafter erected thereon at Landlord's expense except as expressly provided in Section 16.2.     Section 8.4  Prohibition Against Waste.  Tenant shall not do or suffer any waste or damage, disfigurement or injury to the Demised Premises, or any improvements hereafter erected thereon, or to the fixtures or equipment therein, or permit or suffer any overloading of the floors or other use of the Improvements that would place an undue stress on the same or any portion thereof beyond that for which the same was designed.     Section 8.5  Landlord's Right to Effect Repairs.  If Tenant should fail to perform any of its obligations under this Article VIII, then Landlord may, if it so elects, in addition to any other remedies provided herein, effect such repairs and maintenance after giving Tenant ten business days' prior written notice. Any sums expended by Landlord in effecting such repairs and maintenance shall be due and payable, on demand, together with interest thereon at the Maximum Rate of Interest from the date of each such expenditure by Landlord to the date of repayment by Tenant.     Section 8.6  Misuse or Neglect.  Tenant shall be responsible for all repairs to the Building which are made necessary by any misuse or neglect by: (i) Tenant or any of its officers, agents, employees, contractors, licensees, or subtenants; or (ii) any visitors, patrons, guests, or invitees of Tenant or its subtenant while in or upon the Demised Premises. 13 -------------------------------------------------------------------------------- ARTICLE IX COMPLIANCE WITH LAWS AND ORDINANCES     Section 9.1  Compliance with Laws and Ordinances.  Landlord's Improvements and Tenant's Improvements (collectively, the "Initial Improvements") and Landlord's replacements made pursuant to Section 8.1 shall be constructed in accordance with the applicable building code and all other applicable laws, codes, rules, and regulations, as they are interpreted and enforced by the governmental bodies having jurisdiction thereof as of the date of Landlord's building permit for Landlord's Improvements. Tenant shall, throughout the term of this Lease, and at Tenant's sole cost and expense, promptly comply or cause compliance with or remove or cure any violation of any and all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state, municipal and other governmental bodies having jurisdiction over the Demised Premises and the appropriate departments, commissions, boards and officers thereof, and the orders, rules and regulations of the Board of Fire Underwriters where the Demised Premises are situated, or any other body now or hereafter constituted exercising lawful or valid authority over the Demised Premises, or any portion thereof, or exercising authority with respect to the use or manner of use of the Demised Premises, and whether the compliance, curing or removal of any such violation and the costs and expenses necessitated thereby shall have been foreseen or unforeseen, ordinary or extraordinary, and whether or not the same shall be presently within the contemplation of Landlord or Tenant or shall involve any change of governmental policy, or require structural or extraordinary repairs, alterations or additions by Tenant and irrespective of the costs thereof.     Section 9.2  Compliance with Permitted Encumbrances.  Tenant, at its sole cost and expense, shall comply with the Permitted Encumbrances and all agreements, contracts, easements, restrictions, reservations or covenants, if any, hereafter created by Tenant or consented to, in writing, by Tenant or requested, in writing, by Tenant. Tenant shall also comply with, observe and perform all provisions and requirements of all policies of insurance at any time in force with respect to the Demised Premises and required to be obtained and maintained under the terms of Article VI hereof and shall comply with all development permits issued by governmental authorities issued in connection with development of the Demised Premises.     Section 9.3  Tenant's Obligations.  Notwithstanding that it may be usual and customary for Landlord to assume responsibility and performance of any or all of the obligations set forth in this Article IX, and notwithstanding any order, rule or regulation directed to Landlord to perform, Tenant hereby assumes such obligations because, by nature of this Lease, the rents and income derived from this Lease by Landlord are net rentals not to be diminished by any expense incident to the ownership, occupancy, use, leasing, or possession of the Demised Premises or any portion thereof.     Section 9.4  Tenant's Right to Contest Laws and Ordinances.  After prior written notice to Landlord, Tenant, at its sole cost and expense and without cost or expense to Landlord, shall have the right to contest the validity or application of any law or ordinance referred to in this Article IX in the name of Tenant or Landlord, or both, by appropriate legal proceedings diligently conducted but only if compliance with the terms of any such law or ordinance pending the prosecution of any such proceeding may legally be delayed without the incurrence of any lien, charge or liability of any kind against the Demised Premises, or any portion thereof, and without subjecting Landlord or Tenant to any liability, civil or criminal, for failure so to comply therewith until the final determination of such proceeding; provided, however, if any lien, charge or civil liability would be incurred by reason of any such delay, Tenant nevertheless may contest as aforesaid and delay as aforesaid, provided that such delay would not subject Tenant or Landlord to criminal liability and Tenant (a) prosecutes the contest with due diligence and in good faith, and (b) agrees to indemnify, defend and hold harmless Landlord and the Demised Premises from any charge, liability or expense whatsoever.     If necessary or proper to permit Tenant so to contest the validity or application of any such law or ordinance, Landlord shall, at Tenant's sole cost and expense, including reasonable attorney's fees 14 -------------------------------------------------------------------------------- incurred by Landlord, execute and deliver any appropriate papers or other documents; provided, Landlord shall not be required to execute any document or consent to any proceeding which would result in the imposition of any cost, charge, expense or penalty on Landlord or the Demised Premises unless Tenant pays such cost, charge, expense, or penalty.     Section 9.5  Compliance with Hazardous Materials Laws.  Tenant shall at all times and in all respects comply with all federal, state and local laws, ordinances and regulations ("Hazardous Materials Laws") relating to the industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, presence, disposal or transportation of any oil, petroleum products, flammable explosives, asbestos, urea formaldehyde, polychlorinated biphenyls, radioactive materials or waste, or other hazardous, toxic, contaminated or polluting materials, substances or wastes, including without limitation any "hazardous substances," "hazardous wastes," "hazardous materials" or "toxic substances" under any such laws, ordinances or regulations (collectively, "Hazardous Materials"). Upon execution and delivery of this Lease, Tenant shall execute and deliver to Landlord the questionnaire attached as Exhibit "F" to this Lease.     Tenant shall at its own expense procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required for Tenant's use of the Demised Premises, including, without limitation, discharge of (appropriately treated) materials or waste into or through any sanitary sewer system serving the Demised Premises. Except as discharged into the sanitary sewer in strict accordance and conformity with all applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials to be removed from the Demised Premises and transported solely by duly licensed haulers to duly licensed facilities for final disposal of such Hazardous Materials and wastes. Tenant shall in all respects, handle, treat, deal with and manage any and all Hazardous Materials in, on, under or about the Demised Premises in complete conformity with all applicable Hazardous Materials Laws and prudent industry practices regarding the management of such Hazardous Materials. All reporting obligations to the extent imposed upon Tenant by Hazardous Materials Laws are solely the responsibility of Tenant. Upon expiration or earlier termination of this Lease, Tenant shall cause all Hazardous Materials (to the extent such Hazardous Materials are generated, stored, released or disposed of during the term of this Lease by Tenant) to be removed from the Demised Premises and transported for use, storage or disposal in accordance and in compliance with all applicable Hazardous Materials Laws. Tenant shall not take any remedial action in response to the presence of any Hazardous Materials in, on, about or under the Demised Premises or in any Improvements situated on the Land, nor enter into any settlement agreement, consent, decree or other compromise in respect to any claims relating to any way connected with the Demised Premises or the Landlord's Improvements on the Land without first notifying Landlord of Tenant's intention to do so and affording Landlord reasonable opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto. In addition, at Landlord's request, at the expiration of the term of this Lease, Tenant shall remove all tanks or fixtures which were placed on the Demised Premises during the term of this Lease and which contain, have contained or are contaminated with, Hazardous Materials.     Tenant shall immediately notify Landlord in writing of (a) any enforcement, clean-up, removal or other governmental or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (b) any claim made or threatened by any person against Landlord, or the Demised Premises, relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (c) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in, on or about the Demised Premises or with respect to any Hazardous Materials removed from the Demised Premises, including, any complaints, notices, warnings, reports or asserted violations in connection therewith. Tenant shall also provide to Landlord, as promptly as possible, and in any event within five business days after Tenant first receives or sends the same, with copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Demised Premises or Tenant's use thereof. Upon written 15 -------------------------------------------------------------------------------- request of Landlord (to enable Landlord to defend itself from any claim or charge related to any Hazardous Materials Law), Tenant shall promptly deliver to Landlord notices of hazardous waste manifests reflecting the legal and proper disposal of all such Hazardous Materials removed or to be removed from the Demised Premises. All such manifests shall list the Tenant or its agent as a responsible party and in no way shall attribute responsibility for any such Hazardous Materials to Landlord.     Section 9.6  Hazardous Materials Representation by Landlord.  To the best of Landlord's actual and present knowledge, no Hazardous Materials exist or are located on or in the Demised Premises, except as may be disclosed in that certain environmental site assessment prepared by Terra Associates, Inc., dated December 21, 1998 (the "Environmental Report"). Further, Landlord represents to Tenant that, to the best of its knowledge, Landlord has not caused the generation, storage or release of Hazardous Materials upon the Demised Premises, except in accordance with Hazardous Materials Laws. Landlord agrees to arrange for either the Environmental Report to be updated or another level one or level two environmental assessment of the Demised Premises to be performed between the date of execution of this Lease and the Commencement Date, at Landlord's sole cost and expense, and to provide a copy thereof to Tenant.     Section 9.7  Cost of Compliance with Hazardous Materials Laws.  Provisions of Sections 9.5 and 9.6 notwithstanding, Tenant shall be responsible only for that part of the cost of compliance with Hazardous Materials Laws which relates to a breach by Tenant of the covenants contained in this Lease to be kept and performed by Tenant, including but not limited to the covenants contained in Section 9.5. Landlord shall be responsible only for that part of the cost of compliance with Hazardous Materials Laws which relates to a breach by Landlord of the covenants contained in this Lease, including but not limited to the covenants contained in Section 9.6.     Section 9.8  Discovery of Hazardous Materials.  In the event (a) Hazardous Materials are discovered upon the Demised Premises, (b) Landlord has been given written notice of the discovery of such Hazardous Materials, and (c) pursuant to the provisions of Section 9.7, neither Landlord nor Tenant is obligated to pay the cost of compliance with Hazardous Materials Laws, then and in that event Landlord may voluntarily but shall not be obligated to agree with Tenant to take all action necessary to bring the Demised Premises into compliance with Hazardous Materials Laws at Landlord's sole cost. In the event Landlord fails to notify Tenant in writing within 30 days of the notice to Landlord of the discovery of such Hazardous Materials that Landlord intends to voluntarily take such action as is necessary to bring the Demised Premises into compliance with Hazardous Materials Laws, then Tenant may, (i) bring the Demised Premises into compliance with Hazardous Materials Laws at Tenant's sole cost or (ii) provided such Hazardous Materials endanger persons or property in, on, or about the Demised Premises or interfere with Tenant's use of the Demised Premises, terminate the Lease on a date not less than 90 days following written notice of such intent to terminate.     Section 9.9  Indemnification.  Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord), protect and hold Landlord and each of Landlord's officers, directors, partners, employees, agents, attorneys, successors and assigns free and harmless from and against any and all claims, liabilities, damages, costs, penalties, forfeitures, losses or expenses (including attorneys' fees) for death or injury to any person or damage to any property whatsoever (including water tables and atmosphere) arising or resulting in whole or in part, directly or indirectly, from the presence or discharge of Hazardous Materials, in, on, under, upon or from the Demised Premises or the Improvements located thereon or from the transportation or disposal of Hazardous Materials to or from the Demised Premises to the extent caused by Tenant whether knowingly or unknowingly, the standard herein being one of strict liability. Tenant's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repairs, clean-up or detoxification or decontamination of the Demised Premises or the Improvements, and the presence and implementation of any closure, remedial action or other required plans in connection therewith, and shall survive the expiration of or early termination of the term of this Lease. For 16 -------------------------------------------------------------------------------- purposes of the indemnity provided herein, any acts or omissions of Tenant, or its employees, agents, customers, sub-lessees, assignees, contractors or sub-contractors of Tenant (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Tenant.     Section 9.10  Environmental Audits.  Upon request by Landlord during the term of this Lease, prior to the exercise of any renewal term and/or prior to vacating the Demised Premises, Tenant shall undertake and submit to Landlord an environmental audit from an environmental company reasonably acceptable to Landlord which audit shall evidence Tenant's compliance with this Article IX.     Section 9.11  Acts or Omissions Regarding Hazardous Materials.  For purposes of the covenants and agreements contained in Sections 9.5 through 9.10, inclusive, any acts or omissions of Tenant, its employees, agents, customers, sublessees, assignees, contractors or sub-contractors (except Opus Northwest, L.L.C., Landlord and their sub-contractors providing the Initial Improvements) shall be strictly attributable to Tenant; any acts or omissions of Landlord, its employees, agents, customers, assignees, contractors or sub-contractors shall be strictly attributable to Landlord.     Section 9.12  Survival.  The respective rights and obligations of Landlord and Tenant under this Article IX shall survive the expiration or earlier termination of this Lease. ARTICLE X MECHANIC'S LIENS AND OTHER LIENS     Section 10.1  Freedom from Liens.  Tenant shall not suffer or permit any mechanic's lien or other lien to be filed against the Demised Premises, or any portion thereof, by reason of work, labor, skill, services, equipment or materials supplied or claimed to have been supplied to the Demised Premises at the request of Tenant, or anyone holding the Demised Premises, or any portion thereof, through or under Tenant. If any such mechanic's lien or other lien shall at any time be filed against the Demised Premises, or any portion thereof, Tenant shall cause the same to be discharged of record or bonded off, as permitted by statute, on or before the later of (a) 30 days after the date of filing the same or (b) 15 days after Tenant's receipt of notice of the same. If Tenant shall fail to discharge or bond off such mechanic's lien or liens or other lien within such period, then, in addition to any other right or remedy of Landlord, after five days prior written notice to Tenant, Landlord may, but shall not be obligated to, discharge the same by paying to the claimant the amount claimed to be due or by procuring the discharge of such lien as to the Demised Premises by deposit in the court having jurisdiction of such lien, the foreclosure thereof or other proceedings with respect thereto, of a cash sum sufficient to secure the discharge of the same, or by the deposit of a bond or other security with such court sufficient in form, content and amount to procure the discharge of such lien, or in such other manner as is now or may in the future be provided by present or future law for the discharge of such lien as a lien against the Demised Premises. Any amount paid by Landlord, or the value of any deposit so made by Landlord, together with all costs, fees and expenses in connection therewith (including reasonable attorney's fees of Landlord), together with interest thereon at the Maximum Rate of Interest set forth in Section 3.4 hereof, shall be repaid by Tenant to Landlord on demand by Landlord and if unpaid may be treated as Additional Rent. Tenant shall indemnify and defend Landlord against and save Landlord and the Demised Premises, and any portion thereof, harmless from all losses, costs, damages, expenses, liabilities, suits, penalties, claims, demands and obligations, including, without limitation, reasonable attorney's fees resulting from the assertion, filing, foreclosure or other legal proceedings with respect to any such mechanic's lien or other lien. Tenant may obtain financing of its acquisition of its trade fixtures and equipment. Landlord agrees to subordinate its landlord's lien to the rights of the lender using a form reasonably acceptable to Landlord.     All materialmen, contractors, artisans, mechanics, laborers and any other person now or hereafter furnishing any labor, services, materials, supplies or equipment to Tenant with respect to the Demised Premises, or any portion thereof, are hereby charged with notice that they must look exclusively to Tenant to obtain payment for the same. Notice is hereby given that Landlord shall not be liable for any 17 -------------------------------------------------------------------------------- labor, services, materials, supplies, skill, machinery, fixtures or equipment furnished or to be furnished to Tenant upon credit, and that no mechanic's lien or other lien for any such labor, services, materials, supplies, machinery, fixtures or equipment shall attach to or affect the estate or interest of Landlord in and to the Demised Premises, or any portion thereof.     Section 10.2  Landlord's Indemnification.  The provisions of Section 10.1 above shall not apply to any mechanic's lien or other lien for labor, services, materials, supplies, machinery, fixtures or equipment furnished to the Demised Premises in the performance of Landlord's obligations to construct the Initial Improvements required by the provisions of Article II or Landlord's repair obligations in Section 8.1 and Section 21.2 hereof, and Landlord does hereby agree to indemnify and defend Tenant against and save Tenant and the Demised Premises, and any portion thereof, harmless from all losses, costs, damages, expenses, liabilities and obligations, including, without limitation, reasonable attorney's fees resulting from the assertion, filing, foreclosure or other legal proceedings with respect to any such mechanic's lien or other lien.     Section 10.3  Removal of Liens.  Except as otherwise provided for in this Article X, Tenant shall not create, permit or suffer, and shall promptly discharge and satisfy of record, any other lien, encumbrance, charge, security interest, or other right or interest which shall be or become a lien, encumbrance, charge or security interest upon the Demised Premises, or any portion thereof, or the income therefrom, or on the interest of Landlord or Tenant in the Demised Premises, or any portion thereof, save and except for those liens, encumbrances, charges, security interests, or other rights or interests consented to, in writing, by Landlord, or those mortgages, assignments of rents, assignments of leases and other mortgage documentation placed thereon by Landlord in financing or refinancing the Demised Premises. ARTICLE XI INTENT OF PARTIES     Section 11.1  Net Lease.  Landlord and Tenant do each state and represent that it is the intention of each of them that this Lease be interpreted and construed as an absolute net lease and all Basic Rent and Additional Rent shall be paid by Tenant to Landlord without abatement, deduction, diminution, deferment, suspension, reduction or setoff except as expressly set forth in this Lease, and the obligations of Tenant shall not be affected by reason of damage to or destruction of the Demised Premises from whatever cause (except as provided for in Section 9.8 and Section 13.6 hereof); nor shall the obligations of Tenant be affected by reason of any condemnation, eminent domain or like proceedings (except as provided in Article XIV hereof); nor shall the obligations of Tenant be affected by reason of any other cause whether similar or dissimilar to the foregoing or by any laws or customs to the contrary. It is the further express intent of Landlord and Tenant that (a) the obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements and that the Basic Rent and Additional Rent, and all other charges and sums payable by Tenant hereunder, shall commence at the times provided herein and shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to an express provision in this Lease; (b) all costs or expenses of whatsoever character or kind, general or special, ordinary or extraordinary, foreseen or unforeseen, and of every kind and nature whatsoever that may be necessary or required in and about the Demised Premises, or any portion thereof, and Tenant's possession or authorized use thereof during the term of this Lease, shall be paid by Tenant and all provisions of this Lease are to be interpreted and construed in light of the intention expressed in this Section 11.1; (c) the Basic Rent specified in Section 3.1 shall be absolutely net to Landlord so that this Lease shall yield net to Landlord the Basic Rent specified in Section 3.1 in each year during the term of this Lease (unless extended or renewed at a different Basic Rent); (d) all Impositions, insurance premiums, utility expense, repair and maintenance expense, and all other costs, fees, interest, charges, expenses, reimbursements and obligations of every kind and nature whatsoever relating to the Demised Premises, or any portion thereof, which may arise or become due during the term of this Lease, or any extension 18 -------------------------------------------------------------------------------- or renewal thereof, shall be paid or discharged by Tenant as Additional Rent; and (e) Tenant hereby agrees to indemnify, defend and save Landlord harmless from and against such costs, fees, charges, expenses, reimbursements and obligations, any interest thereon.     Section 11.2  Payment by Landlord.  If Tenant shall at any time fail to pay any Imposition in accordance with the provisions of Article V, or to take out, pay for, maintain and deliver any of the insurance policies or certificates of insurance provided for in Article VI, or shall fail to make any other payment or perform any other act on its part to be made or performed, then Landlord, after ten business days' prior written notice (or without notice in case of emergency), and without waiving or releasing Tenant from any obligation of Tenant contained in this Lease, may, but shall be under no obligation to do so, (a) pay any Imposition payable by Tenant pursuant to the provisions of Article V; (b) take out, pay for and maintain any of the insurance policies provided for in this Lease; or (c) make any other payment or perform any other act on Tenant's part to be paid or performed as in this Lease provided, and Landlord may enter upon the Demised Premises for any such purpose and take all such action therein or thereon as may be necessary therefor. Nothing herein contained shall be deemed as a waiver or release of Tenant from any obligation of Tenant in this Lease contained.     Section 11.3  Interest on Unpaid Amounts.  If Tenant shall fail to perform any act required of it within ten business days after written notice to Tenant, Landlord may perform the same, but shall not be required to do so, in such manner and to such extent as Landlord may deem necessary or desirable, and in exercising any such right to employ counsel and to pay necessary and incidental costs and expenses, including reasonable attorney's fees. All sums so paid by Landlord and all necessary and incidental costs and expenses, including reasonable attorneys fees, in connection with the performance of any such act by Landlord, together with interest thereon at the Maximum Rate of interest provided for in Section 3.4 hereof from the date of making such expenditure by Landlord, shall be deemed Additional Rent hereunder and, except as is otherwise expressly provided herein, shall be payable to Landlord on demand or, at the option of Landlord, may be added to any monthly rental then due or thereafter becoming due under this Lease, and Tenant covenants to pay any such sum or sums, with interest as aforesaid, and Landlord shall have, in addition to any other right or remedy of Landlord, the same rights and remedies in the event of nonpayment thereof by Tenant as in the case of default by Tenant in the payment of monthly Basic Rent. Landlord shall not be limited in the proof of any damages which Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not paid or not incurred by Tenant, and which would have been payable upon such insurance, but Landlord shall also be entitled to recover as damages for such breach the uninsured amount of any loss (to the extent of any deficiency between the dollar limits of insurance required by the provisions of this Lease and the dollar limits of the insurance actually carried by Tenant), damages, costs and expenses of suit, including reasonable attorney's fees, suffered or incurred by reason of damage to or destruction of the Demised Premises, or any portion thereof or other damage or loss which Tenant is required to insure against hereunder, occurring during any period when Tenant shall have failed or neglected to provide insurance as aforesaid. ARTICLE XII DEFAULTS OF TENANT     Section 12.1  Event of Default.  If any one or more of the following events (in this Article sometimes called "Events of Default") shall happen:     (a) If default shall be made by Tenant, by operation of law or otherwise, under the provisions of Article XV hereof relating to assignment, sublease, mortgage or other transfer of Tenant's interest in this Lease or in the Demised Premises;     (b) If default shall be made in the due and punctual payment of any Basic Rent or Additional Rent payable under this Lease or in the payment of any obligation to be paid by 19 -------------------------------------------------------------------------------- Tenant, when and as the same shall become due and payable, and such default shall continue for a period of ten days after written notice thereof given by Landlord to Tenant;     (c) If default shall be made by Tenant in keeping, observing or performing any of the terms contained in this Lease, other than those referred to in Subparagraphs (a) and (b) of this Section 12.1, which does not expose Landlord to criminal liability, and such default shall continue for a period of 30 days after written notice thereof given by Landlord to Tenant, or in the case of such a default or contingency which cannot with due diligence and in good faith be cured within 30 days, and Tenant fails to proceed promptly and with due diligence and in good faith to cure the same and thereafter to prosecute the curing of such default with due diligence and in good faith, it being intended that in connection with a default which does not expose Landlord to criminal liability, not susceptible of being cured with due diligence and in good faith within 30 days, that the time allowed Tenant within which to cure the same shall be extended for such period as may be necessary for the curing thereof promptly with due diligence and in good faith;     (d) If default shall be made by Tenant in keeping, observing or performing any of the terms contained in this Lease, other than those referred to in Subparagraphs (a), (b) and (c) of this Section 12.1, and which exposes Landlord to criminal liability, and such default shall continue after written notice thereof given by Landlord to Tenant, and Tenant fails to proceed timely and promptly with all due diligence and in good faith to cure the same and thereafter to prosecute the curing of such default with all due diligence, it being intended that in connection with a default which exposes Landlord to criminal liability that Tenant shall proceed immediately to cure or correct such condition with continuity and with all due diligence and in good faith;     then, and in any such event, Landlord, at any time thereafter during the continuance of any such Event of Default, may give written notice to Tenant specifying such Event of Default or Events of Default and stating that this Lease and the terms hereby demised shall terminate on the date specified in such notice, and upon the date specified in such notice this Lease and the terms hereby demised, and all rights of Tenant under this Lease, including all rights of renewal whether exercised or not, shall terminate, or in the alternative or in addition to the foregoing remedy, Landlord may assert and have the benefit of any other remedy allowed herein, at law, or in equity.     Section 12.2  Surrender of Demised Premises.  Upon any expiration or termination of this Lease, Tenant shall quit and peaceably surrender the Demised Premises, and all portions thereof, to Landlord, and Landlord, upon or at any time after any such expiration or termination, may, without further notice, enter upon and reenter the Demised Premises, and all portions thereof, and possess and repossess itself thereof, by force, summary proceeding, ejectment or otherwise, and may dispossess Tenant and remove Tenant and all other persons and property from the Demised Premises, and all portions thereof, and may have, hold and enjoy the Demised Premises and the right to receive all rental and other income of and from the same.     Section 12.3  Reletting by Landlord.  At any time, or from time to time after any such expiration or termination, Landlord may relet the Demised Premises, or any portion thereof, in the name of Landlord or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions (which may include concessions or free rent) as Landlord, in its uncontrolled discretion, may determine and may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Demised Premises, or any part thereof, or for any failure to collect any rent due upon any such reletting; provided, however, that Landlord agrees to use commercially reasonable efforts to mitigate its damages as required by law.     Section 12.4  Survival of Tenant's Obligations.  No such termination of this Lease shall relieve Tenant of its liabilities and obligations under this Lease (as if this Lease had not been so terminated), and such liabilities and obligations shall survive any such termination. In the event of any such termination, whether or not the Demised Premises, or any portion thereof, shall have been relet, 20 -------------------------------------------------------------------------------- Tenant shall pay to Landlord a sum equal to the Basic Rent, and the Additional Rent and any other charges required to be paid by Tenant, up to the time of such termination of this Lease, and thereafter Tenant, until the end of what would have been the term of this Lease in the absence of such termination, shall be liable to Landlord for, and shall pay to Landlord, as and for liquidated and agreed current damages for Tenant's default:     (a) The equivalent of the amount of the Basic Rent and Additional Rent which would be payable under this Lease by Tenant if this Lease were still in effect, less     (b) The net proceeds of any reletting effected pursuant to the provisions of Section 12.3 hereof after deducting all of Landlord's reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, reasonable attorney's fees, alteration costs, and expenses of preparation of the Demised Premises, or any portion thereof, for such reletting.     Tenant shall pay such current damages in the amount determined in accordance with the terms of this Section 12.4, as set forth in a written statement thereof from Landlord to Tenant (hereinafter called the "Deficiency"), to Landlord in monthly installments on the days on which the Basic Rent would have been payable under this Lease if this Lease were still in effect, and Landlord shall be entitled to recover from Tenant each monthly installment of the Deficiency as the same shall arise.     Section 12.5  Damages.  At any time after an Event of Default and termination of this Lease, whether or not Landlord shall have collected any monthly Deficiency as set forth in Section 12.4, Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord, on demand, as and for final damages for Tenant's default, an amount equal to the difference between the then present worth of the aggregate of the Basic Rent and Additional Rent and any other charges to be paid by Tenant hereunder for the unexpired portion of the term of this Lease (assuming this Lease had not been so terminated), and the then present worth of the then aggregate fair and reasonable fair market rent of the Demised Premises for the same period. In the computation of present worth, a discount at the rate of 6% per annum shall be employed. If the Demised Premises, or any portion thereof, be relet by Landlord for the unexpired term of this Lease, or any part thereof, before presentation of proof of such damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall, prima facie, be the fair and reasonable fair market rent for the part or the whole of the Demised Premises so relet during the term of the reletting. Nothing herein contained or contained in Section 12.4 shall limit or prejudice the right of Landlord to prove for and obtain, as damages by reason of such expiration or termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the difference referred to above.     Section 12.6  No Waiver.  No failure by Landlord or by Tenant to insist upon the performance of any of the terms of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance by Landlord of full or partial rent from Tenant or any third party during the continuance of any such breach, shall constitute a waiver of any such breach or of any of the terms of this Lease. None of the terms of this Lease to be kept, observed or performed by Landlord or by Tenant, and no breach thereof, shall be waived, altered or modified except by a written instrument executed by Landlord and/or by Tenant, as the case may be. No waiver of any breach shall affect or alter this Lease, but each of the terms of this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach of this Lease. No waiver of any default of Tenant herein shall be implied from any omission by Landlord to take any action on account of such default, if such default persists or is repeated and no express waiver shall affect any default other than the default specified in the express waiver and that only for the time and to the extent therein stated. One or more 21 -------------------------------------------------------------------------------- waivers by Landlord shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition.     Section 12.7  Landlord's Remedies.  In the event of any breach or threatened breach by Tenant of any of the terms contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity or by statute or otherwise as though entry, reentry, summary proceedings and other remedies were not provided for in this Lease. Each remedy or right of Landlord provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease, or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or the beginning of the exercise by Landlord of any one or more of such rights or remedies shall not preclude the simultaneous or later exercise by Landlord of any or all other rights or remedies.     Section 12.8  Bankruptcy.  If, during the term of this Lease, (a) Tenant shall make an assignment for the benefit of creditors, (b) a voluntary petition be filed by Tenant under any law having for its purpose the adjudication of Tenant a bankrupt, or Tenant be adjudged a bankrupt pursuant to an involuntary petition in bankruptcy, (c) a receiver be appointed for the property of Tenant, or (d) any department of the state or federal government, or any officer thereof duly authorized, shall take possession of the business or property of Tenant, the occurrence of any such contingency shall be deemed a breach of the Lease and this Lease shall, ipso facto upon the happening of any of said contingencies, be terminated and the same shall expire as fully and completely as if the day of the happening of such contingency were the date herein specifically fixed for the expiration of the term, and Tenant will then quit and surrender the Demised Premises, but Tenant shall remain liable as hereinafter provided. Notwithstanding other provisions of this Lease, or any present or future law, Landlord shall be entitled to recover from Tenant or Tenant's estate (in lieu of the equivalent of the amount of all rent and other charges unpaid at the date of such termination) as damages for loss of the bargain and not as a penalty, an aggregate sum which at the time of such termination represents the difference between the then present worth of the aggregate of the Basic Rent and Additional Rent and any other charges payable by Tenant hereunder that would have accrued for the balance of the term of this Lease (assuming this Lease had not been so terminated), over the then present worth of the aggregate fair market rent of the Demised Premises for the balance of such period, unless any statute or rule of law covering the proceedings in which such damages are to be proved shall limit the amount of such claim capable of being so proved, in which case Landlord shall be entitled to prove as and for damages by reason of such breach and termination of this Lease the maximum amount which may be allowed by or under any such statute or rule of law without prejudice to any rights of Landlord against any guarantor of Tenant's obligations herein. In the computation of present worth, a discount rate of 6% per annum shall be employed. Nothing contained herein shall limit or prejudice Landlord's right to prove and obtain as damages arising out of such breach and termination the maximum amount allowed by any such statute or rule of law which may govern the proceedings in which such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the excess of the present value of the rent and other charges required herein over the present value of the fair market rents referred to above. Specified remedies to which Landlord may resort under the terms of this Section 12.8 are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord may be lawfully entitled.     Section 12.9  Waiver by Tenant.  Tenant hereby expressly waives, so far as permitted by law, any and all right of redemption or reentry or repossession or to revive the validity and existence of this Lease in the event that Tenant shall be dispossessed by a judgment or by order of any court having jurisdiction over the Demised Premises or the interpretation of this Lease or in case of entry, reentry or repossession by Landlord or in case of any expiration or termination of this Lease. 22 -------------------------------------------------------------------------------- ARTICLE XIII DESTRUCTION AND RESTORATION     Section 13.1  Destruction and Restoration.  Tenant covenants and agrees that in case of damage to or destruction of the Improvements after the Commencement Date of the term of this Lease, by fire or otherwise, Tenant, at its sole cost and expense, shall promptly restore, repair, replace and rebuild the same as nearly as possible to the condition that the same were in immediately prior to such damage or destruction with such changes or alterations (made in conformity with Article XIX hereof) as may be reasonably acceptable to Landlord or required by law. Tenant shall forthwith give Landlord written notice of such damage or destruction upon the occurrence thereof and specify in such notice, in reasonable detail, the extent thereof. Such restoration, repairs, replacements, rebuilding, changes and alterations, including the cost of temporary repairs for the protection of the Demised Premises, or any portion thereof, pending completion thereof are sometimes hereinafter referred to as the "Restoration." The Restoration shall be carried on and completed in accordance with the provisions and conditions of Section 13.2 and Article XIX hereof. If the net amount of the insurance proceeds (after deduction of all costs, expenses and fees related to recovery of the insurance proceeds) recovered by Landlord and held by Landlord and Tenant as co-trustees is reasonably deemed insufficient by Landlord to complete the Restoration of such improvements (exclusive of Tenant's personal property and trade fixtures which shall be restored, repaired or rebuilt out of Tenant's separate funds), Tenant shall, upon request of Landlord, deposit with Landlord and Tenant, as co-trustees a cash deposit equal to the reasonable estimate of the amount necessary to complete the Restoration of such improvements less the amount of such insurance proceeds available.     Section 13.2  Application of Insurance Proceeds.  All insurance moneys recovered by Landlord and held by Landlord and Tenant as co-trustees on account of such damage or destruction, less the costs, if any, to Landlord to recover such funds, shall be applied to the payment of the costs of the Restoration and shall be paid out from time to time as the Restoration progresses upon the written request of Tenant, accompanied by a certificate of the architect or a qualified professional engineer in charge of the Restoration stating that as of the date of such certificate (a) the sum requested is justly due to the contractors, subcontractors, materialmen, laborers, engineers, architects, or persons, firms or corporations furnishing or supplying work, labor, services or materials for such Restoration, or is justly required to reimburse Tenant for any expenditures made by Tenant in connection with such Restoration, and when added to all sums previously paid out by Landlord does not exceed the value of the Restoration performed to the date of such certificate by all of said parties; (b) except for the amount, if any, stated in such certificates to be due for work, labor, services or materials, there is no outstanding indebtedness known to the person signing such certificate, after due inquiry, which is then due for work, labor, services or materials in connection with such Restoration, which, if unpaid, might become the basis of a mechanic's lien or similar lien with respect to the Restoration or a lien upon the Demised Premises, or any portion thereof; and (c) the costs, as estimated by the person signing such certificate, of the completion of the Restoration required to be done subsequent to the date of such certificate in order to complete the Restoration do not exceed the sum of the remaining insurance moneys, plus the amount deposited by Tenant, if any, remaining in the hands of Landlord after payment of the sum requested in such certificate.     Tenant shall furnish Landlord at the time of any such payment with evidence reasonably satisfactory to Landlord that there are no unpaid bills in respect to any work, labor, services or materials performed, furnished or supplied in connection with such Restoration. Landlord and Tenant as co-trustees shall not be required to pay out any insurance moneys where Tenant fails to supply satisfactory evidence of the payment of work, labor, services or materials performed, furnished or supplied, as aforesaid. If the insurance moneys in the hands of Landlord and Tenant as co-trustees, and such other sums, if any, deposited with Landlord and Tenant as co-trustees pursuant to Section 13.1 hereof, shall be insufficient to pay the entire costs of the Restoration, Tenant agrees to pay any 23 -------------------------------------------------------------------------------- deficiency within 30 days of demand. Upon completion of the Restoration and payment in full thereof by Tenant, Landlord shall, within a reasonable period of time thereafter, turn over to Tenant all insurance moneys or other moneys then remaining upon submission of proof reasonably satisfactory to Landlord that the Restoration has been paid for in full and the damaged or destroyed Building and other improvements repaired, restored or rebuilt as nearly as possible to the condition they were in immediately prior to such damage or destruction, or with such changes or alterations as may be made in conformity with Section 13.1 and Article XIX hereof.     Section 13.3  Continuance of Tenant's Obligations.  Except as provided for in Section 13.6, no destruction of or damage to the Demised Premises, or any portion thereof, by fire, casualty or otherwise shall permit Tenant to surrender this Lease or shall relieve Tenant from its liability to pay to Landlord the Basic Rent and Additional Rent payable under this Lease or from any of its other obligations under this Lease, and Tenant waives any rights now or hereafter conferred upon Tenant by present or future law or otherwise to quit or surrender this Lease or the Demised Premises, or any portion thereof, to Landlord or to any suspension, diminution, abatement or reduction of rent on account of any such damage or destruction.     Section 13.4  Availability of Insurance Proceeds.  To the extent that any insurance moneys which would otherwise be payable to Landlord and used in the Restoration of the damaged or destroyed improvements are paid to any mortgagee of Landlord and applied in payment of or reduction of the sum or sums secured by any such mortgage or mortgages made by Landlord on the Demised Premises, Landlord may make available, for the purpose of Restoration of such improvements, an amount equal to the amount payable to its mortgagee out of such proceeds and in such event, such sum shall be applied in the manner provided in Section 13.2 hereof.     Section 13.5  Completion of Restoration.  The foregoing provisions of this Article XIII apply only to damage or destruction of the Improvements by fire, casualty or other cause occurring after the Commencement Date. Any such damage or destruction occurring prior to such time shall be restored, repaired, replaced and rebuilt by Landlord and during such period of construction Landlord shall obtain and maintain the builder's risk insurance coverage referred to in Section 6.1 hereof. All moneys received by Landlord under its builder's risk insurance coverage shall be applied by Landlord to complete the Restoration of such damage or destruction and if such insurance proceeds are insufficient Landlord shall provide all additional funds necessary to complete the Restoration of the Improvements.     Section 13.6  Termination of Lease.  If, within two years prior to the expiration of the term of this Lease, the Improvements shall be destroyed or damaged to such an extent that the Restoration thereof will cost an amount in excess of Five Hundred Thousand Dollars ($500,000.00) over and above the net proceeds of the insurance required to be and maintained by Tenant (to be collected by Landlord and Tenant as co-trustees), hereinafter referred to as the "Excess Funds," and Tenant shall be unable or unwilling to expend out of its own funds such Excess Funds for the purpose of Restoration of such damage or destruction for occupancy by Tenant, Tenant shall, with reasonable promptness, notify Landlord, in writing, of such fact, which notice shall be accompanied by a detailed statement of the nature and extent of such damage or destruction and detailed estimates of the total cost of Restoration. Within 30 days after the giving of such notice, Landlord shall notify Tenant either that (a) it will furnish, at its sole cost and expense, the Excess Funds which are necessarily required in connection with the Restoration (to be disbursed in conformity with the requirements of Section 13.2 and Article XIX hereof), or (b) it is unwilling to expend the Excess Funds for such purpose. Failure to give such notice within such 30-day period shall be deemed an election by Landlord not to make such expenditure. In the event that Landlord elects not to expend the Excess Funds, as aforesaid, then Tenant shall have the option, within 15 days after the expiration of said 30-day period, to terminate this Lease and surrender the Demised Premises to Landlord by a notice, in writing, addressed to Landlord, specifying such election accompanied by Tenant's payment of the balance of the Basic Rent and Additional Rent and other charges hereafter specified in this Section 13.6. Upon the giving of such notice and the payment 24 -------------------------------------------------------------------------------- of such amounts, the term of this Lease shall cease and come to an end on a day to be specified in Tenant's notice, which date shall not be more than 30 days after the date of delivery of such notice by Tenant to Landlord. Tenant shall accompany such notice with its payment of all Basic Rent and Additional Rent and other charges payable by Tenant hereunder, justly apportioned to the date of such termination. In such event Landlord shall be entitled to the proceeds of all insurance required to be carried by Tenant hereunder and Tenant shall execute all documents reasonably requested by Landlord to allow such proceeds to be paid to Landlord. ARTICLE XIV CONDEMNATION     Section 14.1  Condemnation of Entire Demised Premises.  If, during the term of this Lease, the entire Demised Premises shall be taken as the result of the exercise of the power of eminent domain (hereinafter referred to as the "Proceedings"), this Lease and all right, title and interest of Tenant hereunder shall cease and come to an end on the date of vesting of title pursuant to such Proceedings and Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such award, damages, consequential damages and compensation to Landlord and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease. Tenant may, however, make a separate claim not payable out of Landlord's award for Tenant's lost trade fixtures and its moving expenses, as permitted by law.     In any taking of the Demised Premises, or any portion thereof, whether or not this Lease is terminated as in this Article provided, Tenant shall not be entitled to any portion of the award for the taking of the Demised Premises or damage to the Improvements, except as otherwise provided for in Section 14.3 with respect to the restoration of the Improvements, or for the estate or interest of Tenant therein, all such award, damages, consequential damages and compensation being hereby assigned to Landlord, and Tenant hereby waives any right it now has or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease, except that Tenant shall have, nevertheless, the limited right to prove in the Proceedings and to receive any award which may be made for damages to or condemnation of Tenant's movable trade fixtures and equipment, and for Tenant's relocation costs in connection therewith.     Section 14.2  Partial Condemnation/Termination of Lease.  If, during the Initial Term of this Lease, or any extension or renewal thereof, less than the entire Demised Premises, but more than 15% of the floor area of the Building, or more than 25% of the land area of the Demised Premises, shall be taken in any such Proceedings, this Lease shall, upon vesting of title in the Proceedings, terminate as to the portion of the Demised Premises so taken, and Tenant may, at its option, terminate this Lease as to the remainder of the Demised Premises. Tenant shall not have the right to terminate this Lease pursuant to the preceding sentence unless (a) the business of Tenant conducted in the portion of the Demised Premises taken cannot reasonably be carried on with substantially the same utility and efficiency in the remainder of the Demised Premises (or any substitute space securable by Tenant pursuant to clause [b] hereof) and (b) Tenant cannot construct or secure substantially similar space to the space so taken, on the Demised Premises. Such termination as to the remainder of the Demised Premises shall be effected by notice in writing given not more than 60 days after the date of vesting of title in such Proceedings, and shall specify a date not more than 60 days after the giving of such notice as the date for such termination. Upon the date specified in such notice, the term of this Lease, and all right, title and interest of Tenant hereunder, shall cease and come to an end. If this Lease is terminated as in this Section 14.2 provided, Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such award, damages, consequential damages and compensation to Landlord, and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised 25 -------------------------------------------------------------------------------- Premises, or any portion thereof, or its interest in this Lease except as otherwise provided in Section 14.1. The right of Tenant to terminate this Lease, as in this Section 14.2 provided, shall be exercisable only upon condition that no Event of Default then exists. In the event that Tenant elects not to terminate this Lease as to the remainder of the Demised Premises, the rights and obligations of Landlord and Tenant shall be governed by the provisions of Section 14.3 hereof.     Sectin 14.3  Partial Condemnation/Continuation of Lease.  If 15%, or less, of the floor area of the Building, or 25%, or less, of the land area of the Demised Premises, shall be taken in such Proceedings, or if more than 15% of the floor area of the Building or more than 25% of the land area of the Demised Premises is taken (but less than the entire Demised Premises), and this Lease is not terminated as in Section 14.2 hereof provided, this Lease shall, upon vesting of title in the Proceedings, terminate as to the parts so taken, and Tenant shall have no claim or interest in the award, damages, consequential damages and compensation, or any part thereof except as otherwise provided in Section 14.1. Landlord shall be entitled to and shall receive the total award made in such Proceedings, Tenant hereby assigning any interest in such award, damages, consequential damages and compensation to Landlord, and Tenant hereby waiving any right Tenant has now or may have under present or future law to receive any separate award of damages for its interest in the Demised Premises, or any portion thereof, or its interest in this Lease except as otherwise provided in Section 14.1. The net amount of the award (after deduction of all costs and expenses, including attorneys' fees, incurred in connection with recovery of the award), shall be held by Landlord and Tenant as co-trustees and applied as hereinafter provided. Tenant, in such case, covenants and agrees, at Tenant's sole cost and expense (subject to reimbursement to the extent hereinafter provided), promptly to restore that portion of the Improvements on the Demised Premises not so taken to a complete architectural and mechanical unit for the use and occupancy of Tenant as in this Lease provided. In the event that the net amount of the award (after deduction of all costs and expenses, including attorney's fees, incurred in connection with recovery of the award) that may be received by Landlord and held by Landlord and Tenant as co-trustees in any such Proceedings for physical damage to the Improvements as a result of such taking is insufficient to pay all costs of such restoration work, Tenant shall deposit with Landlord and Tenant as co-trustees such additional sum as may be required upon the written request of Landlord. The provisions and conditions in Article XIX applicable to changes and alterations shall apply to Tenant's obligations to restore that portion of the Improvements to a complete architectural and mechanical unit. Landlord and Tenant as co-trustees agree in connection with such restoration work to apply so much of the net amount of any award (after deduction of all costs and expenses, including attorney's fees) that may be received by Landlord and held by Landlord and Tenant as co-trustees in any such Proceedings for physical damage to the Improvements as a result of such taking to the costs of such restoration work thereof and the said net award for physical damage to the Improvements as a result of such taking shall be paid out from time to time to Tenant, or on behalf of Tenant, as such restoration work progresses upon the written request of Tenant, which shall be accompanied by a certificate of the architect or the registered professional engineer in charge of the restoration work stating that (a) the sum requested is justly due to the contractors, subcontractors, materialmen, laborers, engineers, architects or other persons, firms or corporations furnishing or supplying work, labor, services or materials for such restoration work or as is justly required to reimburse Tenant for expenditures made by Tenant in connection with such restoration work, and when added to all sums previously paid out by Landlord and Tenant as co-trustees does not exceed the value of the restoration work performed to the date of such certificate; and (b) the net amount of any such award for physical damage to the Improvements as a result of such taking remaining in the hands of Landlord, together with the sums, if any, deposited by Tenant with Landlord and Tenant as co-trustees pursuant to the provisions hereof, will be sufficient upon the completion of such restoration work to pay for the same in full. If payment of the award for physical damage to the Improvements as a result of such taking, as aforesaid, shall not be received by Landlord in time to permit payments as the restoration work progresses (except in the event of an appeal of the award by Landlord), Tenant shall, nevertheless, perform and fully pay for 26 -------------------------------------------------------------------------------- such work without delay (except such delays as are referred to in Article XIX hereof), and payment of the amount to which Tenant may be entitled shall thereafter be made by Landlord out of the net award for physical damage to the Improvements as a result of such taking as and when payment of such award is received by Landlord. If Landlord appeals an award and payment of the award is delayed pending appeal Tenant shall, nevertheless, perform and fully pay for such work without delay (except such delays as are referred to in Article XIX hereof), and payment of the amount to which Tenant would have been entitled had Landlord not appealed the award (in an amount not to exceed the net award prior to such appeal) shall be made by Landlord to Tenant as restoration progresses pursuant to this Section 14.3. In which event Landlord shall be entitled to retain an amount equal to the sum disbursed to Tenant pursuant to the preceding sentence out of the net award as and when payment of such award is received by Landlord. Tenant shall also furnish Landlord and Tenant as co-trustees with each certificate hereinabove referred to, together with evidence reasonably satisfactory to Landlord that there are no unpaid bills in respect to any work, labor, services or materials performed, furnished or supplied, or claimed to have been performed, furnished or supplied, in connection with such restoration work, and that no liens have been filed against the Demised Premises, or any portion thereof. Landlord and Tenant as co-trustees shall not be required to pay out any funds when there are unpaid bills for work, labor, services or materials performed, furnished or supplied in connection with such restoration work, or where a lien for work, labor, services or materials performed, furnished or supplied has been placed against the Demised Premises, or any portion thereof. Upon completion of the restoration work and payment in full therefor by Tenant, and upon submission of proof reasonably satisfactory to Landlord that the restoration work has been paid for in full and that the Improvements have been restored or rebuilt to a complete architectural and mechanical unit for the use and occupancy of Tenant as provided in this Lease, Landlord and Tenant as co-trustees shall pay over to Tenant any portion of the cash deposit furnished by Tenant then remaining. To the extent that any award, damages or compensation which would otherwise be payable to Landlord and applied to the payment of the cost of restoration of the Improvements is paid to any mortgagee of Landlord and applied in payment or reduction of the sum or sums secured by any such mortgage or mortgages made by Landlord on the Demised Premises, Landlord shall make available for the use of Tenant, in connection with the payment of the cost of restoring the Improvements an amount equal to the amount of such net award payable to the mortgagee. From and after the date of delivery of possession to the condemning authority pursuant to the Proceedings, a just and proportionate part of the Basic Rent, according to the extent and nature of such taking, shall abate for the remainder of the term of this Lease.     Section 14.4  Continuance of Obligations.  In the event of any termination of this Lease, or any part thereof, as a result of any such Proceedings, Tenant shall pay to Landlord all Basic Rent and all Additional Rent and other charges payable hereunder with respect to that portion of the Demised Premises so taken in such Proceedings with respect to which this Lease shall have terminated justly apportioned to the date of such termination. From and after the date of vesting of title in such Proceedings, Tenant shall continue to pay the Basic Rent and Additional Rent and other charges payable hereunder, as in this Lease provided, to be paid by Tenant, subject to an abatement of a just and proportionate part of the Basic Rent according to the extent and nature of such taking as provided for in Sections 14.3 and 14.6 hereof in respect to the Demised Premises remaining after such taking.     Section 14.5  Adjustment of Rent.  In the event of a partial taking of the Demised Premises under Section 14.3 hereof, or a partial taking of the Demised Premises under Section 14.2 hereof, followed by Tenant's election not to terminate this Lease, the fixed Basic Rent payable hereunder during the period from and after the date of vesting of title in such Proceedings to the termination of this Lease shall be reduced to a sum equal to the product of the Basic Rent provided for herein multiplied by a fraction, the numerator of which is the value of the Demised Premises after such taking and after the same has been restored to a complete architectural unit, and the denominator of which is the value of the Demised Premises prior to such taking. 27 -------------------------------------------------------------------------------- ARTICLE XV ASSIGNMENT, SUBLETTING, ETC.     Section 15.1  Restriction on Transfer.  Tenant shall not sublet the Demised Premises, or any portion thereof, nor assign, mortgage, pledge, transfer or otherwise encumber or dispose of this Lease, or any interest therein, or in any manner assign, mortgage, pledge, transfer or otherwise encumber or dispose of its interest or estate in the Demised Premises, or any portion thereof, without obtaining Landlord's prior written consent in each and every instance, which consent shall not be unreasonably withheld or delayed, provided the following conditions are complied with:     (a) Any assignment of this Lease shall transfer to the assignee all of Tenant's right, title and interest in this Lease and all of Tenant's estate or interest in the Demised Premises.     (b) At the time of any assignment or subletting, and at the time when Tenant requests Landlord's written consent thereto, this Lease must be in full force and effect, without an Event of Default.     (c) Any such assignee shall assume, by written, recordable instrument, in form and content satisfactory to Landlord, the due performance of all of Tenant's obligations under this Lease, including any accrued obligations at the time of the effective date of the assignment, and such assumption agreement shall state that the same is made by the assignee for the express benefit of Landlord as a third party beneficiary thereof. A copy of the assignment and assumption agreement, both in form and content satisfactory to Landlord, fully executed and acknowledged by assignee, shall be sent to Landlord ten days prior to the effective date of such assignment.     (d) In the case of a subletting, a copy of any sublease fully executed and acknowledged by Tenant and the sublessee shall be mailed to Landlord ten days prior to the effective date of such subletting, which sublease shall be in form and content acceptable to Landlord.     (e) Such assignment or subletting shall be subject to all the provisions, terms, covenants and conditions of this Lease, and Tenant-assignor (and the guarantor or guarantors of this Lease, if any) and the assignee or assignees shall continue to be and remain liable under this Lease, as it may be amended from time to time without notice to any assignor of Tenant's interest or to any guarantor.     (f)  Each sublease permitted under this Section 15.1 shall contain provisions to the effect that (i) such sublease is only for actual use and occupancy by the sublessee; (ii) such sublease is subject and subordinate to all of the terms, covenants and conditions of this Lease and to all of the rights of Landlord thereunder; and (iii) in the event this Lease shall terminate before the expiration of such sublease, the sublessee thereunder will, at Landlord's option, attorn to Landlord and waive any rights the sublessee may have to terminate the sublease or to surrender possession thereunder, as a result of the termination of this Lease.     (g) Tenant agrees to pay on behalf of Landlord any and all costs of Landlord, including reasonable attorney's fees paid or payable to outside counsel, occasioned by such assignment or subletting not to exceed $1,000.00. Landlord agrees to respond to Tenant's request for consent under this Section 15.1 within 15 days after Landlord's receipt of Tenant's written request.     Section 15.2  Restriction From Further Assignment.  Notwithstanding anything contained in this Lease to the contrary and notwithstanding any consent by Landlord to any sublease of the Demised Premises, or any portion thereof, or to any assignment of this Lease or of Tenant's interest or estate in the Demised Premises, no sublessee shall assign its sublease nor further sublease the Demised Premises, or any portion thereof, and no assignee shall further assign its interest in this Lease or its interest or estate in the Demised Premises, or any portion thereof, nor sublease the Demised Premises, or any portion thereof, without Landlord's prior written consent in each and every instance which 28 -------------------------------------------------------------------------------- consent shall not be unreasonably withheld or unduly delayed. No such assignment or subleasing shall relieve Tenant from any of Tenant's obligations in this Lease contained.     Section 15.3  Tenant's Failure to Comply.  Tenant's failure to comply with all of the foregoing provisions and conditions of this Article XV shall (whether or not Landlord's consent is required under this Article), at Landlord's option, render any purported assignment or subletting null and void and of no force and effect.     Sectin 15.4  Sharing of Excess Rent.  If Landlord consents to Tenant assigning its interest under this Lease or subletting all or any portion of the Demised Premises, Tenant shall pay to Landlord (in addition to Rent and all other amounts payable by Tenant under this Lease) 50 percent of the rents and other considerations payable by such assignee or subtenant in excess of the Rent otherwise payable by Tenant from time to time under this Lease after deducting Tenant's reasonable out-of-pocket reletting costs. For the purposes of this computation, the additional amount payable by Tenant shall be determined by application of the rental rate per square foot for the Demised Premises or any portion thereof sublet. Said additional amount shall be paid to Landlord within 30 days of Tenant's receipt of such Rent or other considerations from the assignee or subtenant.     Section 15.5  Assignment to Affiliates.  So long as there is no Event of Default of the Lease, Tenant shall have the right to assign this Lease to any corporation or other entity which is controlled by, under the control of, or under common control with Tenant, or any corporation into which Tenant may be merged or consolidated, or which purchases all or substantially all of the assets of Tenant (each an "Affiliate of Tenant"); provided, however, (i) Tenant shall not be released from its obligations under this Lease, (ii) Landlord shall be given at least 15 days prior written notice of the assignment, (iii) Landlord shall be given a copy of the document effecting the assignment at least 15 days prior to the date on which the assignment shall occur, and (iv) from and after the date of the assignment, Tenant shall be jointly and severally liable with the Affiliate of Tenant with respect to all obligations of Tenant under this Lease.     Section 15.6  Permitted Subleases.  So long as there is no Event of Default of this Lease, Tenant shall have the right to enter into up to three subleases so long as Tenant and each such sublease comply with the obligations of Sections 15.1(d), 15.1(e), and 15.1(f) and so long as Tenant complies strictly with the following conditions: (i) each subtenant must be one of Tenant's suppliers, (ii) the term of each sublease shall not exceed one year and must expire no later than the expiration date of the Lease or on any earlier termination date of the Lease, (iii) the total amount of square footage subject to all subleases, in the aggregate, shall not exceed 30,000 square feet of floor area, and (iv) the permitted use in each sublease shall be for storage only. ARTICLE XVI SUBORDINATION, NONDISTURBANCE, NOTICE TO MORTGAGEE AND ATTORNMENT     Section 16.1  Subordination by Tenant.  This Lease and all rights of Tenant therein, and all interest or estate of Tenant in the Demised Premises, or any portion thereof, shall be subject and subordinate to the lien of any mortgage, deed of trust, security instrument or other document of like nature ("Mortgage"), which at any time may be placed upon the Demised Premises, or any portion thereof, by Landlord, and to any replacements, renewals, amendments, modifications, extensions or refinancing thereof, and to each and every advance made under any Mortgage. Such subordination shall be conditioned on the holder of the Mortgage agreeing not to disturb Tenant's rights under the Lease so long as no Event of Default exists. Tenant agrees at any time hereafter, and from time to time on demand of Landlord, to execute and deliver to Landlord any instruments, releases or other documents that may be reasonably required for the purpose of subjecting and subordinating this Lease to the lien of any such Mortgage so long as such instrument, release or other document provides that 29 -------------------------------------------------------------------------------- the holder of the Mortgage agrees not to disturb Tenant's rights under this Lease so long as no Event of Default exists. It is agreed, nevertheless, that so long as no Event of Default exists, that such subordination agreement or other instrument, release or document shall not interfere with, hinder or molest Tenant's right to quiet enjoyment under this Lease, nor the right of Tenant to continue to occupy the Demised Premises, and all portions thereof, and to conduct its business thereon in accordance with the covenants, conditions, provisions, terms and agreements of this Lease; provided, however, that the holder of the Mortgage and its successors shall not be bound by the provisions of Section 21.3. The lien of any such Mortgage shall not cover Tenant's trade fixtures or other personal property located in or on the Demised Premises. If there is a Mortgage in effect as of the execution date of this Lease, Landlord agrees to obtain from the holder of the Mortgage a subordination and nondisturbance agreement containing the terms set forth in this Section 16.1.     Sectin 16.2  Landlord's Default.  In the event of any act or omission of Landlord constituting a default by Landlord, Tenant shall not exercise any remedy until Tenant has given Landlord prior written notice of such act or omission and until a 30-day period of time to allow Landlord or the mortgagee to remedy such act or omission shall have elapsed following the giving of such notice; provided, however, if such act or omission cannot, with due diligence and in good faith, be remedied within such 30-day period, the Landlord and/or mortgagee shall be allowed such further period of time as may be reasonably necessary provided that it shall have commenced remedying the same with due diligence and in good faith within said 30-day period. In the event Landlord's act or omission which constitutes a Landlord's default hereunder results in an immediate threat of bodily harm to Tenant's employees, agents or invitees, or damage to Tenant's property (a "Special Landlord Default"), Tenant may proceed to cure the default without prior notice to Landlord provided, however, in that event Tenant shall give written notice to Landlord as soon as possible after commencement of such cure. Nothing herein contained shall be construed or interpreted as requiring any mortgagee to remedy such act or omission. If Landlord fails to cure a Special Landlord Default under this Section 16.2 after two written notices of such Special Landlord Default are given to Landlord by Tenant as provided in this Section 16.2 and if Landlord does not contest the fact that Landlord is in default of the Lease, then Landlord shall reimburse Tenant the reasonable costs of Tenant's cure of the Special Landlord Default within 30 days after Tenant's invoice for the reasonable costs of such cure, setting forth in reasonable detail the work performed.     Sectin 16.3  Attornment.  If any mortgagee shall succeed to the rights of Landlord under this Lease or to ownership of the Demised Premises, whether through possession or foreclosure or the delivery of a deed to the Demised Premises, then, upon the written request of such mortgagee so succeeding to Landlord's rights hereunder, Tenant shall attorn to and recognize such mortgagee as Tenant's landlord under this Lease, and shall promptly execute and deliver any instrument that such mortgagee may reasonably request to evidence such attornment (whether before or after making of the mortgage). In the event of any other transfer of Landlord's interest hereunder, upon the written request of the transferee and Landlord, Tenant shall attorn to and recognize such transferee as Tenant's landlord under this Lease and shall promptly execute and deliver any instrument that such transferee and Landlord may reasonably request to evidence such attornment if such instrument also provides that such transferee agrees to recognize Tenant's rights under the Lease except for those in Section 21.3. ARTICLE XVII SIGNS     Section 17.1  Tenant's Signs.  Tenant may erect signs on the exterior or interior of the Building or on the landscaped area adjacent thereto, provided that such sign or signs (a) do not cause any structural damage or other damage to the Building; (b) do not violate applicable Laws; and (c) do not violate any existing restrictions affecting the Demised Premises. Tenant shall first obtain Landlord's prior written consent as to any sign, which consent shall not be unreasonably withheld or delayed. 30 -------------------------------------------------------------------------------- ARTICLE XVIII REPORTS BY TENANT     Section 18.1  Annual Statements.  Upon request by Landlord at any time after 135 days after the end of the applicable fiscal year of Tenant, Tenant shall deliver to Landlord (within 15 days after receipt of written request) a copy of its audited financial statement, including the certification of its auditor, and similar financial statement of any guarantor of Tenant's obligations under this Lease. ARTICLE XIX CHANGES AND ALTERATIONS     Section 19.1  Tenant's Changes and Alterations.  Tenant shall have the right at any time, and from time to time during the term of this Lease, to make such changes and alterations, structural or otherwise, to the Building, improvements and fixtures hereafter erected on the Demised Premises as Tenant shall deem necessary or desirable in connection with the requirements of its business, which such changes and alterations (other than changes or alterations of Tenant's movable trade fixtures and equipment) shall be made in all cases subject to the following conditions, which Tenant covenants to observe and perform:     (a)  Permits.  No change or alteration shall be undertaken until Tenant shall have procured and paid for, so far as the same may be required from time to time, all municipal, state and federal permits and authorizations of the various governmental bodies and departments having jurisdiction thereof, and Landlord agrees to join in the application for such permits or authorizations whenever such action is necessary, all at Tenant's sole cost and expense, provided such applications do not cause Landlord to become liable for any cost, fees or expenses.     (b)  Compliance with Plans and Specifications.  Before commencement of any change, alteration, restoration or construction (hereinafter sometimes referred to as "Work") involving in the aggregate an estimated cost of more than Ten Thousand and no/100 Dollars ($10,000.00) or which in Landlord's reasonable judgment would materially alter the mechanical, structural, or electrical systems of the Improvements, Tenant shall (i) furnish Landlord with detailed plans and specifications of the proposed change or alteration; (ii) obtain Landlord's prior written consent, which consent shall not be unreasonably withheld (but such consent may be withheld if the change or alteration would, in the reasonable judgment of Landlord, impair the value or usefulness of the Land or Improvements, or any substantial part thereof to Landlord); (iii) obtain Landlord's prior written approval of a licensed architect or licensed professional engineer selected and paid for by Tenant, who shall supervise any such work (hereinafter referred to as "Alterations Architect or Engineer"); (iv) obtain Landlord's prior written approval of detailed plans and specifications prepared and approved in writing by said Alterations Architect or Engineer, and of each amendment and change thereto; and (v) furnish to Landlord a surety company performance bond issued by a surety company licensed to do business in the state in which the Demised Premises are located and reasonably acceptable to Landlord in an amount equal to the estimated cost of such work guaranteeing the completion thereof within a reasonable time thereafter (1) free and clear of all mechanic's liens or other liens, encumbrances, security interests and charges, and (2) in accordance with the plans and specifications approved by Landlord. Notwithstanding the foregoing, Tenant may make alterations which do not affect the Building's structure or the Building's systems or equipment, provided the expenditures therefor do not exceed $50,000.00, without Landlord's prior written consent so long as Tenant gives Landlord a written description of the proposed alterations at least 15 days prior to commencement of the alterations so that Landlord may post a notice of nonresponsibility.     (c)  Value Maintained.  Any change or alteration shall, when completed, be of such character as not to materially reduce the value of the Demised Premises or the Building to which such 31 -------------------------------------------------------------------------------- change or alteration is made below its value to Landlord immediately before such change or alteration, nor shall such change or alteration reduce the area or cubic content of the Building, nor change the character of the Demised Premises or the Building as to use without Landlord's express written consent.     (d)  Compliance with Laws.  All Work done in connection with any change or alteration shall be done promptly and in a good and workmanlike manner and in compliance with all building and zoning laws of the place in which the Demised Premises are situated, and with all laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof, and in accordance with the orders, rules and regulations of the Board of Fire Underwriters where the Demised Premises are located, or any other body exercising similar functions. The cost of any such change or alteration shall be paid in cash so that the Demised Premises and all portions thereof shall at all times be free of liens for labor and materials supplied to the Demised Premises, or any portion thereof. The Work of any change or alteration shall be prosecuted with reasonable dispatch, delays due to strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions or similar causes beyond the control of Tenant excepted. Tenant shall obtain and maintain, at its sole cost and expense, during the performance of the Work, workers' compensation insurance covering all persons employed in connection with the Work and with respect to which death or injury claims could be asserted against Landlord or Tenant or against the Demised Premises or any interest therein, together with comprehensive general liability insurance for the mutual benefit of Landlord and Tenant with limits of not less than One Million Dollars ($l,000,000.00) in the event of injury to one person, Three Million Dollars ($3,000,000.00) in respect to any one accident or occurrence, and Five Hundred Thousand Dollars ($500,000.00) for property damage, and the fire insurance with "extended coverage" endorsement required by Section 6.1 hereof shall be supplemented with "builder's risk" insurance on a completed value form or other comparable coverage on the Work. All such insurance shall be in a company or companies authorized to do business in the state in which the Demised Premises are located and reasonably satisfactory to Landlord, and all such policies of insurance or certificates of insurance shall be delivered to Landlord endorsed "Premium Paid" by the company or agency issuing the same, or with other evidence of payment of the premium satisfactory to Landlord.     (e)  Property of Landlord.  All improvements and alterations (other than Tenant's trade fixtures and equipment, no matter how affixed to the Building, including the components of the clean room) made or installed by Tenant shall immediately, upon completion or installation thereof, become the property of Landlord without payment therefor by Landlord, and shall be surrendered to Landlord on the expiration of the term of this Lease.     (f)  Location of Improvements.  No change, alteration, restoration or new construction shall be in or connect the Improvements with any property, building or other improvement located outside the boundaries of the parcel of land described in Exhibit "A" attached, nor shall the same obstruct or interfere with any existing easement.     (g)  Removal of Improvements.  As a condition to granting approval for any changes or alterations, Landlord may require Tenant to agree that Landlord, by written notice to Tenant, given at or prior to the time of granting such approval, may require Tenant to remove any improvements, additions or installations installed by Tenant in the Demised Premises at Tenant's sole cost and expense, and repair and restore any damage caused by the installation and removal of such improvements, additions, or installations; provided, however, the only improvements, additions or installations which Tenant shall remove shall be those specified in such notice. All improvements, additions or installations installed by Tenant which did not require Landlord's prior approval shall be removed by Tenant as provided for in this Section 19.1(g), unless Tenant has obtained a written waiver of such condition from Landlord. 32 --------------------------------------------------------------------------------     (h)  Written Notification Required.  Tenant shall notify Landlord in writing 30 days prior to commencing any alterations, additions or improvements to the Demised Premises which have been approved by Landlord so that Landlord shall have the right to record and post notices of non-responsibility on the Demised Premises. ARTICLE XX MISCELLANEOUS PROVISIONS     Section 20.1  Entry by Landlord.  Tenant agrees to permit Landlord and authorized representatives of Landlord to enter upon the Demised Premises at all reasonable times during ordinary business hours after reasonable prior notice (except in the case of emergency) for the purpose of inspecting the same and making any necessary repairs to comply with any laws, ordinances, rules, regulations or requirements of any public body, or the Board of Fire Underwriters, or any similar body. Tenant shall have the right to accompany Landlord in connection with any such entry. Landlord must follow Tenant's procedure for entering into Tenant's clean room. Nothing herein contained shall imply any duty upon the part of Landlord to do any such work which, under any provision of this Lease, Tenant may be required to perform and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform the same. Landlord may, during the progress of any work, keep and store upon the Demised Premises all necessary materials, tools and equipment. Unless caused by Landlord's negligence or willful misconduct, Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business or other damage to Tenant by reason of making repairs or the performance of any work in or about the Demised Premises or on account of bringing material, supplies and equipment into, upon or through the Demised Premises during the course thereof, and the obligations of Tenant under this Lease shall not be thereby affected in any manner whatsoever, provided, however, that Landlord agrees to use commercially reasonable efforts not to interfere with Tenant's business operations.     Section 20.2  Exhibition of Demised Premises.  Landlord is hereby given the right during usual business hours at any time during the term of this Lease after giving Tenant reasonable prior notice to enter upon the Demised Premises and to exhibit the same for the purpose of mortgaging or selling the same. During the last six months of the term unless Tenant exercises an option to extend described in Section 21.1, Landlord shall be entitled to display on the Demised Premises, in such manner as to not unreasonably interfere with Tenant's business, signs indicating that the Demised Premises are for rent or sale and suitably identifying Landlord or its agent. Tenant agrees that such signs may remain unmolested upon the Demised Premises and that Landlord may exhibit said premises to prospective tenants during said period.     Section 20.3  Indemnification by Tenant.  To the fullest extent allowed by law, Tenant shall at all times indemnify, defend and hold Landlord and Landlord's shareholders, employees and managing agent harmless against and from any and all claims, costs, liabilities, actions and damages (including, without limitation, reasonable attorneys' fees and costs) by or on behalf of any person or persons, firm or firms, corporation or corporations, arising from the conduct or management, or from any work or things whatsoever done in or about the Demised Premises, and will further indemnify, defend and hold Landlord harmless against and from any and all claims arising during the term of this Lease, from any condition of the Improvements or the Demised Premises, or arising from any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed, pursuant to the terms of this Lease, or arising from any act or negligence of Tenant, its agents, servants, employees or licensees, or arising from any accident, injury or damage whatsoever caused to any person, firm or corporation occurring during the term of this Lease, in or about the Demised Premises, in each case unless caused by the negligence or willful misconduct of Landlord or its employees, agents, or contractors, and from and against all costs, attorney's fees, expenses and liabilities incurred in or about any such claim or action or proceeding brought thereon; and in case any 33 -------------------------------------------------------------------------------- action or proceeding be brought against Landlord by reason of any such claim, Tenant, upon notice from Landlord, covenants to defend such action or proceeding by counsel reasonably satisfactory to Landlord. Tenant's obligations under this Section 20.3 shall be insured by contractual liability endorsement on Tenant's policies of insurance required under the provisions of Section 6.2 hereof. Landlord agrees to indemnify, defend, and hold Tenant and Tenant's shareholders and employees harmless against any and all claims, costs, liabilities, actions and damages (including reasonable attorneys' fees and costs) caused by Landlord's breach of this Lease; provided, however, that Landlord shall never be liable for consequential damages such as lost profits, punitive damages, or any loss or damage to Tenant's property, the risk of loss of which shall be borne by Tenant.     Section 20.4  Notices.  All notices, demands and requests which may be or are required to be given, demanded or requested by either party to the other shall be in writing. All notices, demands and requests shall be sent by United States registered or certified mail, postage prepaid or by an independent overnight courier service, addressed as follows: To Landlord:   Opus Northwest, L.L.C. 915 - 118th Avenue SE Bellevue, WA 98005 Attn: Thomas B. Parsons Telephone:  (425) 453-4100 Facsimile:  (425) 453-1712   With a copy to:       Opus, L.L.C. 10350 Bren Road West Minnetonka, MN 55343 Attn: Legal Department Telephone:  (612) 656-4444 Facsimile:  (612) 656-4755   With a copy to:       Property Manager at the address described in Section 3.1 of the Lease   With a copy to:       Ball Janik LLP 101 SW Main Street Suite 1100 Portland, OR 97204 Attn: Barbara W. Radler Phone:  (503) 228-2525 Fax:  (503) 295-1058   To Tenant:       Merix Corporation 1521 Poplar Lane Forest Grove, OR 97116 Attn: Terri Timberman, Chief Administrative Officer Phone:  (503) 359-2646 Fax:  (503) 357-1504   With a copy to:       Merix Corporation 1521 Poplar Lane Forest Grove, OR 97116 Attn:  Janie S. Brown, VP & CFO Phone:  (503) 359-2653 34 --------------------------------------------------------------------------------   With a copy to:       Perkins Coie LLP 1211 SW 5th Avenue, Suite 1500 Portland, OR 97204 Attn: Christopher Matthews Phone:  (503) 727-2000 Fax:  (503) 727-2222 or at such other place as Landlord may from time to time designate by written notice to Tenant. Notices, demands and requests which shall be served upon Landlord by Tenant, or upon Tenant by Landlord, in the manner aforesaid, shall be deemed to be sufficiently served or given for all purposes hereunder at the time such notice, demand or request shall be mailed or delivered to a courier.     Section 20.5  Quiet Enjoyment.  Landlord covenants and agrees that Tenant, upon paying the Basic Rent and Additional Rent, and upon observing and keeping the covenants, agreements and conditions of this Lease on its part to be kept, observed and performed, shall lawfully and quietly hold, occupy and enjoy the Demised Premises (subject to the provisions of this Lease) during the term of this Lease without hindrance or molestation by Landlord or by any person or persons claiming under Landlord.     Section 20.6  Landlord's Continuing Obligations.  The term "Landlord," as used in this Lease so far as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners at the time in question of the fee of the Demised Premises, and in the event of any transfer or transfers or conveyance in which the transferee assumes the Landlord's obligations under this Lease accruing after the date of such transfer, the then grantor shall be automatically freed and relieved from and after the date of such transfer or conveyance of all liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed, provided that any funds in the hands of such landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be turned over to the grantee, and any amount then due and payable to Tenant by Landlord or the then grantor under any provision of this Lease shall be paid to Tenant. The covenants and obligations contained in this Lease on the part of Landlord shall, subject to the aforesaid, be binding on Landlord's successors and assigns, during and in respect of their respective successive periods of ownership. Nothing herein contained shall be construed as relieving Landlord of its obligations under Article II or Section 21.2 of this Lease, or releasing Landlord from any obligation to complete the cure of any breach by Landlord during the period of its ownership of the Demised Premises.     Section 20.7  Estoppel.  Landlord and Tenant shall, each without charge at any time and from time to time, within ten days after written request by the other party, certify by written instrument, duly executed, acknowledged and delivered to any mortgagee, assignee of a mortgagee, proposed mortgagee, or to any purchaser or proposed purchaser, or to any other person dealing with Landlord, Tenant or the Demised Premises:     (a) That this Lease (and all guaranties, if any) is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect, as modified, and stating the modifications);     (b) The dates to which the Basic Rent or Additional Rent have been paid in advance;     (c) Whether or not there are then existing any breaches or defaults by such party or the other party known by such party under any of the covenants, conditions, provisions, terms or agreements of this Lease, and specifying such breach or default, if any, or any setoffs or defenses against the enforcement of any covenant, condition, provision, term or agreement of this Lease (or of any guaranties) upon the part of Landlord or Tenant (or any guarantor), as the case may be, to 35 -------------------------------------------------------------------------------- be performed or complied with (and, if so, specifying the same and the steps being taken to remedy the same); and     (d) Such other factual statements or certificates as either party may reasonably request.     It is the intention of the parties hereto that any statement delivered pursuant to this Section 20.7 may be relied upon by any of such parties dealing with Landlord, Tenant or the Demised Premises. If Tenant does not deliver such statement to Landlord within such 10 day period, Landlord, and any prospective purchaser or encumbrancer of the Demised Premises or the Building, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by Landlord; (ii) that this Lease has not been cancelled or terminated and is in full force and effect, except as otherwise represented by Landlord; that the current amounts of the Basic Rent and Security Deposit are as represented by Landlord; that any changes made against the Security Deposit are uncontested and valid; that there have been no subleases or assignments of the Lease; (iii) that not more than one month's Basic Rent or other charges have been paid in advance; and (iv) that Landlord is not in default under the Lease. In such event, Tenant shall be estopped from denying the truth of such facts.     Section 20.8  Authority.  The person signing this Lease on behalf of Tenant represents and warrants to Landlord that he or she has full power and authority to bind Tenant to the terms of this Lease. Tenant hereby represents and warrants to Landlord that (i) Tenant is a corporation duly organized, validly existing, and in good standing under the laws of the State of Oregon, (ii) this Lease has been duly authorized, executed, and delivered by Tenant, and (iii) this Lease is binding in all respects on Tenant.     Setion 20.9  Memorandum of Lease.  Upon not less than ten days prior written request by either party, the parties hereto agree to execute and deliver to each other a Memorandum Lease, in recordable form, setting forth the following:     (a) The date of this Lease;     (b) The parties to this Lease;     (c) The term of this Lease and options to extend;     (d) The legal description of the Demised Premises;     (e) The right of first opportunity described in Section 21.3; and     (f)  Such other matters reasonably requested by either party to be stated therein.     Section 20.10  Severability.  If any covenant, condition, provision, term or agreement of this Lease shall, to any extent, be held invalid or unenforceable, the remaining covenants, conditions, provisions, terms and agreements of this Lease shall not be affected thereby, but each covenant, condition, provision, term or agreement of this Lease shall be valid and in force to the fullest extent permitted by law. This Lease shall be construed and be enforceable in accordance with the laws of the state in which the Demised Premises are located.     Sectin 20.11  Successors and Assigns.  The covenants and agreements herein contained shall bind and inure to the benefit of Landlord, its successors and assigns, and Tenant and its permitted successors and assigns.     Section 20.12  Captions.  The caption of each article of this Lease is for convenience and reference only, and in no way defines, limits or describes the scope or intent of such article or of this Lease. 36 --------------------------------------------------------------------------------     Section 20.13  Relationship of Parties.  This Lease does not create the relationship of principal and agent, or of partnership, joint venture, or of any association or relationship between Landlord and Tenant, the sole relationship between Landlord and Tenant being that of landlord and tenant.     Section 20.14  Entire Agreement.  All preliminary and contemporaneous negotiations are merged into and incorporated in this Lease. This Lease together with the Exhibits contains the entire agreement between the parties and shall not be modified or amended in any manner except by an instrument in writing executed by the parties hereto.     Section 20.15  No Merger.  There shall be no merger of this Lease or the leasehold estate created by this Lease with any other estate or interest in the Demised Premises by reason of the fact that the same person, firm, corporation or other entity may acquire, hold or own directly or indirectly, (a) this Lease or the leasehold interest created by this Lease or any interest therein, and (b) any such other estate or interest in the Demised Premises, or any portion thereof. No such merger shall occur unless and until all persons, firms, corporations or other entities having an interest (including a security interest) in (1) this Lease or the leasehold estate created thereby, and (2) any such other estate or interest in the Demised Premises, or any portion thereof, shall join in a written instrument expressly effecting such merger and shall duly record the same.     Section 20.16  Possession and Use.  Tenant acknowledges that the Demised Premises are the property of Landlord and that Tenant has only the right to possession and use thereof upon the covenants, conditions, provisions, terms and agreements set forth in this Lease.     Section 20.17  No Surrender During Lease Term.  No surrender to Landlord of this Lease or of the Demised Premises, or any portion thereof, or any interest therein, prior to the expiration of the term of this Lease shall be valid or effective unless agreed to and accepted in writing by Landlord and consented to in writing by all contract vendors and mortgagees, and no act or omission by Landlord or any representative or agent of Landlord, other than such a written acceptance by Landlord consented to by all contract vendors and the mortgagees, as aforesaid, shall constitute an acceptance of any such surrender.     Section 20.18  Surrender of Demised Premises.  At the expiration of the term of this Lease, Tenant shall surrender the Demised Premises in the same condition as the same were in upon delivery of possession thereto at the Commencement Date of the term of this Lease, reasonable wear and tear excepted, but restored to Shell Condition (as defined below), and subject to the provisions of Article XIII, and shall surrender all keys to the Demised Premises to Landlord at the place then fixed for the payment of Basic Rent and shall inform Landlord of all combinations on locks, safes and vaults, if any. "Shell Condition" shall mean a condition for use by a typical distribution use tenant, as reasonably determined by Landlord. For example, Tenant shall make all sloping floors level, as designated by Landlord, and Tenant shall remove its special piping and equipment. Tenant shall, at the expiration of the term of this Lease, Tenant shall at such time remove all of its property therefrom and all alterations and improvements placed thereon by Tenant if so requested by Landlord pursuant to the terms of Section 9.1(g). Tenant shall repair any damage to the Demised Premises caused by such removal, and any and all such property not so removed shall, at Landlord's option, become the exclusive property of Landlord or be disposed of by Landlord, at Tenant's cost and expense, without further notice to or demand upon Tenant. If the Demised Premises be not surrendered as above set forth, Tenant shall indemnify, defend and hold Landlord harmless against loss or liability resulting from the delay by Tenant in so surrendering the Demised Premises, including, without limitation any claim made by any succeeding occupant founded on such delay. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this Lease.     All property of Tenant not removed within 30 days after the last day of the term of this Lease shall be deemed abandoned. Tenant hereby appoints Landlord its agent to remove all property of Tenant from the Demised Premises upon termination of this Lease and to cause its transportation and 37 -------------------------------------------------------------------------------- storage for Tenant's benefit, all at the sole cost and risk of Tenant and Landlord shall not be liable for damage, theft, misappropriation or loss thereof and Landlord shall not be liable in any manner in respect thereto. Tenant shall pay all costs and expenses of such removal, transportation and storage. Tenant shall reimburse Landlord upon demand for any expenses incurred by Landlord with respect to removal or storage of abandoned property and with respect to restoring said Demised Premises to good order, condition and repair.     Section 20.19  Holding Over.  In the event Tenant remains in possession of the Demised Premises after expiration of this Lease, and without the execution of a new lease, it shall be deemed to be occupying the Demised Premises as a tenant from month to month, subject to all the provisions, conditions and obligations of this Lease insofar as the same can be applicable to a month-to-month tenancy, except that the Basic Rent shall be escalated to 150% of the then current Basic Rent for the Demised Premises.     Section 20.20  Landlord Approvals.  Any approval by Landlord or Landlord's architects and/or engineers of any of Tenant's drawings, plans and specifications which are prepared in connection with any construction of improvements respecting the Demised Premises shall not in any way be construed or operate to bind Landlord or to constitute a representation or warranty of Landlord as to the adequacy or sufficiency of such drawings, plans and specifications, or the improvements to which they relate, for any reason, purpose or condition, but such approval shall merely be the consent of Landlord, as may be required hereunder, in connection with Tenant's construction of improvements relating to the Demised Premises in accordance with such drawings, plans and specifications.     Section 20.21  Survival.  All obligations (together with interest or money obligations at the Maximum Rate of Interest) accruing prior to expiration of the term of this Lease shall survive the expiration or other termination of this Lease.     Section 20.22  Attorneys' Fees.  In the event of any litigation or judicial action in connection with this Lease or the enforcement thereof, the prevailing party in any such litigation or judicial action shall be entitled to recover all costs and expenses of any such judicial action or litigation (including, but not limited to, reasonable attorneys' fees and paralegals' fees) from the other party whether incurred in the litigation or other action or on any appeal or review thereof.     Section 20.23  Landlord's Limited Liability.  Tenant agrees to look solely to Landlord's interest in the Demised Premises and the proceeds thereof for recovery of any judgment from Landlord, it being agreed that Landlord (and if Landlord is a partnership, its partners, whether general or limited, and if Landlord is a corporation, its directors, officers or shareholders) shall never be personally liable for any personal judgment or deficiency decree or judgment against it.     Section 20.24  Broker.  Tenant and Landlord represent that they have dealt directly with and only with Cushman & Wakefield of Oregon, Inc. and Ossey Patterson Co. in connection with this Lease and that no other broker has negotiated or participated in negotiations of this Lease or is entitled to any commission in connection therewith. Tenant shall indemnify and hold Landlord harmless from and against any and all commissions, fees and expenses and all claims therefor by any broker, salesman or other party in connection with or arising out of Tenant's action in entering into this Lease, except for the commissions of Cushman & Wakefield of Oregon, Inc. and Ossey Patterson Co. Landlord shall indemnify and hold Tenant harmless from and against any and all commissions, fees and expenses and all claims therefor by any broker, salesman or other party in connection with or arising out of Landlord's action in entering into this Lease, and Landlord shall pay the commissions due Cushman & Wakefield of Oregon, Inc. and Ossey Patterson Co. pursuant to Landlord's separate written agreement with such brokers.     Section 20.25  Governing Law.  This Lease shall be governed by the laws of the State of Oregon. All covenants, conditions and agreements of Tenant arising hereunder shall be performable in the 38 -------------------------------------------------------------------------------- county wherein the Demised Premises are located. Any suit arising from or relating to this Lease shall be brought in the county wherein the Demised Premises are located, and the parties hereto waive the right to be sued elsewhere.     Section 20.26  Joint and Several Liability.  All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant.     Section 20.27  Time is of the Essence.  Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. ARTICLE XXI ADDITIONAL PROVISIONS     Section 21.1  Options to Extend       (a)  General.  Tenant shall have the right, subject to the provisions of this Section 21.1, to extend the Initial Term for three consecutive and successive periods of five years each (each a "Renewal Term") provided that (a) this Lease is in full force and effect; (b) no Event of Default exists at the time of exercise of the right of renewal or at the time set for commencement of the Renewal Term in question; (c) Tenant exercises its right to the Renewal Term by giving Landlord written notice of its election at least nine (9) months before the first day of the Renewal Term; and (d) the Renewal Term shall be upon the same terms, covenants and conditions as provided in the Lease, except that the monthly Basic Rent shall be the Basic Rent for the Renewal Term as set forth in Section 21.1(b) of this Lease.     (b)  Extended Term Basic Rent        (i) Determination of Market Rent. The monthly Basic Rent during each Renewal Term shall be 100 percent of the monthly market rate for a five year term for comparable space leased on comparable terms in the Portland, Oregon area ("Market Rent") but in no event less than one hundred percent (100%) of the Basic Rent payable in the period immediately preceding the Renewal Term. Landlord shall give Tenant notice of Landlord's estimation of Market Rent within 10 business days after receiving Tenant's notice exercising its option to renew. If Tenant disagrees with such estimate, it shall notify Landlord in writing thereof within 10 business days of Tenant's receipt of its notice. If Tenant fails to notify Landlord that it disagrees with the estimation within said 10 business day period, Tenant shall be deemed to have agreed to the Market Rent proposed by Landlord. If there is a disagreement on such estimation, the parties shall promptly meet to attempt to resolve their differences. If the differences as to Market Rent are not resolved within 25 days of the date Tenant receives Landlord's initial estimate of Market Rent, then the parties shall submit the matter to appraisal in accordance with Section 21.1(b) so that Market Rent is determined before the first day of the Renewal Term, or Tenant may give Landlord written notice within 3 business days after expiration of the 25-day period that Tenant withdraws the notice exercising its right of renewal and this Lease shall expire as of the expiration of the Initial Term.     (ii) Appraisal Process. If the parties are unable to reach agreement on Market Rent during the period specified in Section 21.1(b), then Landlord or Tenant (the "Moving Party") may give notice to the other demanding appraisal and naming an appraisal company. The recipient of such notice (the "Recipient") shall, within 10 days after receiving the Moving Party's notice, give notice to the Moving Party naming an appraisal company selected by the Recipient. Each appraiser shall be a member of the American Institute of Appraisers and shall have not less than 10 years experience in the appraisal of properties like the Demised Premises in the greater Portland metropolitan area. If the Recipient fails to notify the Moving Party of the name of the appraisal company it has selected within said 10 day period, the appraisal company selected by the Moving Party shall determine the Market Rent for the Renewal Term. The appraiser(s) shall determine the Basic Rent for the Renewal Term, which shall be 39 -------------------------------------------------------------------------------- the monthly amount per square foot that a willing, comparable tenant would pay and a willing, comparable landlord would accept, in an arms-length lease for comparable space in a comparable building at a comparable site for a comparable period of time, giving consideration to the rent rates per square foot, the standard of measurement by which square footage is measured, the type and extent of liability under any escalation clauses and all other applicable conditions of tenancy (which is a more detailed description of the Market Rate). The Market Rate shall not be less than 100% of the Basic Rent payable under the Lease in the period immediately preceding the Renewal Term. The appraiser(s) shall render a decision in writing to Landlord and Tenant simultaneously within 20 days of their appointment. Any decision in which the appraiser appointed by Landlord and the appraiser appointed by Tenant concur shall be binding and conclusive upon the parties.     (c)  Arbitration.  If the two appraisers are unable to agree upon a determination of Market Rent within 20 days after appointment of the appraiser(s), gi2711b they shall appoint a third appraiser, who shall be an impartial person with qualifications similar to those required of the first two appraisers. If the initial two appraisers are unable to agree upon such appointment within 5 days after expiration of the 20 day period, the third appraiser shall be selected by the parties themselves, if they can agree, within a further period of 10 days. If the parties do not so agree, then either party, on behalf of both, may request appointment of such a qualified person by the then presiding judge of the Multnomah County Circuit Court acting in his private non-judicial capacity. The other party shall not raise any question as to such judge's full power and jurisdiction to entertain the application for and make the appointment, and the parties agree to indemnify the presiding judge against all claims arising out of the presiding judge's appointment of an appraiser. If the Market Rent cannot be determined by agreement between the two appraisers selected by Landlord and Tenant, or settlement between the parties during the course of appraisal, the Market Rent shall be determined by the three appraisers in accordance with the following procedure. Each of the two appraisers originally selected by the parties shall prepare a written statement of his determination of the Market Rent, supported by the reasons therefor, with counterpart copies for each party and the third appraiser. The appraisers shall arrange for a simultaneous exchange of their Market Rent determinations. The role of the third appraiser shall be to select which of the two proposed determinations most closely approximates his determination of the Market Rent. The third appraiser shall have no right to propose a middle ground or any modification of either of the two proposed Market Rents. The appraisers shall attempt to decide the issue within 10 days after the appointment of the third appraiser. The Market Rent chosen by the third appraiser shall constitute the decision of the appraisers and be final and binding upon the parties.     Resolution.  In the event of a failure, refusal or inability of any appraiser to act, his successor shall be appointed by him, but in the case of the third appraiser, his successor shall be appointed in the manner described above for appointment of the third appraiser. The appraisers shall have the right to consult experts and competent authorities with factual information or evidence pertaining to a determination of Market Rent, but any such consultation shall be made in the presence of both parties with full right on their parts to cross-examine. The appraiser(s) shall render the determination of Market Rent in writing, with counterpart copies to each party. The appraisers shall have no power to modify the provisions of this Lease. Each party shall pay the fees and expenses of its respective appraiser and both shall share equally the fees and expenses of the third appraiser, if any. Each party shall pay the attorneys' fees and expenses of its counsel and the fees and expenses of any witnesses called by that party. Time is of the essence in connection with the establishment of Market Rent. If the Market Rent for a Renewal Term is not determined before the first day of the Renewal Term, Tenant shall continue to pay Basic Rent in the amount payable during the immediately preceding period until the Basic Rent for the Renewal Term is determined. Within 10 business days after the Basic Rent for the Renewal Term has been determined, Tenant shall pay to the Landlord the excess, if any, of the Basic Rent due at the rate set by the appraiser(s) over the Basic Rent actually paid during any expired portion of the Renewal Term. 40 --------------------------------------------------------------------------------     Section 21.2  Initial Improvements       (a)  Landlord's Improvements.  Landlord will cause to be constructed the base building shell improvements described on Exhibit "C" ("Landlord's Improvements"), to be paid for as provided in Section 21.2(c).     (b)  Tenant's Improvements.  Landlord will cause to be constructed, to be paid for as provided in Section 21.2(c), all improvements (other than Landlord's Improvements) ("Tenant's Improvements") to be designed as provided in this Section 21.2. Tenant's Improvements become the property of Landlord and a part of the Building immediately upon installation. Landlord's Improvements and Tenant's Improvements are sometimes collectively referred to in this Lease as the "Initial Improvements."     (c)  Improvement Allowance.  Landlord agrees to pay up to $4,540,100.00 (the "Improvement Allowance") for Landlord's Costs (defined below). Tenant shall pay all of Landlord's Costs which are in excess of the Improvement Allowance plus Landlord's Fee and the Warranty Fee (as defined below) within thirty (30) days after Landlord's billing to Tenant therefor. Landlord may bill Tenant such amounts on a monthly basis, at Landlord's option, as progress payments, which Tenant shall pay within thirty (30) days after billing therefor. "Landlord's Costs" are all direct and indirect costs, fees, and expenses related to the Land and the Initial Improvements including, without limitation, all costs, fees, and expenses related to the acquisition of the Land, obtaining all permits and governmental approvals for the Initial Improvements, designing, constructing, and installing the Initial Improvements, general conditions, document preparation, costs of drawing plans and specifications, builders risk and liability insurance costs, and all labor, materials, supplies, and equipment used for any of the foregoing, plus any excise or sales tax imposed on any of the foregoing. A preliminary budget, which is subject to change, of Landlord's Costs is attached as Exhibit "G". All of Landlord's Costs are subject to change except that the cost of the items described on Exhibit "G" next to which an asterisk (*) is placed shall equal the amount for such items set forth in Exhibit "G". After the Final Plans are completed, Landlord will prepare an updated budget and, thereafter, the Designated Representatives shall meet at least every other week to update the budget. Landlord's Fee shall equal five percent (5%) of the total of Landlord's Costs in excess of $4,540,100.00. The Warranty Fee shall equal one percent (1%) of costs, fees, and expenses of labor, materials, supplies, and equipment for construction of the Initial Improvements (the "Warranty Fee"). If Landlord incurs any costs, fees or expenses to repair or replace any of the Initial Improvements under Landlord's construction warranty or replacement obligations as described in this Lease, such amount shall be deducted from the Warranty Fee. Any amount not so paid from the Warranty Fee within sixteen (16) months following the date of Substantial Completion of the Tenant Improvements shall be reimbursed to Tenant, if and to the extent, Tenant pays the Warranty Fee as required by this Section 21.2(c). Such payment shall be made within 30 days after the end of such 16-month period. Landlord is not obligated to pay or incur any amounts that exceed the Improvement Allowance. If Landlord's Costs exceed the Improvement Allowance, Tenant will pay the excess to Landlord in cash as Additional Rent as provided above but in no event later than upon Substantial Completion of the Tenant's Improvements. Within 10 days after Landlord's demand therefor accompanied by reasonable documentation of such costs, Tenant will also pay, as Additional Rent, all of Landlord's Costs (including lost rent) resulting from any Tenant Delay. If Landlord reasonably estimates that the cost of the Initial Improvements will exceed the Improvement Allowance, Landlord may require Tenant to deposit with Landlord, before Landlord commences construction of Initial Improvements, an amount equal to the amount by which the cost of the Initial Improvements exceeds the Improvement Allowance.     (d)  Property Manager/Site Superintendent.  Landlord is the general contractor for the Initial Improvements. In connection with installing the Initial Improvements, Landlord will utilize a project manager and site superintendent, the fees of which are payable by Tenant on a weekly basis as a direct cost of the Initial Improvements. The fee for the project manager shall equal $2,800.00 per week, the 41 -------------------------------------------------------------------------------- fee for the assistant project manager shall equal $2,400.00 per week, and the fee for the superintendent shall equal $2,800.00 per week.     (e)  Shell Plan.  Landlord will provide Tenant with a shell plan for Landlord's Improvements (a) adequate for Landlord to prepare working drawings for Landlord's Improvements; (b) showing, in reasonable detail, the design and appearance of the finishing material Landlord will use in connection with installing Landlord's Improvements without additional requests for information; and (c) containing such other detail or description as may be necessary for Landlord to adequately define the scope of Landlord's Improvements. Tenant will have five business days to review and approve or make recommendations for change in the shell plan. Any disapproval or recommendation for change will specify both the requested change and the reason for the change with particularity. Landlord will promptly make revisions to the proposed shell plan necessary to obtain Tenant's approval. Landlord and Tenant will indicate their agreement to the shell plan by initialing two sets thereof.     (f)  Working Drawings and Specifications.  After the shell plan has been established, Landlord will provide Tenant with the final working drawings and specifications (the "Final Plans"). When Landlord requests Tenant to specify details or layouts, Tenant will specify the same, within two business days after Landlord's request, so as not to delay completion of the Final Plans. Tenant will approve the Final Plans in writing within five business days after receiving the same. If Tenant disapproves the Final Plans within the five business day period described in this section, Landlord will revise the Final Plans and submit the same to Tenant for approval. Tenant will have the same approval rights and approval time period with respect to the revised Final Plans as Tenant had with respect to the initial Final Plans as described in this section. Landlord will seal as required by law the Final Plans after Tenant approves the same and will submit the same for permits and construction bids. Landlord will promptly notify Tenant of any changes to the Final Plans that are required by the City of Wood Village (the "City"). Tenant will approve or disapprove the required changes in writing within two business days after receiving notice of the same. Tenant will not withhold its approval except for reasonable cause and will not act in an arbitrary or capricious manner in connection with approving the Final Plans or any changes thereto required by City. If Tenant fails to notify Landlord of Tenant's approval or disapproval of the Final Plans or City's required changes thereto within the five or two business day periods described in this section, or fails to specify any details or layouts within the two business day period described in this section, such failure is deemed to be a Tenant Delay and the Target Date is automatically extended day for day for each day of delay after the date by which Tenant was obligated to approve the Final Plans or specify the details or layouts.     (g)  Changes to Final Plans.  Tenant will notify Landlord of any desired revisions to the Final Plans Tenant approved under Section 21.2(f). If Landlord approves the revisions (such approval not to be unreasonably withheld or delayed), Landlord will revise the Final Plans accordingly and will notify Tenant of the additional cost of the Initial Improvements and the anticipated delay in completing the Initial Improvements caused by such revisions. Tenant will approve or disapprove the increased cost and delay within five business days after Landlord notifies Tenant of the additional cost and delay. If Tenant fails to notify Landlord of its approval or disapproval of the additional cost and delay within the five business day period, Tenant is deemed to have disapproved the additional cost or delay. If Tenant disapproves the additional cost or delay, Tenant is deemed to have withdrawn its proposed revisions to the Final Plans. If incident to a requested revision to the Final Plans, Landlord stops work pending resolution of whether Tenant finally approves or disapproves a proposed revision (for such five business day period or such longer time as Landlord waits for Tenant's decision regarding such change), then whether or not Tenant ultimately approves or disapproves the proposed revision and its attendant additional cost or delay, any delay resulting from the work stoppage will constitute a Tenant Delay.     (h)  Substantial Completion of Tenant's Improvements.  Tenant is solely responsible for the design and permitting of Tenant's Improvements. Landlord is not responsible therefor. Landlord will use commercially reasonable efforts to achieve substantial completion of Tenant's Improvements as soon as 42 -------------------------------------------------------------------------------- commercially reasonable after Substantial Completion of Landlord's Improvements and receipt of all building permits necessary to construct Tenant's Improvements, subject to Excused Delays. If Landlord fails to timely prosecute construction of the Tenant Improvements in a manner reasonably consistent with the final project schedule developed and approved by Landlord and Tenant after completion of the plans for Tenant's Improvements (the "TI Schedule"), Tenant shall have the right to take the following action: (i) provide written notification to Landlord setting forth with particularity the failure or failures by Landlord to timely conform to the TI Schedule, and setting forth no less than a period of fourteen (14) days from Landlord's receipt of such written notice for Landlord to respond thereto; (ii) within fourteen (14) calendar days of receipt of such notice set forth above, Landlord shall respond in writing to Tenant, setting forth with particularity either that construction of Tenant's Improvements has returned to conformance with the TI Schedule, or those actions Landlord is taking to bring the construction of Tenant's Improvements back into conformance with the TI Schedule within a reasonable period of time; and (iii) if Landlord fails to so timely respond as set forth above, or if construction of Tenant's Improvements is not returned to conformance with the TI Schedule within a reasonable period of time, Tenant shall have the right to terminate Landlord's work as general contractor for the Tenant Improvements no less than ten (10) days after Tenant provides Landlord written notification of such termination. Effective with the termination date as determined in this paragraph, Landlord shall submit to Tenant an itemization of all of Landlord's Costs computed as a percentage of Landlord's Costs, and Tenant shall pay such final invoicing within 30 days after billing therefor.     (i)  Punch List.  Within ten days after Substantial Completion of the Tenant's Improvements, Landlord and Tenant will inspect the Premises and develop a punch list. Landlord will complete (or repair, as the case may be) the items described on the punch list with commercially reasonable diligence and speed, subject to delays caused by Tenant Delays and Force Majeure. If Tenant refuses to inspect the Premises with Landlord within the ten-day period, Tenant is deemed to have accepted the Premises as delivered, subject to Section 21.2.(j).     (j)  Construction Warranty.  Subject to the TI Warranty Maximum described below, Landlord warrants Tenant's Improvements against defective workmanship and materials for a period of one year after Substantial Completion of Tenant's Improvements. Landlord warrants Landlord's Improvements against defective workmanship and materials for a period of one year after Substantial Completion of Landlord's Improvements. Landlord's sole obligation under this warranty is to repair or replace, as necessary, any defective item caused by poor workmanship or materials if Tenant notifies Landlord of the defective item within such applicable one-year period. Landlord has no obligation to repair or replace any item after such one year period expires except as provided in Section 8.1. Payment for Landlord's warranty obligations shall be made from the Warranty Fee described in Section 21.2(c). The cost of Landlord's compliance with Landlord's obligations under this Section 21.2(j) pertaining to Tenant's Improvements shall not exceed that portion of the Warranty Fee applicable to the Tenant's Improvements, which amount is equal to one percent (1%) of costs, fees, and expenses of labor, materials, supplies, and equipment for construction of Tenant's Improvements (the "TI Warranty Maximum"). THE WARRANTY TERMS PROVIDE TENANT WITH ITS SOLE AND EXCLUSIVE REMEDIES FOR INCOMPLETE OR DEFECTIVE WORKMANSHIP OR MATERIALS OR OTHER DEFECTS IN THE PREMISES IN LIEU OF ANY CONTRACT, WARRANTY OR OTHER RIGHTS, WHETHER EXPRESSED OR IMPLIED, THAT MIGHT OTHERWISE BE AVAILABLE TO TENANT UNDER APPLICABLE LAW. ALL OTHER WARRANTIES ARE EXPRESSLY DISCLAIMED.     (k)  Representatives.  "Designated Representative" means any person authorized to speak and act on behalf of Landlord or Tenant and upon whom the other will fully and unconditionally be entitled to rely for any and all purposes of this Section 21.2 until such designation will be revoked or altered as hereinafter provided. Landlord hereby appoints Bruce A. Wood and John F. Gordon as its Designated 43 -------------------------------------------------------------------------------- Representatives. Tenant hereby appoints Mike Clause as its Designated Representative. Either party may change its Designated Representative(s) by notice to the other, but no such change or revocation of the power of a Designated Representative will affect any approval or consent given by a party's Designated Representative prior to the other party receiving notice of revocation of such Designated Representative's appointment. Landlord or Tenant's approval or consent to any matter arising under this Section 21.2 will conclusively be evidenced by the signature of one of its Designated Representative(s).     (l)  Defined Terms.  For purposes of this Lease, the following terms shall have the following meanings:     "Certificate of Occupancy" means a certificate of occupancy or similar document or permit (whether conditional, unconditional, temporary or permanent) that must be obtained from the appropriate governmental authority as a condition to a tenant's lawful occupancy of space in the Building.     "Final Plans" means the final working drawings and specifications Landlord prepares for Landlord's Improvements after receiving Tenant's space plan for Landlord's Improvements.     "Force Majeure" means acts of God; strikes; lockouts; labor troubles; inability to procure (or delay in procuring) materials; any weather condition which delays work even if not unusual, such as rain; governmental laws or regulations; casualty, orders or directives of any legislative, administrative, or judicial body or any governmental department; receipt of all required building permits for Landlord's Improvements after September 15, 2000; inability to obtain or delay in obtaining any required licenses, permissions or authorizations (despite diligent, commercially reasonable pursuit of such permits, licenses, permissions or authorizations); action or non-action of public utilities, and other similar or dissimilar causes beyond Landlord's reasonable control.     "Punch List" means a list of items not completed by Landlord in connection with the Tenant's Improvements or Tenant's Improvements items in need of repair prepared in accordance with Section 21.2(i).     "Substantial Completion" means, with respect to Landlord's Improvements, the date on which the shell building and the roof structure are water tight, with utilities operational to the Building, and sufficiently completed such that Tenant may begin to move in its horizontal DES Line and its press system and, with respect to Tenant's Improvements, either (a) the date a Certificate of Occupancy is issued for the Premises or (b) if the City or other appropriate authority does not require that a Certificate of Occupancy or other similar document be issued for the Premises, the date Tenant is reasonably able to occupy and use the Premises for its intended purposes; provided, however, that if either of the events subparagraph (a) or (b) describes is delayed or prevented because of work Tenant is responsible for performing in the Premises, "Substantial Completion" means the date that Landlord has performed all of Landlord's work that is necessary for either of the events subparagraph (a) or (b) describes to occur and Landlord has made the Premises available to Tenant for the performance of Tenant's work.     "Tenant" means the tenant identified in the Lease and such Tenant's permitted successors and assigns. In any provision relating to the conduct, acts or omissions of "Tenant," the term     "Tenant" includes the tenant identified in the Lease and such Tenant's agents, employees, contractors, invitees, successors, assigns and others using the Premises or on the Property with Tenant's expressed or implied permission.     "Tenant Delays" means any delay caused or contributed to by Tenant, including, without limitation, Tenant's ordering of any long lead time item(s), Tenant's failure to timely approve any plans, including the shell plan for Landlord's Improvements within the time period provided in this 44 -------------------------------------------------------------------------------- Lease, Tenant's failure to timely respond to any other request from Landlord for a response or approval within the time period reasonably requested by Landlord, Tenant's failure to timely prepare or approve the Final Plans within the time period provided in this Lease and any delay from any revisions Tenant proposes to approved Final Plans. Tenant Delays also include, without limitation, any delay due to Tenant's failure to comply strictly with Tenant's obligations set forth in the schedule attached as Exhibit "E" or to do what is reasonably requested by Landlord to facilitate Landlord's compliance with the schedule attached as Exhibit "E".     "Warranty Terms" means, collectively, the Punch List and construction warranty provisions of Section 21.2 (j) of the Lease.     Section 21.3  Right of First Opportunity to Make Offer.  Landlord agrees that, prior to presenting a bona fide offer to sell the Demised Premises to any party or accepting a bona fide offer to purchase the Demised Premises, Landlord shall first give written notice to Tenant of its desire to sell the Demised Premises and give Tenant ten days within which to make an offer to Landlord to purchase the Demised Premises. If Tenant desires, Landlord agrees to negotiate with Tenant in good faith during such ten-day period. If Landlord and Tenant do not enter into a binding agreement pertaining to the purchase and sale of the Demised Premises within such ten day period, Tenant's rights under this Section 21.3 shall terminate and be of no further force or effect except that such rights shall revive after a sale of the Demised Premises is closed and shall be applicable to the successor Landlord, on a one-time basis, in accordance with the same terms and conditions of this Section 21.3. This right of first opportunity to make an offer shall not apply to a sale of the Demised Premises to any Affiliate of Landlord. That is, Landlord shall be free to sell the Demised Premises to an Affiliate of Landlord without regard to this Section 21.3. "Affiliate of Landlord" shall mean any Person (defined below) directly or indirectly controlling, controlled by or under common control with, Landlord. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlling", "controlled by" and "under common control with"), as applied with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person whether through the ownership of voting securities or by contract or otherwise. Without limiting the generality of the foregoing, the phrase "Affiliate of Landlord" shall include Gerald Rauenhorst, a trust for the benefit of Gerald Rauenhorst and/or members of his family or their issue, Opus, L.L.C., Opus Corporation, or the parent or subsidiary of any of them, or a partner, limited liability company, corporation or other entity directly or indirectly comprised of all or some of the above or a fund managed or initiated by any of the foregoing. A "Person" shall mean an individual, trust, estate, corporation, limited partnership, general partnership, limited liability company or other entity. The right of first opportunity to make an offer shall not be applicable to any holder of any Mortgage as defined in Section 16.1 or to any successor to such holder.     Section 21.4  Conditions Subsequent.  The effectiveness of this Lease is conditioned on Landlord purchasing the Land. If Landlord does not purchase the Land, this Lease shall be thereby terminated and Landlord shall reimburse Tenant's actual and reasonable out-of-pocket third-party expenses incurred in connection with its design of the Tenant Improvements and the negotiation of this Lease, in an amount not to exceed $25,000, within 30 days after receipt of copies of paid invoices evidencing such expenses. Landlord also retains the right to terminate this Lease (without reimbursement of any costs to Tenant) if Landlord does not obtain design review approval from the City of Wood Village (or on appeal of such decision) on terms and conditions reasonably acceptable to Landlord. 45 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, each of the parties hereto has caused this Lease to be duly executed as of the day and year first above written. LANDLORD:   OPUS NORTHWEST, L.L.C., a Delaware limited liability company           By       /s/ THOMAS B. PARSONS     Its   Vice President   TENANT:       MERIX CORPORATION, an Oregon corporation           By       /s/ TERRI TIMBERMAN     Its   Chief Administrative Officer           By       /s/ JOHN JOHNSTON     Its   Director of Materials 46 -------------------------------------------------------------------------------- QUICKLINKS NET LEASE AGREEMENT WITNESSETH: ARTICLE I TERM OF LEASE ARTICLE II CONSTRUCTION OF IMPROVEMENTS ARTICLE III BASIC RENT ARTICLE IV USE OF DEMISED PREMISES ARTICLE V PAYMENT OF TAXES, ASSESSMENTS, ETC. ARTICLE VI INSURANCE ARTICLE VII UTILITIES ARTICLE VIII REPAIRS ARTICLE IX COMPLIANCE WITH LAWS AND ORDINANCES ARTICLE X MECHANIC'S LIENS AND OTHER LIENS ARTICLE XI INTENT OF PARTIES ARTICLE XII DEFAULTS OF TENANT ARTICLE XIII DESTRUCTION AND RESTORATION ARTICLE XIV CONDEMNATION ARTICLE XV ASSIGNMENT, SUBLETTING, ETC. ARTICLE XVI SUBORDINATION, NONDISTURBANCE, NOTICE TO MORTGAGEE AND ATTORNMENT ARTICLE XVII SIGNS ARTICLE XVIII REPORTS BY TENANT ARTICLE XIX CHANGES AND ALTERATIONS ARTICLE XX MISCELLANEOUS PROVISIONS ARTICLE XXI ADDITIONAL PROVISIONS
QuickLinks -- Click here to rapidly navigate through this document EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is made effective October 10, 2000, by and between Jore Corporation, a Montana corporation ("Jore") and David H. Bjornson ("Employee").     NOW, THEREFORE, the parties hereto agree as follows: 1.  Employment.     Jore hereby agrees to continue to employ Employee as its Chief Legal and Administrative Officer, and Employee hereby accepts such employment in accordance with the terms of this Agreement and the terms of employment applicable to employees of Jore. In the event of any conflict or ambiguity between the terms of this Agreement and terms of employment applicable to Jore employees in general, the terms of this Agreement shall control. 2.  Duties of Employee.     The duties of Employee shall include the performance of all of the duties typical of the office held by Employee as described in the bylaws of Jore, if applicable, and such other duties and projects as may be assigned by a superior officer of Jore, or the board of directors of Jore. Employee shall devote his full time productive time, ability and attention to the business of Jore and shall perform all duties in a professional, ethical and businesslike manner. Employee will not, during the term of this Agreement, directly or indirectly engage in any other business, either as an employee, employer, consultant, principal, officer, director, advisor, or in any other capacity, either with or without compensation, that would be in conflict with Employee's duties on Jore's behalf. 3.  Compensation.     A.  Base Compensation.  Employee will be paid compensation during this Agreement at a base salary of $159,100 per year, payable in installments according to Jore's regular payroll schedules.     B.  Incentive Compensation.  Employee will be paid such incentive compensation as may be agreed upon from time to time between Employee and Jore management. Unless otherwise provided herein, any bonus or other incentive compensation will be calculated on a calendar quarter basis, with the requirement Employee be employed on the last day of such quarter to qualify for the bonus. 4.  Benefits.     A.  Holidays, Vacation and Personal Days.  Employee will be entitled to paid holidays, vacation days, and personal days each calendar year, as set out in the Jore employee handbook, or, as to corporate officers, as set forth in Jore employee compensation guidelines as adopted and modified from time to time ("Jore's Compensation Guidelines"). Jore will notify Employee on or about the beginning of each calendar year with respect to the holiday schedule for the coming year. Vacation days will be scheduled in advance subject to requirements of Jore. Such holidays must be taken during the calendar year and cannot be carried forward into the next year.     B.  Life Insurance, Disability, and Medical Plan.  Jore agrees to include Employee in the group medical plan of Jore and, if applicable to the office of Employee pursuant to Jore's Compensation Guidelines, to provide voluntary life insurance and disability insurance for Employee in the amounts and under the terms and conditions set forth in Jore's Compensation Guidelines as in effect on the date hereof. Employee shall be responsible for payment of any federal or state income tax imposed upon these benefits.     C.  Expense Reimbursement.  Employee shall be entitled to reimbursement for all reasonable and customary expenses, including travel and entertainment, incurred by Employee in the performance of Page 1 -------------------------------------------------------------------------------- Employee duties. Employee will maintain records and written receipts as required by Jore's internal policies and reasonably requested by Jore to substantiate such expenses. Any anticipated out of the ordinary expenses must be pre-approved by senior management of Jore. 5.  Term and Termination.     A.  The Initial Term of this Agreement shall commence on the date hereof and it shall continue in effect for a period of five (5) years. Thereafter, the Agreement shall be renewed upon the mutual agreement of Employee and Jore for successive one-year terms, unless terminated in accordance herewith.     B.  This Agreement and Employee's employment may be terminated at Jore's discretion without cause during the Initial Term with 30 days prior written notice to Employee. If the termination is without cause, Jore shall pay to Employee base compensation through the date which is one hundred twenty (120) days from the date on which the termination is to be effective as per the timely delivered notice. In addition, Employee shall be entitled to a pro rata share of incentive compensation as provided in section 3.B. through and including the effective date of termination (but not including the period of continuing compensation under this subsection).     C.  This Agreement may be terminated by Employee at Employee's discretion by providing at least thirty (30) days prior written notice to Jore. In the event of termination by Employee pursuant to this subsection, Jore may immediately relieve Employee of all duties and immediately terminate this Agreement, provided that Jore shall pay Employee at the then applicable base salary rate to the termination date included in Employee original termination notice, but in no event in excess of thirty (30) days from the date Jore receives such notice. Any incentive compensation which has accrued through such date, but has not been paid, shall be forfeited by Employee in this event, and shall not be paid.     D.  In the event that Employee is in breach of any material obligation owed Jore under this Agreement, habitually neglects the duties to be performed under this Agreement, becomes permanently disabled and is no longer able to perform the essential functions of the position with reasonable accommodation, engages in any conduct which is dishonest, damages the reputation or standing of Jore, is convicted of a serious criminal act or engages in any act listed as cause for dismissal in the Jore Employee Handbook, then Jore may terminate this Agreement upon five (5) days notice to Employee. In event of termination of the agreement pursuant to this subsection, Employee shall be paid only at the then applicable base salary rate up to and including the date of termination. Employee shall not be paid any incentive compensation or other additional compensation, prorated or otherwise.     E.  In the event Jore is acquired, or is the non-surviving party in a merger, or sells all or substantially all of its assets, this Agreement shall not be terminated and Jore agrees to use its best efforts to ensure that the transferee or surviving entity is bound by the provisions of this Agreement. Page 2 -------------------------------------------------------------------------------- 6.  Notices.     Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services; If to Jore: Jore Corporation 45000 Highway 93 South Ronan, Montana 59864 Attention: General Counsel If to Employee: David H. Bjornson 3400 Lorraine Drive Missoula, Montana 59803 7.  Final Agreement.     This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. Only a further writing that is duly executed by both parties may modify this Agreement. 8.  Governing Law.     This Agreement shall be construed and enforced in accordance with the laws of the state of Montana. 9.  Headings.     Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent. 10. Assignment.     Neither this Agreement nor any or interest in this Agreement may be assigned by Employee without the prior express written approval of Jore, which may be withheld by Jore at Jore's absolute discretion. Jore may assign or delegate all or any part of its rights or obligations under this Agreement to a direct or indirect subsidiary or parent or by merger, consolidation, sale or transfer of all or substantially all of its assets, provided any resulting assignee or transferee succeeds to the obligations of Jore hereunder, and provided that at least eighty percent (80%) of the ultimate ownership of such assignee or transferee immediately after such transfer or assignment is held or owned, directly or indirectly, by the same parties owning or holding immediately prior to the transfer or assignment. All references to Jore shall include any permitted assignee or successor to Jore. 11. Preparation of Agreement.     Employee acknowledges that this Agreement was prepared by attorneys representing Jore, and that the terms of this Agreement will have tax consequences to Employee. Employee has been advised to consult with an attorney and tax advisor of his choice before entering into this Agreement and has done so, or has waived the opportunity to do so. Employee acknowledges that he has not relied upon any legal or tax advice of Jore's attorneys in connection with this Agreement. Page 3 -------------------------------------------------------------------------------- 12. Severability.     If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. 13. Arbitration.     The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in Lake County, Montana, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act as arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator's expenses and administrative fees of arbitration.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Jore Corporation   Employee:   By:               --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Matt Jore   David H. Bjornson   President     Page 4 -------------------------------------------------------------------------------- QUICKLINKS EMPLOYMENT AGREEMENT
Standard Form of Agreement Between Owner and Contractor where the basis of payment is a STIPULATED SUM -------------------------------------------------------------------------------- THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401. AIA Document A201-1997, General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified. This document has been approved and endorsed by The Associated General Contractors of America. Copyright 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987,© 1997 by The American Institute of Architects. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will subject the violator to legal prosecution. -------------------------------------------------------------------------------- AGREEMENT made as of the 14th day of September in the year of 2000. (In words, indicate day, month and year) BETWEEN the Owner: (Name, address and other information) AMSCAN, INC. 32 Leone Lane Chester, N.Y.  10918 and the Contractor (Name, address and other information) CLAYCO CONSTRUCTION COMPANY, INC. 2199 Innerbelt Business Center Drive St. Louis, Missouri  63114 The Project is: (Name and location) Design and construction of an office warehouse/distribution center, consisting of an approximately 526,566 square feet on approximately 50 acres of land located at 47 Elizabeth Drive, Chester, New York (the “Site”). -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 1. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997. The Architect is: (Name, address and other information) Mitchell and Hugeback Architects The Owner and Contractor agree as follows. 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 8. 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 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION   3.1   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 sert 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 or the date of Contractor’s receipt of a fully exectued original of this Agreement, whichever occurs later.   If, prior to the 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:   3.2   The Contract Time shall be measured from the date of commencement.   3.3   The Contractor shall achieve Substantial Completion of the entire Work not later than ten (10) monthsdays 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 any delays contemplated in paragraph 8.3.1 of the General Conditions (AIA Document No. A201) attached hereto, such completion date being the “Contract Time”   , 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.) See Insert 3.3 ARTICLE 4 CONTRACT SUM 4.1     The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor’s performance of the Contract. The Contract Sum shall be Nineteen Million Three Hundred Forty Thousand Five Hundred Four and NO/100 Dollars ($19,340,504.00), subject to additions additions and deductions as provided in the Contract Documents, subject to an increase of five and one half percent (5.5%) on all Change Orders, as defined in Paragraph 7.9 herein below, increasing the cost of the Work, and subject to a decrease of five and one half percent (5.5%) on all Change Orders decreasing the cost of the Work.   4.2   The Contract Sum is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner: (State tate 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 that amount expires) Outline Specifications dated September 11, 2000, and consisting of twenty-two (22) pages attached hereto as Exhibit A (“Outline Specs”). -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 2. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.   4.3  Unit prices, if any, are as follows: See Insert 4.4 ARTICLE 5 PAYMENTS   5.1 PROGRESS PAYMENTS   5.1.1     Based upon Applications for Payment submitted to the Owner Architect by the Contractor and Certificates for Payment issued by the Architect, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents.   5.1.2     The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:   5.1.3      Provided that an Application for Payment is received by the Owner Architect not later than the first day of a month, the Owner shall make payment to the Contractor not later than the twentieth (20th) day of the same month. If an Application for Payment is received by the Owner Architect after the application date fixed above, payment shall be made by the Owner not later than twenty (20) days after the Owner Architect receives the Application for Payment.   5.1.4     Each Application for Payment shall be based on the attached most recent schedule of values (as the same may be changed by Change Orders) submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Contract Sum among the various portions of the Work. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner Architect may require and shall be attached to this Contract. This schedule, unless objected to by the Architect, shall be used as a basis for reviewing the Contractor’s Applications for Payment.   5.1.5      Applications for Payment shall indicate the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment.   5.1.6      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 Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Contract Sum allocated to that portion of the Work Work in the schedule of values, less retainage of five percent (5%). Pending final determination of cost to the Owner of charges 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 Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the completed construction (or, if approved in advance by the Owner, suitably suitably stored off the site at a location agreed upon in writing), as provided in Paragraph 9.3.2 of AIA Document A201-1997,  less retainage of five percent (5%);   .3 Subtract the aggregate of previous payments made by the Owner; and   .4 Subtract amounts, if any, for which the OwnerArchitect has withheld all or a portion of a progress or nullified a Certificate for Paymentpayment as provided in Paragraph 9.5 of AIA Document A201-1997.   5.1.7      The progress payment amount determined in accordance with Subparagraph 5.1.6 shall be further modified under the following circumstances:   .1 Add, upon Substantial Completion of the Work, a sum sufficient to increase the total payments to the full amount of the the Contract Sum, less such amounts as the Architect shall determine for incomplete Work determined pursuant to  Paragraph 9.8.4 of the AIA Document A201-1997, retainage applicable to such work and unsettled claims; and -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 3. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.     (Subparagraph 9.8.5 of AIA Document A201-1997 requires release of applicable retainage upon Substantial Completion of Work with consent of surety, if any.)   .2 Add, if final completion of the Work is thereafter materially delayed through no fault of the Contractor, any additional amounts payable in accordance with Subparagraph 9.10.3 of AIA Document A201-1997.   5.1.8      Reduction or limitation of retainage, if any, shall be as follows:   (If it is intended, prior to Substantial Completion of the entire Work, to reduce or limit the retainage resulting from the percentages inserted in Clauses 5.1.6.1 and 5.1.6.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation.) If any Subcontractor performing sitework, tilt-up concrete work, structure steel worrk or flatwork fully performs all of its obligations under its Subcontract and the Contractor has approved such work, then upon request of the Contractor, the Owner shall release the full amount of the retainage for such Subcontractor to the Contractor for payment to the Subcontractor.   5.1.9      Except with the Owner’s prior approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site.   5.2 FINAL PAYMENT   5.2.1      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 AIA 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 ArchitectParagraph 9.10 of AIA Document A201-1997 has been satisfied.   5.1.8     The Owner’s final payment to the Contractor shall be made no later than 30 days after the conditions of paragraph 9.10 Document A201-1997 have been satisfied. issuance of the Architect’s final Certificate for Payment, or as follows: ARTICLE 6 TERMINATION OR SUSPENSION   6.1  The Contract may be terminated by the Owner or the Contractor as provided in Article 14 of AIA Document A201-1997.   6.2  The Work may be suspended by the Owner as provided in Article 14 of AIA Document A201-1997. ARTICLE 7 MISCELLANEOUS PROVISIONS   7.1   Where reference is made in this Agreement to a provision of AIA Document A201-1997 or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents.   7.2   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.) One percent over the "prime rate" as reported by The Wall Street Journal.   (Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner’s 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.)   7.3  The Owner's representative is: (Name, address and other information) Willard Finch AMSCAN, INC. 32 Leone Lane Chester, N.Y. 10918 -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 4. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.   7.4   The Contractor's representative is: (Name, address and other information) Darrell E. Smith Clayco Construction Company, Inc. 2199 Innerbelt Business Center Drive St. Louis, MO 63114   7.5   Neither the Owner’s nor the Contractor’s representative shall be changed without ten days written notice to the other party.          7.6    Other provisions:             The Contractor will enter into a direct contractual relationship with the Architect, engineers, and other design professionals to provide the design of the Project. The Owner acknowledges and agrees that the Contractor is not a licensed architect or engineer and is not agreeing to perform services which require such a license in the State in which the Project is located. Such services will be performed by licensed architects, engineers and design build subcontractors under separate agreements. The fees and expenses of those design professionals contracted and paid for by the Contractor shall be included as part of the Contract Sum. .1         If there is any conflict among the Contract Documents then the following priority shall be given to the same: first, the provisions of this Agreement (A101) shall govern, second, the provisions of the General Conditions (A201) shall govern, third, the Outline Specs shall govern (provided that as to design matters, the Outline Specs shall govern over A101 or A201), and fourth, the most recent version of any drawings approved by Owner and Contractor in writing shall govern. .2         The Owner represents that it is the owner of fee simple title to the land on which the Project will be constructed. Attached to this Contract is a true copy of the deed to the land by which the Owner received title to the same.           7.8 If the Owner requests a change in the Work by giving the Contractor a written change order request (a “CO Request”), setting forth in detail the nature of the requested change, then the Contractor shall furnish to the Owner a written offer to make the requested change, which offer shall include the Contractor’s determination of the changes, if any, to the (i) Contract Sum, (ii) the schedule of values or (iii) the Contract Time. If the Owner accepts such offer in writing and without revision, then such offer and acceptance, together, shall constitute a “Change Order” which shall operate to amend this Contract as provided herein. If the Owner accepts such offer subject to revisions not previously agreed to be the Contractor in writing, then such “acceptance” shall constitute a counteroffer by the Owner to the Contractor which the Contractor may either accept in writing or reject. If the Contractor accents such counteroffer in writing, the same shall constitute a Change Order. The Contractor shall have no obligation to perform any changes in the Work except pursuant to a Change Order made as provided herein. ARTICLE 8 ENUMERATION OF CONTRACT DOCUMENTS   8.1   The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:   8.1.1      The Agreement is this executed 1997 edition of the Standard Form of Agreement Between Owner and Contractor, AIA Document A101-1997.   8.1.2      The General Conditions are the 1997 edition of the General Conditions of the Contract for Construction, AIA Document A201-1997, as modified in the form attached to this Contract.   8.1.3     The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows:   Document Title Pages   8.1.4      The Specifications are those contained in the Project Manual dated as in Subparagraph 8.1.3, and are as follows: (Either ther list the Specifications here or refer to an exhibit attached to this Agreement.) Section   Title Pages See the Outline Specs.   8.1.5     The Drawings are as follows, and are dated unless a different date is shown below: -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 5. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.   (Either list the Drawings here or refer to an exhibit attached to this Agreement.)   Number Title Date   8.1.6     The Addenda, if any, are as follows:   Number Title Pages   Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 8.   8.1.7     Other documents, if any, forming part of the Contract Documents are as follows: (List here any additional documents that are intended to form part of the Contract Documents. AIA Document A201-1997 provides that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractor’s bid are not part of the Contract Documents until enumerated in this Agreement. They should be listed here only if intended to be part of the Contract Documents.) Schedule of Inserts to Clayco Construction AIA Document A101-1997 and AIA Document A201-1997 (attached hereto and consisting of 17 pages). All references in this AIA Document A101-1997 or in the AIA Document A201-1997 to “Insert” shall mean such attached Schedule of Inserts.   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.   /s/ Michael Murphy -------------------------------------------------------------------------------- OWNER (Signature)   -------------------------------------------------------------------------------- CONTRACTOR (Signature) AMSCAN, INC.   CLAYCO CONSTRUCTION COMPANY, INC. By: /s/ James M. Harrison, Exec. V.P.   By: MICHAEL MURPHY -------------------------------------------------------------------------------- (Printed name and title) James M. Harrison, Exec. V.P.   -------------------------------------------------------------------------------- (Printed name and title) Senior V.P. & CFO Insert A:    THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY -------------------------------------------------------------------------------- THE PARTIES --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below. Electronic Format A101-1997 User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 6. Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.
Exhibit 10(o) Contract No. 117118   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 25, 2000 UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS   1. SHIPPER is: NORTH SHORE GAS COMPANY, a LDC. 2. (a) MDQ totals: 60,000 MMBTU per day. (b) Service option selected (check any or all): [ ] LN [ ] SW [ ]NB 3. TERM: November 1, 2000 through March 31, 2003. 4. Service will be ON BEHALF OF: [X] Shipper or [ ]Other: 5. The ULTIMATE END USERS are customers within any state in the continental U.S.; or (specify state)________________________________________________. 6. [ ] This Agreement supersedes and cancels a _____________ Agreement dated ___________. [X] Service and reservation charges commence the latter of: (a) November 1, 2000, and (b) the date capacity to provide the service hereunder is available on Natural's System. [ ] Other:_____________________________________________ 7. SHIPPER'S ADDRESSES   NATURAL'S ADDRESSES   General Correspondence : NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA RAULIE DE LARA   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P. O. BOX 283 77001-0283     HOUSTON, TEXAS         Statements/Invoices/Accounting Related Materials : NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA 130 E. RANDOLPH DR.   ATTENTION: ACCOUNT SERVICES CHICAGO, IL 60601-6207   ONE ALLEN CENTER, SUITE 1000     500 DALLAS ST., 77002     P.O. BOX 283 77001-0283     HOUSTON, TEXAS         Payments :     NATURAL GAS PIPELINE COMPANY OF AMERICA     P.O. BOX 70605     CHICAGO, ILLINOIS 60673-0605           FOR WIRE TRANSFER OR ACH:     DEPOSITORY INSTITUTION: THE CHASE     MANHATTAN BANK, NEW YORK, NY     WIRE ROUTING #: 021000021     ACCOUNT #: 323-206042     8. The above stated Rate Schedule, as revised from time to time, controls this Agreement and is incorporated herein. The attached Exhibits A, B, and C are part of this Agreement. NATURAL AND SHIPPER ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the entire agreement between the parties and no waiver, representation, or agreement shall affect this Agreement unless it is in writing. Shipper shall provide the actual end user purchasers names(s) to Natural if Natural must provide them to the FERC. AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   NORTH SHORE GAS COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Executive Vice President     Contract No. 117118     EXHIBIT A DATED: February 25, 2000 EFFECTIVE DATE: November 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117118   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. ANR/NGPL SOUTH WOODSTOCK MC MC HENRY IL 6100 09 60,000 HENRY           INTERCONNECT WITH ANR           PIPELINE COMPANY IN SEC. 2-T43N-           R6E, MC HENRY COUNTY, ILLINOIS.             SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: February 25, 2000 EFFECTIVE DATE: November 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117118   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL TONNE RD COOK COOK IL 7866 09 60,000 INTERCONNECT WITH NORTH           SHORE GAS COMPANY ON           TRANSPORTER'S HOWARD STREET           LINE IN SEC. 27-T41N-R11E, COOK           COUNTY, ILLINOIS.             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: November 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117118   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: November 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117118   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 30   40   F   60,000 37   0   F   0 40   37   B   60,000
AMENDMENT TO THE TELLABS, INC. 1989 STOCK OPTION PLAN (As Amended and Restated Effective June 26, 1992) WHEREAS, Tellabs, Inc. (the "Corporation") has heretofore established the Tellabs, Inc. 1989 Stock Option Plan (the "Plan") for the benefit of participating officers and other key employees of the Corporation and its subsidiaries; WHEREAS, the Corporation deems it desirable to make certain amendments to the Plan relating to the vesting of options and stock appreciation rights ("SARs") and/or the post-employment exercise period in the event of the death, disability, or retirement of an option or SAR holder, or a change in control of the Corporation; WHEREAS, the Compensation Committee of the Corporation has considered the recommendations and recommended that the Board of Directors of the Corporation approve this Amendment to the Plan; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Article 2 of the Plan, the following definition of "Change in Control" shall be added:   (r) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Corporation or any subsidiary of the Corporation, or any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of the Corporation and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation or all or substantially all of the Corporation'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 voting securities of the Corporation; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. II. Under Article 2 of the Plan, the following definition of "Disability" shall be added:   (u) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Article 15 shall be amended in its entirety to read as follows:   15. Termination of Employment. Except as set forth in Article 15A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option or SAR Agreement, the following rules shall apply upon termination of the Grantee's employment with the Corporation and all subsidiaries: (a) Except as set forth in subsections (b), (c) and (d) below, in the event a Grantee ceases to be an employee of the Corporation and its subsidiaries for any reason, any Option or SAR or unexercised portion thereof granted under this Plan may be exercised, to the extent such Option or SAR would have exercisable by the Grantee hereunder on the date on which the Grantee ceased to be an employee, within three months of such date (seven months in the event such termination occurs after the occurrence of a Change in Control), but in no event later than the date of expiration of the term of the Option or SAR. (b) In the event of termination of employment due to the death the Grantee, each Option or SAR held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or SAR or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option or SAR held by the Grantee may, to the extent exercisable at the time of such termination, be exercised at any time prior to the expiration date of the Option or SAR or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option or SAR held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Corporation or its subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or an affiliate of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option or SAR shall vest At least 80 but less than 90 points          75% of each unvested option or SAR shall vest At least 90 points                                  100% of each unvested option or SAR shall vest and all Options held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a non-qualified stock option. IV. The Plan shall hereby be amended by adding a new Article 15A to read:   15A. Change in Control. (a) Upon the occurrence of a Change in Control, any and all Options and SARs granted hereunder shall become immediately exercisable and remain exercisable until such Options and SARs expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options and SARs granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control.   V. Article 16 of the Plan shall be amended in its entirety to read as follows: 16. Effect of Change in Stock Subject to Plan. Except as provided below, the Board shall make equitable adjustments in the number and class of shares of stock subject to the Plan, and to the Option and SAR rights granted hereunder and the exercise prices of such Option and SAR rights, in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, acquisition, separation or other change in the capital structure of the Corporation. IN WITNESS WHEREOF, the foregoing amendments to the Tellabs, Inc. 1989 Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.     TELLABS, INC.     By: /s Michael J. Birck Name: Michael J. Birck Its: President and Chief Executive Officer
-------------------------------------------------------------------------------- EXHIBIT 10.8 RIVERCHASE BUSINESS PARK WAREHOUSE LEASE      THIS LEASE, (“Lease”), made and entered into as of this 12th day of July, 2000, by and between Landlord and Tenant as specified in Items 1 and 2 of the Definitions appearing in Section 1.1 hereof.      Landlord hereby demises and rents unto Tenant, and Tenant hereby leases from Landlord, certain Premises now existing in Landlord’s Warehouse Center (“Center”), as described in Item 3 of the Definitions appearing in Section 1.1 hereof, and upon the terms, covenants and conditions contained herein. ARTICLE 1 EXHIBITS, PREMISES, USE OF PREMISES AND TERM SECTION 1.0  COVENANTS OF LANDLORD’S AUTHORITY         Landlord represents and covenants that; (a) prior to commencement of the Lease term, it will have either good title to or a valid leasehold interest in the land and building of which the Premises form a part; and (b) upon performing all of its obligations hereunder, Tenant shall peacefully and quietly have, hold and enjoy the Premises for the term of this Lease. SECTION 1.1 DEFINITIONS         The following items shall be defined or be referred to as indicated below for the purposes of this Lease and the Exhibits attached hereto: Item 1 - Landlord: RBP, LLC an Alabama Limited Liability Company Post Office Box 187 Birmingham, Alabama 35201-0187 Item 2 - Tenant: BioCryst Pharmaceuticals, Inc. 2190-B Parkway Lake Drive Hoover, Alabama 35244 Item 3 - Center: Riverchase Business Park   Premises (Section 1.3): Suite #'s 2190 A, B, H, 2192 A, C, K having a gross leaseable area of approximately 50,150 square feet   Item 4 - Use of Premises (Section 1.4): Research and development of pharmaceuticals and any other related purpose approved by Landlord.   Item 5 - Tenant’s Trade Name: BioCryst Pharmaceuticals, Inc.   Item 6 - Lease Term (Section 1.5) 10 years and -0- months   Item 7 - Lease Commencement Date (Section 1.5): July 1, 2000               Lease Expiration Date (Section 1.5): June 30, 2010   Item 8 - Rent Commencement Date (Section 1.6): July 1, 2000   Item 9 - Total Fixed Minimum Rent (See Addendum to Lease Exhibit D) --------------------------------------------------------------------------------   Item 10 - Fixed Minimum Rent Increase(s) – (See Addendum to Lease Exhibit D)                 Adjustment Dates:                 Basic Standard:   Item 11 - Security Deposit (Section 10.1): $21,400.00 (transferred from previous lease dated January 17, 1992).   Item 12 - Tenant’s Participation in Real Estate Taxes (Section 4.2):                 Base Year - 2000   Item 13 - Common Area Maintenance (Section 1.2) (payable quarterly) Item 14 - Notices (Section 12.1) Tenant: BioCryst Pharmaceuticals, Inc. 2190 – B Parkway Lake Drive Hoover, Alabama 35244           Landlord’s           Agent: Engel Realty Company, Inc. P. O. Box 187 Birmingham, Alabama 35201-0187           Landlord: RBP, LLC, an Alabama Limited Liability Company 951 Eighteenth Street South Birmingham, Alabama 35205   NOTE: Please send all rent payments to the Landlord’s Agent’s address.   Item 15 - Additional Terms: None SECTION 1.2 COMMON AREA MAINTENANCE - DEFINITIONS      A. COMMON AREAS      Landlord shall make available within the Center such Common Areas, including but not limited to parking areas, driveways, truckways, delivery passages, loading docks, pedestrian sidewalks and ramps, access and egress roads, open and enclosed courts and malls, landscaped and planted areas, public restrooms and other facilities, as Landlord in its sole discretion shall deem appropriate.      Landlord shall operate, manage, equip, light, repair and maintain said Common Areas for their intended purposes in such manner as Landlord, in its reasonable discretion, shall determine, and Landlord reserves the right from time to time to make reasonable changes to the Common Areas, provided such changes do not either (i) reduce the number of parking spaces available for Tenant’s use, or (ii) materially adversely affect access to Tenant’s loading docks, and Landlord shall not be subject to liability therefor nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall any such action be deemed an actual or constructive eviction of Tenant.      B. USE OF COMMON AREAS      During the term of this Lease only, Tenant and its permitted concessionaires, officers, employees, agents, customers and invitees shall hav the non-exclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas as designated from time to time by Landlord, subject to such reasonable rules and regulations as Landlord may from time to time impose in a uniform and non-discriminatory basis, including, the designation of specific areas in which vehicles owned by Tenant, its concessionaires, officers, employees and agents must be parked, provided such designated parking areas are located in reasonably proximity to the Premises. If Landlord shall designate such parking areas, and if any vehicle of Tenant or permitted concessionaire, officer, employee or agent of Tenant is parked in any other portion of the Center, Tenant shall pay to Landlord upon demand the sum of Ten Dollars ($10.00) for each such vehicle for each day, or part thereof, such vehicle is so parked, and Tenant hereby authorizes Landlord to tow or cause any such vehicle to be towed from the Center, and agrees to reimburse Landlord for the cost thereof upon demand, and to otherwise indemnify and hold Landlord harmless with respect thereto. Tenant agrees after notice thereof to abide by such rules and regulations and to use its best efforts to cause Tenant’s permitted concessionaires, officers, employees, agents, customers and invitees to conform thereto. Tenant shall, upon request, furnish to Landlord the license numbers of the vehicles operated by Tenant and its concessionaires, officers, employees and agents. Landlord may at any time close temporarily any Common Area to make repairs or changes, to prevent the acquisition of public rights in such areas and to discourage non-customer parking, and Landlord shall not be subject to liability therefor nor shall any action be deemed an actual or constructive eviction of Tenant. Landlord may do such other acts in and to the Common areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other Tenants, its and their concessionaires, officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Neither Tenant nor Tenant’s employees, concessionaires, officers or agents may solicit business in the parking lot or other Common Areas or distribute any handbills or other advertising matter in such areas or place any handbills or advertising matter in or on any vehicles parked therein without Landlord’s prior written consent. --------------------------------------------------------------------------------      Landlord reserves the right to grant to third persons the non-exclusive right to cross over and use in common with Landlord and all tenants of the Center the Common Areas as designed from time to time by Landlord.      C. CHARGE FOR COMMON AREAS   Tenant’s pro rata share of the Common Areas costs shall be the portion of such costs which the floor area of the Premises bears to the gross leaseable area in the Center. Tenant shall pay to Landlord, in the manner provided below, Tenant’s pro rata share of the Common Area maintenance costs as such terms are defined as follows: All costs and expenses paid or incurred by Landlord, its agents or any contractor employed by Landlord directly related to the day-to-day operation, maintenance, managing, equipping, insuring, repairing and replacing the Common Areas. Such costs and expenses shall include but not be limited: Maintaining lighting fixtures, including costs of light bulbs and electric current (provided, however, that if a Tenant requires that the Center remain illuminated after 11 p.m., Tenant shall be responsible for the cost allocable to said requirement), repairing, replacing and maintaining all fire sprinkler systems and other similar fire prevention equipment and systems serving the Center, salaries and related costs of all on-site personnel, repairs and maintenance, costs and expenses of planting, maintaining, replanting and replacing flowers and other landscaping, sound systems, removal of trash, rubbish, garbage and other refuse, cleaning, supplies, uniforms and dry cleaning thereof, premiums for liability, fire, hazard, sign and other property related insurance, costs of operating, maintaining and repairing truck serviceways, tunnels, loading docks, retaining walls, pedestrian malls (open or enclosed, courts, plazas, stairs, ramps, sidewalks, washrooms and other elements of the Common Areas, illumination and maintenance of signs equipment depreciation, comfort and first-aid stations, parcel pick-up stations, service contracts with independent contractors, capital expenditures required under any governmental law, rule or regulation that was not applicable to the building at the time it was originally constructed, and administrative and overhead costs equal to fifteen percent (15%) of the total costs of operating and maintaining the Common Areas. With respect to any capital improvements, the amortized cost of capital improvements (as distinguished from replacement parts or components installed in the ordinary course of business) made to the Center which are: (a) performed primarily to reduce operating expense costs or otherwise improve the operating efficiency of the Center; or (b) required to comply with any laws that are enacted, or first interpreted to apply to the Center after the date of this Lease; or (c) replacement of light standards, fixtures and equipment; or (d) repair or repaving of any parking areas shall be amortized by Landlord over the lesser of the Payback Period (defined below) or 5 years. The amortized cost of capital improvements may, at Landlord’s option, include actual or imputed interest at the rate that Landlord would reasonably be required to pay to finance the cost of the capital improvement. “Payback Period“means the reasonably estimated period of time that it takes for the cost savings resulting from a capital improvement to equal the total cost of the capital improvement.   Expenses shall not include: the cost of capital improvements (except as set forth above); depreciation; interest (except as provided above for the amortization of capital improvements); principal payments of mortgage and other non-operating debts of Landlord; the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; costs in connection with leasing space in the Building, including brokerage commissions; lease concessions, including rental abatements and construction allowances, granted to specific tenants; costs incurred in connection with the sale, financing or refinancing of the Center; fines, interest and penalties incurred due to the late payment of taxes or expenses; organizational expenses associated with the creation and operation of the entity which constitutes Landlord; or any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants in the Center under their respective leases. If the Center is not at least 95% occupied during any calendar year or if Landlord is not supplying services to at least 95% of the total rentable square footage of the Center at any time during a calendar year, expenses shall, at Landlord’s option, be determined as if the Building had been 95% occupied and Landlord had been supplying services to 95% of the rentable square footage of the Center during that calendar year. --------------------------------------------------------------------------------      D. COMMON AREA MAINTENANCE COSTS      Tenant, for each Lease Year or Partial Lease Year, during the term of this Lease or any renewal thereof, shall pay to Landlord its proportionate share, as hereinafter defined, of the annual Common Area Maintenance assessed or levied against the land and buildings of the Center. Tenant’s proportionate share for said Common Area Maintenance for each Lease Year or Partial Lease Year of the term of this Lease or any renewal thereof shall be determined by dividing the total number of square feet in the Premises by the total number of square feet of all leaseable building space within the Building. Any payments due by Tenant hereunder shall be made during each Lease Year or Partial Lease Year of the term of this Lease or any renewal thereof within Thirty (30) days after Tenant’s receipt of Landlord’s written certification of the amount due. Tenant’s share shall be prorated in the event Tenant is required to make such payment for a Partial Lease Year.      If the Lease expires during a Partial Lease Year, Landlord shall bill Tenant, not more than sixty (60) days prior to the expiration date of the Lease, for its estimated pro rata share of Common Area Maintenance for the Partial Lease Year. Tenant shall remit full payment to Landlord within fifteen (15) days after receipt of such bill. If Tenant fails to remit such full payment to Landlord, Landlord, in its sole discretion, may deduct the amount due from Tenant’s Security Deposit and be entitled to all other rights and remedies hereunder for Tenant’s default. SECTION 1.3 PREMISES LEASED BY TENANT      a. The premises leased by Tenant are located at the Center set forth in Item 3 of the Definitions, which Premises are particularly described in Item 3 of the Definitions.   The boundaries and location of the Premises are cross-hatched on the Site plan diagram of the Center (Exhibit “B”), which sets forth the general layout of the Center, but shall not be deemed to be a warranty, representation, or agreement upon the part of the Landlord that said Center will be exactly as indicated on said diagram.      The Premises includes, for the purpose of this Lease, the Premises within Landlord’s Center leased to Tenant herein and shall extend to the exterior faces of all walls or to the building line where there is no wall, or to the center line of those walls separating the Premises from other Premises in the Center, together with the appurtenances specifically granted in this Lease, but reserving and excepting to Landlord the use of the exterior walls and the roof and the right to install, maintain, use, repair and replace pipes, ducts, conduits, and wires leading through the Premises in locations which will not materially interfere with Tenant’s use thereof and serving other parts of the Center. SECTION 1.4 USE OF PREMISES      The Premises shall be used and occupied only for the purpose as specified in Item 4 of the Definitions and for no other purpose or purposes without Landlord’s prior written consent. Tenant shall, at its own risk and expense, obtain all governmental licenses and permits necessary for such use. SECTION 1.5 LEASE TERM      The term of this Lease shall be for the period specified in Item 6 of the Definitions commencing and expiring as provided in Item 7 of the Definitions, unless sooner terminated or extended as hereinafter provided. SECTION 1.6 RENT COMMENCEMENT DATE      Tenant shall commence payment of Rent at the earlier of (a) the date specified in Item 8 of the Definitions, or (b) the date when the Tenant shall occupy the Premises, which date shall be agreed to by both parties in writing no later than five (5) days after Tenant opens for business. If the Rent Commencement Date falls on a day other than the first day of a calendar month, the Fixed Minimum Rent for such month shall be prorated on a per diem basis, calculated on the basis of thirty (30) day month. -------------------------------------------------------------------------------- SECTION 1.7 LEASE YEAR      For purposes of this Lease, the term Lease Year is defined to mean a calendar year (beginning January 1 and extending through December 31 of any given year). Any portion of a year which is less than a Lease Year, that is, from the Lease Commencement Date through the next December 31, and from the last January 1, falling within the term of the Lease through the last day of the term, shall be defined as a Partial Lease Year. SECTION 1.8 ACCEPTANCE OF PREMISES      Tenant acknowledges that it has fully inspected and accepts the Premises in their present condition and “as is”, and that the same are suitable for the use specified in Item 4 of the Definitions. ARTICLE II RENT SECTION 2.1 FIXED MINIMUM RENT      The total Fixed Minimum Rent for the Lease Term as specified in Item 9 of the Definitions shall be payable by Tenant as specified in Item 9 of the Definitions.      The phrase “Fixed Minimum Rent” shall be the Fixed Minimum Rent above specified, payable monthly in advance on the first day of each month, without prior demand therefor and without any deduction or setoff whatsoever. In addition, Tenant covenants and agrees to pay Landlord all applicable sales or other taxes that may be imposed on the above specified rents or payments hereinafter provided for to be received by Landlord when each such payment is made. If Tenant pays any installment of Fixed Minimum Rent or any other sum by check and such check is returned for insufficient funds or other reasons not the fault of Landlord, then Tenant shall pay to Landlord on demand a processing fee of $25.00 per returned check. Landlord, at its option, may subtract any such processing fee from any Security Deposit held by Landlord, and, in such event, Tenant shall deposit a like amount with Landlord in accordance with the terms of Section 10.1. SECTION 2.2 LATE PAYMENT PENALTY      Should Tenant fail to pay when due any Installment of Fixed Minimum Rent or any other sum payable to Landlord under the terms of this Lease, then Landlord shall assess a servicing fee of Fifty Dollars ($50.00) per month from and after the Fifth (5th) day following the date on which any sum shall be due and payable, until the required payments are made. Landlord, at its option, may subtract any such amount that is not paid from any Security Deposit held by Landlord and, in such event, Tenant shall deposit a like amount with Landlord in accordance with the terms of Section 10.1 herein. Should Tenant remit a partial payment for any outstanding Fixed Minimum Rent or Additional Rent due, Landlord shall apply said partial payment to the outstanding Fixed Minimum Rent or Additional Rent as Landlord deems necessary in its sole discretion. SECTION 2.3 ADDITIONAL RENT - DEFINITION      In addition to the foregoing Fixed Minimum Rent and Fixed Minimum Rent Increase, all payments to be made under this Lease by Tenant to Landlord shall be deemed to be and shall become Additional Rent hereunder and, together with Fixed Minimum Rent, shall be included in the term “Rent” whenever such term is used herein. Unless another time shall be herein expressly provided for the payment thereof, any Additional Rent shall be due and payable on demand or together with the next succeeding installment of Fixed Minimum Rent, which ever shall first occur, together with all applicable state taxes, and Landlord, after first giving Tenant not less than ten (10) days prior written notice and opportunity to cure, shall have the right to pay or do any act which requires the expenditure of any sums of money by reason of the failure or neglect of Tenant to perform any of the provisions of this Lease, and in the event Landlord elects to pay such sums or do such acts requiring the expenditure of monies, all such sums so paid by Landlord, together with interest thereon, shall be deemed to be Additional Rent and payable as such by Tenant to Landlord upon demand. -------------------------------------------------------------------------------- ARTICLE III UTILITY SERVICES SECTION 3.1 UTILITIES      Tenant agrees that it shall not install any equipment which will exceed or overload the capacity of any existing utility facility and that if any equipment installed by Tenant shall require additional utility facilities, the same shall be installed at Tenant’s expense in accordance with plans and specifications to be approved in writing by Landlord. Tenant shall promptly pay for all public utilities rendered or furnished to the Premises from and after the date Tenant assumes possession of the Premises (irrespective of whether Tenant shall have opened for business in the Premises) including but not limited to water, gas, electricity and sewer charges and all taxes thereon. Landlord, at its election, may install re-registering meters and collect any and all charges aforesaid from Tenant as and when bills are rendered by Landlord, making returns to the proper public utility company or governmental unit, provided that Tenant shall not be charged more than the rates it would be charged for the same services if furnished direct to the Premises by such companies or governmental units. SECTION 3.2 FURNISHING OF UTILITY SERVICE      Any utility or related service, including a privately owned sewerage disposal system, which Landlord elects to provide or cause to be provided to the Premises, may be furnished by any agent employed by Landlord or by an independent contractor selected by Landlord, and Tenant shall accept the same therefrom to the exclusion of all other suppliers, provided that Tenant shall not be charged a rate in excess of then prevailing competitive rates for the same services if furnished direct to the Premises by public utility companies or governmental units. The charges for such services so furnished shall be Additional Rent due on the first day of the calendar month following rendition of a bill therefor. Landlord may discontinue furnishing such services if the same are not so paid for, upon not less than ten (10) days written notice to Tenant, and no such discontinuation shall be deemed an eviction or render Landlord liable to Tenant for damages or relieve Tenant from performance of its obligations hereunder. Interruption or impairment of any such utility or related service, caused or necessitated by repairs or improvements, or by hazards beyond reasonable control of Landlord, shall not give rise to a right or cause of action by Tenant against Landlord in damages or otherwise. Landlord may cease to furnish any one or more of such services at any time without any responsibility to Tenant except to connect the service facilities with other comparable sources of supply for the services so discontinued. ARTICLE IV TAXES SECTION 4.1 TENANT’S TAXES      Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the Premises. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord’s property and if Landlord elects to pay the same or if the assessed value of Landlord’s property is increased by inclusion of personal property, furniture or fixtures placed by Tenant in the Premises, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes. SECTION 4.2 TENANT’S PARTICIPATION IN REAL ESTATE TAXES      Landlord will pay in the first instance all real property taxes, including extraordinary and/or special assessments (and all costs and fees incurred in contesting the same), hereinafter collectively referred to as Real Estate Taxes, which may be levied or assessed by the lawful tax authorities against the land, the buildings, and all other improvements in the Center. --------------------------------------------------------------------------------      Tenant, for each Lease Year or Partial Lease Year, as defined in Section 1.7, during the term of this Lease or any renewal thereof, shall pay to Landlord its proportionate share, as hereinafter defined, of the amount by which the annual Real Estate Taxes assessed or levied against the land and buildings of the Building exceed the Real Estate Taxes for the Base Year specified in Item 12 of the Definitions. Tenant’s proportionate share for said Real Estate Taxes for each Lease Year or Partial Lease Year of the term of this Lease or any renewal thereof shall be determined by dividing the total number of square feet in the Premises by the total number of square feet of all leaseable building space within the Building. Any payment due by Tenant hereunder shall be made during each Lease Year or Partial Lease Year of the term of this Lease or any renewal thereof within thirty (30) days after Tenant’s receipt of Landlord’s written certification of the amount due. Tenant’s share shall be prorated in the event Tenant is required to make such payment for a Partial Lease Year. In addition, should the taxing authorities include in such Real Estate Taxes the value of any improvements made by Tenant, or include machinery, equipment, fixtures, inventory or other personal property or assets of the Tenant, then Tenant shall also pay 100% of the Personal Property Taxes and Real Estate Taxes for such items.      If the Lease expires during a Partial Lease Year, Landlord shall bill Tenant not more than sixty (60) days prior to the expiration date of the Lease for its estimated pro rata share of Real Estate Taxes for the Partial Lease Year. Tenant shall remit full payment to Landlord within fifteen (15) days after receipt of such bill. If Tenant fails to remit such full payment to Landlord, Landlord, in its sole discretion, may deduct the amount due from Tenant’s Security Deposit and be entitled to all other rights and remedies hereunder for Tenant’s default. ARTICLE V REPAIRS AND MAINTENANCE SECTION 5.1 REPAIRS BY LANDLORD      Landlord shall, at its expense, keep the foundations and the roof in good order and repair, and shall make structural repairs and replacements necessary to keep in good order and repair the Center and the pipes and ducts running through the Premises and installed by Landlord, but not including Tenant’s service connections therewith. In no event, however, shall Landlord be responsible to Tenant for damages resulting from Landlord’s failure to make repairs to the Center or the Premises unless Landlord shall have received written notice of the request to make the repair and Landlord shall have failed to act within 30 days to remedy the condition described in such notice (except when the requested repair is of an emergency nature and Landlord shall to repair the same within a reasonable period of time). Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain, or leaks from any part of the Premises or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature, unless directly caused by or attributable to Landlord’s negligence or willful act or omission, but in no event shall Landlord be liable for any consequential or speculative damages. All property of Tenant, including merchandise and furnishings, kept or stored on the Premises shall be so kept or stored at the risk of Tenant. If Landlord is required to make repairs by reason of any act, omission or negligence of Tenant, any permitted subtenants, concessionaires or their respective employees, agents, invitees, licensees or contractors, the cost of such repairs shall be borne by Tenant and shall be due and payable within ten (10) days after receipt of Landlord’s notification of the amount due. SECTION 5.2 REPAIRS AND MAINTENANCE BY TENANT      Tenant shall make and pay for all repairs to the interior of the Premises and shall replace all things necessary to keep the same in a good state of repair, such as, but not limited to, all fixtures, furnishings, lighting, doors, and store signs of Tenant. At its option, Landlord may supply the air conditioning unit for the Premises and see, at its own cost, that said unit is in good repair prior to Tenant’s occupancy. Tenant shall then maintain, replace and keep in good repair all air conditioning, plumbing, heating and electrical installations for the Premises. Any air conditioning unit supplied by Tenant shall remain in the Premises for the duration of the Lease Term and any renewals thereof, and shall become the property of the Landlord upon installation of such unit. Tenant shall at all times keep the Premises and the immediate areas in front, behind and adjacent to it, exterior entrances, exterior walls, all glass and show windows, moldings and bulkheads, and all partitions, doors, floor surfaces, fixtures, equipment and appurtenances thereof in good order, condition and repair, and in a satisfactory condition of cleanliness, including reasonable periodic painting of the interior and, if applicable, the exterior of the Premises, damage by unavoidable casualty and reasonable wear and tear excepted. Tenant shall be fully responsible and liable for the maintenance and lighting of all its exterior signs, and shall periodically repaint metal surfaces that rust or begin to deteriorate from any causes. Any damage to the exterior walls to which a sign may be attached, including but not limited to rust stains and structural cracking of the fascia, caused by Tenant’s use of such sign, shall be repaired by Tenant at its own cost. Tenant shall make such other necessary repairs in and to the Premises not specified in Section 5.1 hereof as the responsibility of Landlord, and shall keep in force a standard maintenance agreement with a company acceptable to Landlord on all air conditioning equipment and provide a copy of said maintenance agreement to Landlord. In addition to the foregoing, Tenant shall, to the extent it is not an obligation of Landlord to maintain as a Common Area expense, repair and maintain fire extinguishers and other fire prevention equipment, including, but not limited to, a fire sprinkling system in the Premises, in accordance with the recommendations or requirements of Landlord’s fire engineer or Landlord’s fire insurance carrier or in accordance with any future recommendations of Landlord’s fire insurance carrier or fire engineer, and in accordance with applicable governmental codes. --------------------------------------------------------------------------------      If Tenant refuses or neglects to properly repair and/or maintain the Premises as required herein and to the reasonable satisfaction of Landlord as soon as reasonably possible after not less than thirty (30) days written demand, Landlord may, but shall not be obligated to, make such repairs and/or maintenance, without liability for any loss or damage that may accrue to Tenant’s merchandise, fixtures, or other property or to Tenant’s business by reason thereof, and upon completion thereof, Tenant shall pay Landlord’s costs for making such repairs plus twenty percent (20%) for overhead, upon presentation of the bill. Such bill shall include interest at the lesser of the highest non-usurious rate permitted by applicable law or fifteen percent (15%) per annum of the cost from the date of completion of repairs until the date payment is received by Landlord. SECTION 5.3 RIGHT OF ENTRY      Landlord or its representatives, after reasonable prior notice to Tenant (except in the case of any emergency, when no notice is required), shall have the right to enter the Premises at reasonable hours of any day during the Lease Term to: a) ascertain if the Premises are in proper repair and condition, and further, Landlord or its representatives shall have the right, without liability, to enter the Premises for the purpose of making repairs, additions or alterations thereto or to the building in which the same are located, including the right to take the required materials therefor into and upon the Premises without the same constituting an eviction of Tenant in whole or in part, but in doing so, Landlord shall use commercially reasonable efforts to make such repairs and modifications in a fashion so as to not interfere with or disturb Tenant’s operations and the Rent shall not abate while such repairs, alterations, replacements or improvements are being made by reason of loss or interruption of Tenant’s business due to the performance of any such work; and b) show the Premises to prospective purchaser, lenders and tenants. If Tenant shall not be personally present to permit an entry into said Premises when for any reason an entry therein shall be permissible, Landlord may enter the same by a master key or by the use of force without rendering Landlord liable therefor and without in any manner affecting Tenant’s obligations under this Lease. During the ninety (90) days prior to the expiration or earlier termination of the Lease Term, Landlord may place a “For Lease” sign on the Premises. SECTION 5.4 SIDEWALKS AND OUTSIDE AREAS      Nothing shall be thrown or swept out of doors or windows of Tenant’s Premises onto sidewalks, entrances, passages, courts, plazas or any of the Common Areas. Tenant agrees to use reasonable diligence to keep the sidewalks and outside areas immediately in front, behind and adjacent to the Premises broom-clean and otherwise keep said areas free of trash, litter or obstruction of any kind. SECTION 5.5 REPLACEMENT OF GLASS      At the commencement of the term of this Lease, all glass in the Premises shall be in good condition scraped clean of any paint and undamaged. Tenant shall at its own expense replace all glass thereafter broken or damaged ( except for glass broken or damaged by a structural failure of the building ) with glass of the same quality and physical properties. -------------------------------------------------------------------------------- ARTICLE VI ALTERATIONS, CHANGES AND IMPROVEMENTS SECTION 6.1 ALTERATIONS, CHANGES, AND IMPROVEMENTS      Tenant shall not make or permit any alterations, additions or improvements to the Premises without the prior written consent of the Landlord. Consent for minor alterations, additions or improvements will not be unreasonably withheld or delayed by Landlord. Tenant shall have the right at all times to install Tenant’s shelves, bins, machinery, air conditioning or heating equipment and trade fixtures, hereinafter collectively called “Tenant’s Trade Fixtures,” provided Tenant complies with all applicable governmental laws, ordinances and regulations and all Landlord Rules & Regulations as per attached Exhibit C, further provided that such installations by Tenant shall not overload, damage or deface the Premises. Provided Tenant is not in default of any of the terms, conditions or covenants of this Lease, Tenant shall have the right to remove at the termination of this Lease any of Tenant’s Trade Fixtures installed, including any extra air conditioning and heating equipment installed and paid for by Tenant, if any (as specifically differentiated from any such equipment owned or installed by Landlord, and provided further, that Tenant shall immediately repair at its own expense any damage caused by such removal and leave the Premises in a broom-clean and orderly condition. All such work shall be done at such times and in such manner as shall minimize any inconvenience to other occupants of the Center of which the Premises is a part. All alterations, additions and improvements made by Tenant (other than Installation of Tenant’s Trade Fixtures) shall become the property of Landlord upon the termination of this Lease or Landlord may require Tenant to remove such alterations, additions and improvements and any other property placed in or on the Premises by Tenant and restore the Premises to its original condition. Notwithstanding any provision of this Lease seemingly to the contrary, Tenant shall never, under any circumstances, have the power to subject the interest of Landlord in the Premises to any mechanics’ or materialmen’s liens or liens of any kind, nor shall any provision contained in this Lease ever be construed as empowering the Tenant to encumber or cause the Landlord to encumber the title or interest of Landlord in the Premises.      Except as described in the Addendum, Tenant hereby expressly acknowledges and agrees that no alterations, additions repairs or improvements to the Premises of any kind are required or contemplated to be performed as a prerequisite to the execution of this Lease and the effectiveness thereof according to its terms or in order to place the Premises in a condition necessary for the use of the Premises for the purposes set forth in this Lease, that the Premises are presently complete and usable for the purpose set forth in this Lease and that this Lease is in no way conditioned on Tenant making or being able to make alterations, additions, repairs or improvements to the Premises, unless otherwise specified under the Special Provisions section of the Definitions, notwithstanding the fact that alterations, repairs, additions or improvements may be made by Tenant, for Tenant’s convenience or for Tenant’s purposes, subject to Landlord’s prior written consent, at Tenant’s sole cost and expense. Landlord’s approval of any plans, specifications or work drawings shall create no responsibility or liability on the part of the Landlord for their completeness, design sufficiency or compliance with all laws, rules and regulations of governmental agencies or authorities. Landlord acknowledges that it has approved the plans for the work Tenant is presently making to the Premises, as contemplated by the addendum.      Tenant shall have no authority, expressed or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind the interests of Landlord in the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of the Landlord in the premises or under the terms of this lease. Tenant agrees to give Landlord immediate written notice if any lien or encumbrance is placed on the Premises resulting directly or indirectly form any act or omission of Tenant. -------------------------------------------------------------------------------- ARTICLE VII INSURANCE AND INDEMNITY SECTION 7.1 TENANT’S INSURANCE      Tenant shall maintain, at its own cost and expense, with responsible companies approved by Landlord, commercial general liability insurance, insuring Landlord and Tenant, as their interests may appear, against all claims, demands or actions for bodily injury, personal injury or death of any one person in an amount of not less than $1,000,000.00; and for bodily injury, personal injury or death of more than one person in any one accident in an amount of not less than $2,000,000.00; and for damage to property in an amount of not less than $500,000.00. Landlord shall have the right to direct Tenant to increase coverage within reasonable amounts whenever it considers them inadequate. Such liability insurance shall also cover and include all exterior signs maintained by Tenant. The policy of insurance may be in the form of a general coverage or floater policy covering these and other premises, provided that Landlord is specifically insured therein. Tenant shall carry like coverage against loss or damage by boiler or compressor or internal explosion of boilers or compressors, if there is a boiler or compressor in the Premises. Tenant shall maintain insurance covering all glass forming a part of the Premises including plate glass in the Premises and fire insurance against loss or damage by fire or windstorms, with such endorsements for extended coverage, vandalism, malicious mischief and special extended coverage as Landlord may require, covering 100% of the replacement costs of any items of value, including but not limited to signs, stock, inventory, fixtures, improvements, floor coverings and equipment. All of said insurance shall be in form and in responsible companies satisfactory to Landlord, and shall provide that it will not be subject to cancellation, termination or change except after at least thirty (30) days’ prior written notice to Landlord. Any insurance procured by Landlord or Tenant as herein required shall contain an express waiver of any right of subrogation by the insurance company against Landlord. Certificates of insurance, together with satisfactory evidence of the payment of the premiums thereon, shall be deposited with Landlord on the day Tenant begins operations. Thereafter, Tenant shall provide Landlord with evidence of proof of payment upon renewal of any such policy, not less than thirty (30) days’prior to expiration of the term of such coverage. In the event Tenant fails to obtain or maintain the insurance required hereunder, Landlord may obtain same and any costs incurred by Landlord in connection therewith shall be payable by Tenant upon demand. Landlord shall maintain a like amount of commercial general liability insurance covering the Center, including, but not limited to sidewalks and parking lots. SECTION 7.2 EXTRA HAZARD INSURANCE PREMIUMS      Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises any article or permit any activity which may be prohibited by the standard form of fire or public liability insurance policy. Tenant agrees to pay any increase in premiums for fire and extended coverage or public liability insurance which may be carried by Landlord on the Premises or the Center of which they are a part, resulting from the type of merchandise sold or services rendered by Tenant or activities in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant’s use of the Premises, a schedule, issued by the organization making the insurance rate on the Premises, showing various components of such rate, shall be conclusive evidence of the several items and charges which make up the fire and public liability insurance rate on the Premises.      Tenant shall not knowingly use or occupy the Premises or any part thereof, or suffer or permit the same to be used or occupied for any business or purpose deemed extra hazardous on account of fire or otherwise. In the event Tenant’s use and/or occupancy causes any increase of premium for the fire, boiler and/or casualty rates on the Premises or any part thereof above the rate for the normal occupancy legally permitted in the Premises, Tenant shall pay such additional premium on the fire, boiler and/or casualty insurance policy that may be carried by Landlord for its protection. Bills for such additional premiums shall be rendered by Landlord to Tenant and shall be due from and payable by Tenant within fifteen (15) days after received in writing. Failure to pay amounts due hereunder shall be default by Tenant under this Lease. Landlord has received no notice from its insurance carrier of any increase in Landlord’s insurance costs resulting from the nature of Tenant’s occupancy of the Premises. SECTION 7.3 INDEMNITY      a. Tenant during the term hereof shall indemnify and save harmless Landlord from and against any and all claims and demands whether for injuries to persons or loss of life, or damage of property, occurring within the Premises or the Center and arising out of the use and occupancy of the Premises by Tenant, or occasioned wholly or in part by any act or omission of Tenant, its subtenants, agents, contractors, employees, servants, lessees or concessionaires, excepting, however, such claims and demands, whether for injuries to persons or loss of life, or damage to property, caused by the negligence of Landlord. In case Landlord shall, without fault on its part, be made a party to any litigation commenced by or against Tenant, then Tenant shall protect and hold Landlord harmless and shall pay all costs, expenses and reasonable attorneys’ fees that may be incurred or paid by Landlord in enforcing the covenants and agreements of this Lease. --------------------------------------------------------------------------------      b. Landlord hereby agrees to indemnify Tenant, its officers, employees and directors, from and against: (a) all claims resulting from or alleged to have resulted from any breach, violation or non-performance of any covenant or obligation on the part of Landlord contained in this Lease, and (b) all claims of injury or damage to person or property to the extent that any such damage or injury; (i) may be incident to, arise out of, or be proximately caused, wholly or in part, by an act, omission, negligence or misconduct on the part of Landlord or any of its partners, officers, employees, agents or contractors, (ii) may be the proximate result of the violation by Landlord or any of its partners, officers, employees, agents or contractors, of any governmental laws, rules or regulations, or the rules and regulations included in this Lease (as such rules and regulations may hereafter at any time or from time to time be amended or supplemented), or (iii) may in any other way arise from or out of the construction activities, occupancy or use by Landlord or any of its partners, officers, employees, agents or contractors, of the Premises. SECTION 7.4 DEFINITION AND LIABILITY OF LANDLORD      The term Landlord as used in this Lease means only the owner or the mortgagee in possession for the time being of the center in which the Premises are located or the owner of a leasehold interest in the Center and/or the land thereunder so that in the event of sale of the Center or an assignment of this Lease, or a demise of the Center and/or land, Landlord shall be and hereby is entirely freed and relieved of all obligations of Landlord hereunder arising after such transfer, provided the transferee agrees in writing to assume all obligations of the Landlord hereunder, and it shall be deemed without further agreement between the parties and such purchaser(s), assignee(s) or lessee(s) that the Purchaser, assignee or lessee has assumed and agreed to observe and perform all obligations of Landlord hereunder.      It is specifically understood and agreed that there shall be no personal liability on Landlord in respect to any of the covenants, conditions or provisions of this Lease; in the event of a breach or default by Landlord of any of its obligations under this Lease, Tenant shall look solely to the equity of Landlord in the Center for the satisfaction of Tenant’s remedies. ARTICLE VIII DAMAGE, DESTRUCTION AND CONDEMNATION SECTION 8.1 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CASUALTY A. Tenant shall give prompt notice to Landlord in case of fire or other damage to the Premises or the Center containing the Premises. In the event the Premises are damaged by fire, explosion, flood, tornado or by the elements, or through any casualty, or otherwise, after the commencement of the term of this Lease, the Lease shall continue in full force and effect. If the extent of the damage is less than fifty percent (50%) of the cost of replacement of the Premises, the damage shall promptly be repaired by Landlord at Landlord’s expense, provided that Landlord shall not be obligated to expend for such repair in an amount in excess of the insurance proceeds recovered or recoverable as a result of such damage, and that in no event shall Landlord be required to replace Tenant’s stock in trade, fixtures, furniture, furnishings, floor coverings and equipment. Landlord must complete all such repairs within two hundred seventy (270) days after the date of the casualty, and if Landlord shall fail to do so, Tenant may elect to terminate this Lease at any time thereafter. In the event of any such damage and (a) Landlord is not required to repair as hereinabove provided, or (b) the Premises shall be damaged to the extent of fifty percent (50%) or more of the cost of replacement, or (c) the building of which the Premises are a part is damaged to the extent of twenty-five percent (25%) or more of the cost of replacement, or (d) all buildings (taken in the aggregate) in the Center shall be damaged to the extent of more than twenty-five Percent (25%) of the aggregate cost of replacement, Landlord must elect either to repair or rebuild the Premises or the building or buildings, or to terminate this Lease, such notice of such election must be given to Tenant within ninety (90) days after the occurrence of the event causing the damage. B. If the casualty, repairing or rebuilding shall render the Premises untenantable, in whole or in part, a proportionate abatement of the Fixed Minimum all Rent shall be allowed from the date when the damage occurred until the date Landlord completes the repairing or rebuilding, said proportion to be computed on the basis of the relation which the gross square foot area of the space rendered untenantable bears to the floor area of the Premises. -------------------------------------------------------------------------------- C. In the event the Premises or the building(s) shall be damaged in whole or in substantial part within the last twenty-four (24) months of the original term, or within the last twenty-four (24) months of the last renewal term, if renewals are provided for herein, Landlord shall have the option, exercisable within ninety (90) days following such damage, of terminating this Lease, effective as of the date of receipt of mailing notice to Tenant thereof. If any such termination occurs during the initial term, any options for renewal shall automatically be of no further force or effect. D. No damage or destruction of the Premises or the building(s) shall allow Tenant to surrender possession of the Premises nor affect Tenant’s liability for the payment of Rent or any other covenant contained herein, except as may be specifically provided in this Lease. Notwithstanding any of the provisions herein to the contrary, Landlord shall have no obligation to rebuild the Premises or the building(s) and may at its own option cancel this Lease unless the damage or destruction is a result of a casualty covered by Landlord’s insurance policy. SECTION 8.2 CONDEMNATION (a) Total: In the event the entire Premises shall be appropriated or taken under the power of eminent domain by any public or quasi-public authority, this Lease shall terminate and expire as of the date of title vesting in such proceeding, and Landlord and Tenant shall thereupon be released from any further liability hereunder. (b) Partial: If any part of the Premises shall be taken as aforesaid, and such partial taking shall render that Portion not so taken unsuitable for the business of Tenant, as reasonably determined by Landlord, then this Lease and the term herein shall cease and terminate as aforesaid. If such partial taking is not extensive enough to render the Premises unsuitable for the business of Tenant, then this Lease shall continue in effect, except that the Fixed Minimum Rent shall be reduced in the same proportion that the floor area of the Premises taken bears to the original floor area leased and Landlord shall, upon receipt of the award in condemnation, make all necessary repairs or alterations to the building in which the Premises are located so as to constitute the portion of the building not take a complete architectural unit, but such work shall not exceed the scope of the work to be done by Landlord in originally constructing said building, nor shall Landlord, in any event, be required to spend for such work an amount in excess of the amount received by Landlord as damages for the part of the Premises so taken. “Amount received by Landlord” shall mean that part of the award in condemnation that is free and clear to Landlord of any collection by mortgagee for the value of the diminished fee. (c) Termination: If more than Twenty Percent (20%) of the floor area of the building in which the Premises are located shall be taken as aforesaid, Landlord may, by written notice to Tenant, terminate this Lease, such termination to be effective as aforesaid. (d) Rent on Termination: If this Lease is terminated as provided in this paragraph, the Rent shall be paid up to date that possession is so taken by public authority and Landlord shall make an equitable refund of any Rent paid by Tenant in advance. (e) Award: Tenant shall not be entitled to and expressly waives all claim to any condemnation award for any taking, whether in whole or partial, and whether for diminution in value of the leasehold or to the fee, although Tenant shall have the right, to the extent that the same shall not reduce Landlord’s award, to claim from the condemnor, but not from Landlord, such compensation as may be recoverable by Tenant in its own right for damage to Tenant’s business, fixtures and improvements installed by Tenant as its expense. ARTICLE IXDEFAULT SECTION 9.1 DEFAULT      Landlord may, at its option, terminate this Lease, as provided below and take the action outlined in Paragraph 9.2 hereof, IF: A. Tenant defaults in the payment of any rentals or any other payments when due, and such default shall continue for ten (10 days after notice from Landlord to Tenant; OR -------------------------------------------------------------------------------- B. Tenant defaults in fulfilling any of the other covenants or obligations of this Lease on Tenant’s part to be performed hereunder, and such default has not been cured within thirty (30) days after written notice from Landlord to Tenant specifying the nature of said default; OR C. The default so specified shall be of such a nature that the same cannot be reasonably cured or remedied within said thirty (30) day period, if Tenant shall not in good faith have commenced the curing or remedying of such default within such thirty (30) day period and shall not thereafter diligently proceed therewith to completion; OR D. At any time during the term should there be filed by or against Tenant or against any successor tenant then in possession, in any court, pursuant to any statute, either of the United State or any state, a petition: (i) in bankruptcy, (ii) alleging insolvency, (iii) for reorganization, (iv) for the appointment of a receiver or trustee, (v) for an arrangement under the Bankruptcy Acts, or (vi) if a similar type or proceeding shall be filed and any such petition or filing against Tenant has not been dismissed within a period of one hundred twenty (120) days; OR E. Tenant makes or proposes to make an assignment for the benefit of creditors, OR F. Tenant does, or permits to be done, any act which creates a mechanic’s or materialmen’s lien or claim therefore against the Premises of the Center and fails to have the same released or bonded over within thirty (30) days after receipt of a notice of the filing thereof; OR G. Tenant fails to furnish Landlord with a copy of any insurance policy required to be furnished by Tenant to Landlord when due, and such default shall continue for thirty (30) days after written notice from Landlord, Landlord may elect: (i) to terminate this Lease, or (ii) to assess and collect an administrative fee of Five Dollars ($5.00) for each day said policy has not been received in the office of Landlord at the close of each business day. SECTION 9.2 LANDLORD’S RIGHTS ON DEFAULT If the notice provided shall have been given and the term shall expire as aforesaid, Landlord may pursue any of its rights and remedies at law or in equity, including the right to terminate this Lease, in which case Tenant shall immediately surrender the Premises to Landlord. If Tenant fails to surrender the Premises, Landlord may, in compliance with applicable law and without prejudice to any other right or remedy, enter upon and take possession of the Premises and expel and remove Tenant, Tenant’s property and any party occupying all or any part of the Premises.      Should Landlord elect to re-enter or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, it may make such alterations and repairs as may be necessary in order to relet the Premises or any part thereof, for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rentals and upon such other terms and conditions as Landlord, it its sole discretion, may deem advisable. Upon each such reletting, all rentals received by Landlord from such reletting shall be applied, first, to the payment of any indebtedness, other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees and to costs of such alterations and repairs; third, to the payment of Rent due and unpaid hereunder, the residue, if any, shall be held by Landlord and applied in payment of the future rent as the same may become due and payable hereunder. If such rentals received from such reletting during any month be less than that to be paid during the month by Tenant as set forth herein, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. Landlord shall recover from Tenant all damages it may incur by reason of Tenant’s default, including the cost of recovering the Premises and, including charges equivalent to Rent reserved in this Lease, for the remainder of the stated terms, all of which amounts shall be immediately due and payable from Tenant to Landlord. --------------------------------------------------------------------------------      The parties hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other or any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, and/or claim of injury or damage.      In the event of a breach by Tenant of any of the covenants or provisions hereof, Landlord shall have, in addition to any other remedies which it may have, the right to invoke any remedy allowed at law or in equity, including injunctive relief, to enforce Landlord’s rights or any of them, as if re-entry and other remedies were not herein provided for.      In the event of any litigation arising out of a breach or the enforcement of this Lease, the prevailing party in such litigation shall be entitled to recovery of all costs, including reasonable attorneys’ fees.      Notwithstanding anything in this Lease to the contrary, Landlord reserves all rights which any state or local laws, rules, regulations or ordinances confer upon a Landlord against a tenant in default. SECTION 9.3 NON-WAIVER PROVISIONS      The failure of Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein shall not be deemed to be a waiver of any rights or remedies that Landlord may have and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained except as may be expressly waived in writing.      The maintenance of any action or proceeding to recover possession of the Premises or any installment or installments of Rent or any other monies that may be due or become due from Tenant to Landlord shall not preclude Landlord from thereafter instituting and maintaining subsequent actions or proceedings for the recovery or possession of the premises or of any other monies that may be due or become due from Tenant including all expenses, court costs and attorneys’ fees and disbursements incurred by Landlord in recovering possession of the Premises and all costs and charges for the care of the Premises while vacant. Any entry or re-entry by Landlord shall not be deemed to absolve or discharge Tenant from liability hereunder. ARTICLE X SECURITY DEPOSIT SECTION 10.1 SECURITY DEPOSIT A. Tenant has deposited with Landlord the sum specified in Item 11 of the Definitions to be retained by Landlord without liability for interest, as security for the payment of all rent and other sums of money which shall or may be payable for the full stated term of this Lease, and any extension or renewal thereof, and for the faithful performance of all the terms of this Lease to be observed and performed by Tenant. B. If any of the Rent herein reserved or any other sum payable by Tenant to Landlord shall be overdue and unpaid or should Landlord make payment son behalf of Tenant, or it Tenant shall fail to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy which Landlord may have on account thereof, appropriate and apply said entire deposit or so much thereof as may be necessary to compensate Landlord toward the payment of Rent or Additional Rent or loss or damage sustained by Landlord due to breach on the part of Tenant; and Tenant shall promptly upon demand restore said security to the original sum deposited. Within fifteen days after the end of the twenty-fourth month of the Lease Term, provided Tenant shall not be in default hereunder and shall have complied with all the terms, covenants and conditions of this Lease, return to Tenant said sum on deposit or such portion thereof then remaining on deposit with Landlord as set forth herein. SECTION 10.2 PERSONAL PROPERTY      Landlord hereby waives any statutory lien or other interest (including any security interest) in all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Premises. -------------------------------------------------------------------------------- SECTION 10.3 TRANSFER OF DEPOSIT      In the event of a sale or transfer of the Center or any portion thereof which includes the Premises, or in the event of the making of a lease of the Center or of any portion, or in the event of a sale or transfer of the leasehold estate under any such underlying lease, the grantor, transferor or Landlord, as the case may be, shall thereafter be entirely relieved of all terms, covenants and obligations thereafter to be performed by Landlord under this Lease to the extent of the interest or portion so sold, transferred or leased, and it shall be deemed and construed, without further agreement between the parties and the purchaser, transferee or Tenant, as the case may be, has assumed and agreed to carry out any and all covenants of Landlord hereunder; provided that (i) any amount then due and payable to Tenant or for which Landlord or the then grantor, transferor or Landlord would otherwise then be liable to pay to Tenant (it being understood that the owner of an undivided interest in the fee or any such lease shall be liable only for his or its proportionate share of such amount) shall be paid to Tenant; (ii) the interest of the grantor, transferor or Landlord, as Landlord, in any funds then in the hands of Landlord or then grantor, transferor or Landlord in which Tenant has an interest (including all security deposits), shall be turned over, subject to such interest, to the then grantee, transferee or Tenant; and (iii) notice of such sale, transfer or lease shall be delivered to Tenant. ARTICLE XI ADDITIONAL TENANT AGREEMENTS SECTION 11.1 MORTGAGE FINANCING AND SUBORDINATION      This Lease and all of Tenant’s rights hereunder are and shall be subordinate to the present mortgage upon the Center, as well as to any existing ground lease; however, Tenant shall, upon request of either Landlord, the holder of any mortgage or Deed of Trust now or hereafter placed upon the Landlord’s interest in the Premises or future additions thereto, and to any ground lease now or hereafter affecting the Premises, execute and deliver upon demand, such further instruments subordinating this Lease to the lien of any such mortgage or mortgages, and such ground lease, provided such subordination shall be upon the express condition that this Lease shall be recognized by the mortgagees and ground lessors and that the rights of Tenant shall remain in full force and effect during the term of this Lease and any extension thereof, notwithstanding any default by the mortgagors with respect to the mortgages or any foreclosure thereof, or any default by the ground lessee, so long as Tenant shall perform all of the covenants and conditions of this Lease. Tenant agrees to execute all agreements reasonably required by Landlord’s mortgagee or ground lessor or any purchaser at a foreclosure sale or sale in lieu of foreclosure by which agreements Tenant will attorn to the mortgagee or purchaser or ground lessor. SECTION 11.2 ASSIGNMENT OR SUBLETTING      All assignments of this Lease or subleases of the Premises by Tenant shall be subject to and in accordance with all of the provisions of this Section.      Tenant may assign this Lease or sublease the Premises, in whole or in part, to a wholly-owned corporation or controlled subsidiary of Tenant or to a party other than a wholly-owned corporation or controlled subsidiary of Tenant which acquires Tenant or substantially all of Tenant’s assets. All other assignments of subleases may not be made without first having obtained the written consent of Landlord, such consent not to be unreasonably withheld or delayed. Unless otherwise agreed by Landlord in writing, no such assignment shall release Tenant from its obligations under this Lease.      Any assignment of sublease by Tenant shall be only for the purpose specified in Section 1.4, Use of Premises, and for no other purpose, and in no event shall any assignment or sublease of the Premises release or relieve Tenant from any obligations of this Lease and said assignee or sublessee must assume Tenant’s obligations under this Lease.      In the event that Tenant shall seek Landlord’s permission to assign this Lease or sublet the Premises, Tenant shall provide to Landlord the name, address, financial statement and business experience resume of the proposed assignee or subtenant for the three prior years and such other information concerning such proposed assignee or subtenant as Landlord may reasonably request. This information shall be in writing and shall be received by Landlord no less than thirty (30) days’prior to the effective date of the proposed assignment or sublease. It shall be a condition to any consent by Landlord to an assignment or sublease that tenant shall pay to Landlord a processing fee in the amount of One Hundred Twenty Five and No/100 ($125.00). Tenant also agrees to reimburse Landlord for any reasonable legal fees incurred by Landlord in connection with the review and preparation of assignment or sublease-related documents. Payment of the processing fee shall be submitted along with Tenant’s request for Landlord’s consent. Any consent by Landlord to any assignment or sublease, or to the operation of a concessionaire or licensee, shall not constitute a waiver or the necessity for such consent to any subsequent assignment or sublease, or operation by a concessionaire or licensee. --------------------------------------------------------------------------------      Any breach of the assignment clause by Tenant will constitute a default under the terms of this Lease and Landlord shall have all rights and remedies available to it as set forth herein.      In the event Tenant shall sublease the entire Premises for rentals in excess of those rentals payable hereunder, Tenant shall pay to Landlord, as Additional Rent hereunder, one-half of the net amount (after out-of-pocket expenses directly related to such sublease) all such excess rentals.      Any proposed assignee or subtenant of Tenant shall assume Tenant’s obligations hereunder and deliver to Landlord an assumption agreement in form satisfactory to Landlord no less than ten (10) days prior to the effective date of the proposed assignment.      Notwithstanding any of the foregoing provisions, if Tenant is then in default under any of the terms of this Lease, Tenant may not assign or sublet the Premises in whole or in part. SECTION 11.4 SHORT FORM LEASE      Neither party shall record this Lease or a short form thereof without the express written consent of the other. SECTION 11.5 SURRENDER OF PREMISES AND HOLDING OVER      At the expiration of the term, Tenant shall surrender the Premises in good condition, reasonable wear and tear and damage by casualty excepted, and Tenant shall surrender all keys for the Premises to Landlord at the place then fixed for the payment of Rent and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Tenant shall remove all its trade fixtures and any alterations or improvements, subject to the provisions of Section 6.1, before surrendering the Premises, and shall repair, at its own expense, any damage to the Premises caused thereby. Tenant’s obligations to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease. In the event Tenant remains in possession of the Premises after the expiration of the tenancy created hereunder, whether or not with the consent or acquiescence of Landlord, and without the execution of a new lease, Tenant, at the option of Landlord, shall be deemed to be occupying the Premises as a tenant at will on a week-to-week tenancy shall be payable weekly at 150% of the Fixed Minimum Rent, and 150% of all other charges due hereunder, and it shall be subject to all the other terms, conditions, covenants, provisions and obligations of this Lease, and no extension or renewal of this Lease shall be deemed to have occurred by such holding over. Tenant’s obligations to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease. SECTION 11.6 ESTOPPEL CERTIFICATES      Landlord and Tenant agree to provide one another at any time, within ten (10) days of receipt of a written request, a statement certifying that this Lease is unmodified and in full force and effect or, if there have been modifications, that same are in full force and effect as modified and stating the modifications, and the dates to which the Fixed Minimum Rent and other charges have been paid in advance, if any. It is intended that any prospective purchaser or mortgagee of the Premises may rely upon any such statement delivered pursuant to this paragraph. SECTION 11.7 DELAY OF POSSESSION      If the Landlord is unable to give possession of the Premises on the date of the commencement of the aforesaid term by reason of the holding over of any prior tenant or tenants for any other reason, then an abatement or diminution of the Rent to be paid hereunder shall be allowed Tenant under such circumstances, but nothing herein shall operate to extend the term of the Lease beyond the agreed expiration date; and said abatement of Rent shall be the full extent of Landlord’s liability to Tenant for any loss or damage to Tenant on account of said delay in obtaining possession of the Premises. SECTION 11.8 COMPLIANCE WITH LAW, WASTE AND NO NUISANCES      Tenant shall comply with all governmental laws, ordinances and regulations applicable to Tenant’s use of the Premises and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances in, upon, or connected with the Premises, all at Tenant’s sole cost and expense. Tenant shall not commit, or suffer to be committed, any waste upon the Premises or any nuisance, other act, or thing which may disturb the quiet enjoyment of any other tenant in the Center in which the Premises may be located. -------------------------------------------------------------------------------- SECTION 11.9 RULES AND REGULATIONS      Tenant’s use of the Premises shall be subject, at all times during the term of this Lease, to Landlord’s right to adopt in writing, from time to time, modify and/or rescind reasonable Rules and Regulations not in conflict with any of the express provisions hereof governing the use of the parking areas, walks, driveways, passageways, signs, exterior of the building, lighting and other matters affecting other tenants in and the general management and appearance of the Center of which the Premises are a part, but no such rule or regulation shall discriminate against Tenant. The current Rules and Regulations are attached hereto as Exhibit “C” and made a part hereof. SECTION 11.10 ABANDONMENT      If Tenant shall permanently abandon, vacate or surrender the Premises, or be dispossessed by process of law or otherwise, any personal property belonging to Tenant left on the Premises shall, at the option of the Landlord, be deemed abandoned. SECTION 11.11 HAZARDOUS WASTE      The term “Hazardous Substances”, as used in this lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, the use and/or removal of which is required or the use of which is restricted, prohibited or penalized by any “Environmental Law”, which term shall mean any federal, state or local law or ordinance or other statute of a governmental or quasi-governmental authority relating to pollution or protection of the environment. Tenant hereby agrees that (i) no activity will be conducted on the Premises that will produce any Hazardous Substance, except for such activities that are part of the ordinary course of Tenant’s business activities that are part of the ordinary course of Tenant’s business (the “Permitted Activities”), provided said Permitted Activities are conducted in accordance with all Environments Laws and Tenant shall be responsible for obtaining any required permits and paying any fees and providing any testing required by any governmental agency; (ii) the Premises will not be used in any manner for the storage of any Hazardous Substances except for the storage of such materials that are used in the ordinary course of Tenant’s business (the “Permitted Materials”), provided such Permitted Materials are properly stored in a manner and location meeting all Environmental Laws; (iii) no portion of the Premises will be used as a landfill or a dump; (iv) Tenant will not install any underground tanks of any type: (v) Tenant will not allow any surface or subsurface conditions to exist or come into existence that constitute, or with the passage of time may constitute a public or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be brought onto the Premises, except for the Permitted Materials described above, and if so brought or found located thereon, the same shall be immediately removed, with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws. Landlord or Landlord’s representative shall have the right but not the obligation to enter the Premises for the purpose of inspecting the storage, use and disposal of Permitted Materials to ensure compliance with all Environmental Laws. Should it be determined, in Landlord’s sole opinion, that said Permitted Materials are being improperly stored, used, or disposed of, then Tenant shall immediately take such corrective action as requested by Landlord. Should Tenant fail to promptly take such corrective action, Landlord shall have the right to perform such work, and Tenant shall promptly reimburse Landlord for any and all costs associated with said work. If, at any time during or after the term of this Lease, the Premises are found to be so contaminated or subject to said condition as a result of Tenant’s actions or inactions, Tenant shall diligently institute proper and thorough cleanup procedures at Tenant’s sole cost, and Tenant agrees to indemnify and hold Landlord harmless from all claims, demands, actions, liabilities, costs, expenses, damages and obligations of any nature arising from or as a result of the use of Premises by Tenant. The foregoing indemnification shall survive the termination or expiration of this Lease. ARTICLE XII MISCELLANEOUS PROVISIONS SECTION 12.1 NOTICES      Whenever notice shall or may be given to either of the parties by the other, such notice shall be in writing and be either delivered in person or sent by registered or certified mail, with return receipt requested. --------------------------------------------------------------------------------      Notice to Landlord shall be sent to the address specified in Item 14 of the Definitions.      Notice to Tenant shall be sent to the address specified in Item 14 of the Definitions.      If by mail, any notice under this Lease shall be deemed to have been given at the time it is received by the addressee. SECTION 12.2 MODIFICATION; BINDING AGREEMENT; ENTIRE AGREEMENT      This Lease contains all of the agreements between the parties hereto, and it may not be modified in any manner other than by agreement in writing signed by all parties hereto or their successors in interest. The terms, covenants and conditions contained herein shall inure to the benefit of and be binding upon Landlord and Tenant and their respective heirs, successors and assigns, except as may be otherwise expressly provided in this Lease. This Lease, together with all exhibits thereto constitutes the entire agreement between the parties concerning the leasing of space in the Center and supersedes all prior agreements relating thereto. SECTION 12.3 PROVISIONS SEVERABLE      If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be illegal, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those to which it is held illegal, invalid or unenforceable shall not be affected hereby and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 12.4 CAPTIONS      The captions contained herein are for convenience and reference only and shall not be deemed as part of this Lease or construed as in any manner limiting or amplifying the terms and provisions of this Lease to which they relate. SECTION 12.5 RELATIONSHIP OF THE PARTIES      Nothing herein contained shall be deemed or construed as creating the relationship of principal and agent or of partnership or joint venture between the parties hereto; it being understood and agreed that neither the method of computing rent nor any other provision contained herein nor any acts of the parties hereto shall be deemed to create any relationship between the parties other than that of Landlord and Tenant. SECTION 12.6 ACCORD AND SATISFACTION      No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Rent nor shall any endorsement or statement on any check or any letter accompanying any check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided for in this Lease or available at law or in equity. SECTION 12.7 BROKER’S COMMISSION      Except as described in the Addendum, Tenant warrants that there are no claims for broker’s commissions or finder’s fees attributable to Tenant in connection with its execution of this Lease and agrees to indemnify and save Landlord harmless from any liability that may arise from such claim, including reasonable attorneys’fees. SECTION 12.8 DUE AUTHORIZATION; CORPORATE STATUS      In the event this Lease is signed on behalf of Tenant by a person in a representative capacity, each person or persons signing in such capacity represents and warrants to the Landlord and its successors and assigns that:   a. the execution and delivery of this Lease has been duly and validly authorized and all requisite actions have been taken to make it valid and binding on the Tenant; --------------------------------------------------------------------------------   b. the Tenant will, on the date of the commencement of this Lease, be duly organized, validly existing and in good standing in the state of its organization and entitled to conduct its business in the state where the Premises are located.      If Tenant is a corporation, Tenant’s corporate status shall continuously be in good standing and active and current with the state of its incorporation and the state in which the Center is located at the time of execution of the Lease and Tenant shall keep its corporate status active and current throughout the term of the Lease or any extensions or renewals. SECTION 12.9 SUBSTITUTION OF PREMISES      Landlord shall have no right, after the date of execution of this Lease, to substitute for the Premises any other premises in the building. SECTION 12.10 CERTAIN RIGHTS RESERVED TO LANDLORD      Landlord reserves and may exercise the following rights without affecting Tenant’s obligations hereunder:      a. to change: 1. the name of the property; 2. the street address if so directed by the appropriate governmental authority; 3. the suite numbers of the building (landlord to pay for all reasonable costs associated with such change).      b. to install or maintain a sign or signs on the exterior of the building SECTION 12.11 COVENANT OF QUIET ENJOYMENT.      Subject to the provisions of Sections 8.1 and 8.2 of this Lease, provided Tenant pay the Rent and other charges provided herein and complies with the terms of this Lease, its quiet enjoyment of the Premises during the Lease Term shall not be disrupted. EXECUTED BY LANDLORD, this 12th day of July , 2000. LANDLORD:  RBP, LLC AN ALABAMA LIMITED LIABILITY COMPANY BY:  ENGEL REALTY COMPANY, INC., IT’S MANAGING MEMBER BY:  /S/ WILLIAM E. COLEMAN ITS: PRESIDENT EXECUTED BY TENANT, this 12th day of July, 2000. TENANT:  BIOCRYST PHARMACEUTICALS, INC. BY:  /S/ W.RANDALL PITTMAN TITLE: CHIEF FINANCIAL OFFICER -------------------------------------------------------------------------------- EXHIBITS: The exhibits listed hereunder and attached to this Lease are incorporated and made a part hereof by reference: Exhibit A - Legal Description (not included) Exhibit B - Site Plan (not included) Exhibit C - Rules and Regulations Exhibit D - Addendum to Lease Exhibit E - Tenant Improvements and Leasing Commissions -------------------------------------------------------------------------------- “EXHIBIT C” RULES AND REGULATIONS 1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls shall not b obstructed or encumbered by any Tenant or used for any purpose other than ingress and egress to and from the Premises. 2. No awnings or other projections shall be attached to the outside walls of the Center without the prior written consent of the Landlord. No curtains, blinds, shades or screens shall be attached to, hung in or used in connection with any window or door of the Premises without the prior written consent of the Landlord. Such awnings, projections, curtains, blinds, shades, screens or other fixtures must be quality type, design and color, and attached in the manner approved by the Landlord. 3. No sign advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside or inside of the premises or Center without the prior written consent of the Landlord. In the event of the violation of the foregoing by any Tenant, the Landlord may remove such violation of this rule at the expense of Tenant. Exterior signs at front doors shall be inscribed, painted or affixed at the Tenant’s expense and shall be of a size, color and style acceptable to the Landlord. Landlord reserves the right to install and maintain a sign of signs on the exterior of the Center. 4. The sashes, sash doors, skylights, windows and doors that reflect or admit light and air into the halls, passageways or other public places in the Center shall not be covered or obstructed by any Tenant, nor shall any bottles, parcels or other articles be placed on the window ledges. 5. No showcase or other articles shall be put in front or affixed on any part of the exterior of the Center nor placed in the halls, corridors or vestibules, without the prior written consent of the Landlord. 6. The water, wash closets and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags or other substance shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the Tenant who, or whose servants, employees or agents, shall have caused the same. 7. No Tenant shall mark, paint, drill into or in any way deface any part of the Premises or the Center of which they form a part. No boring, cutting or stringing of wires shall be permitted except with the prior written consent of Landlord as it may direct. No Tenant shall lay linoleum or other similar floor covering, so that the same shall come in direct contact with the floor of the Premises, and if linoleum or other similar floor covering is desired to be used, an interlining of builder’s deadening felt shall be first affixed to the floor by a paste or other similar material soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 8. No bicycles, baby carriages, vehicles, birds, or animals of any kind shall be brought into or kept in or about the Premises, and no cooking shall be done or permitted by any Tenant in the Premises. However, this does not prevent Tenant from having coffee, soft drinks, candy and other items for use of Tenant’s employees, servants, agents or visitors. Tenant shall not cause or permit any unusual or objectionable odors to be produced upon or permeates from the Premises. 9. No space in the Center shall be used for manufacturing or for the sale of property of any kind at auction. -------------------------------------------------------------------------------- 10. No Tenant shall make or permit to be made, any disturbing noises or disturb or interfere with occupants of the Center or neighboring buildings or premises of those having business with them. No Tenant shall throw anything out the doors, windows or skylights, or down the passageways. 11. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or the mechanism thereof, without the prior written approval of Landlord, which approval shall not be unreasonably withheld. Tenant shall be supplied, free of charge, with two keys for each door on the Premises. Each Tenant must, upon the termination of his tenancy, restore to the Landlord all keys of stores, offices and toilet rooms, either furnished to or otherwise procured by such Tenant. 12. All removals of the carrying in or out of any safes, freight furniture or bulky matter of any description must take place during the hours which the Landlord or agent may determine from time to time. The Landlord reserves the right to prescribe the weight and position of all safes, which must be placed upon two-inch plank strips to distribute the weight. The moving of safes with other fixtures or bulky matter of any kind must be made with previous notice to the Landlord and under his supervision. Tenant agrees not to place a load upon any floor of the Premises exceeding the floor load per square foot area which such floor was (and is) designed to carry and which is allowed by law. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant’s expense in settings sufficient, in Landlord’s judgment, to absorb and prevent vibration, noise and annoyance. 13. No Tenant shall occupy or permit any portion of the Premises leased to him to be occupied as an office for a public stenographer or a public typist, for the manufacture or sale of liquor, narcotics, dope or tobacco in any form, as a barber or manicure shop, or as an employment bureau. 14. No Tenant shall open, or permit windows in the Premises to be opened at any time. 15. The Premises shall not be used for lodging or sleeping, or for any immoral or illegal purposes. 16. The requirements of Tenants will be attended to only upon application to the office of the Center. Employees shall not perform any work or do anything outside their regular duties unless under special instructions from the office of the Landlord. 17. Canvassing, soliciting and peddling in the Center are prohibited and each Tenant shall cooperate to prevent the same. -------------------------------------------------------------------------------- “EXHIBIT D” ADDENDUM TO LEASE 1. Fixed Minimum Rent Payment: Tenant agrees to pay Fixed Minimum Rent in the following amounts:   July 1, 2000 - June 30, 2001      :      $32,179.58/month July 1, 2001 - June 30, 2002      :      $33,144.97/month July 1, 2002 - June 30, 2003      :      $34,139.32/month July 1, 2003 - June 30, 2004      :      $35,163.50/month July 1, 2004 - June 30, 2005      :      $36,218.40/month July 1, 2005 - June 30, 2006      :      $37,304.96/month July 1, 2006 - June 30, 2007      :      $38,424.11/month July 1, 2007 - June 30, 2008      :      $39,576.83/month July 1, 2008 - June 30, 2009      :      $40,764.13/month July 1, 2009 - June 30, 2010      :      $41,987.06/month 2. Tenant Improvements: Tenant is in the process of making certain improvements to the Premises. All such improvement constructed by Tenant shall be done in a first-class, workmanlike manner.   General Contractor:   (a) Landlord has approved Tenant’s plans and the selection of Golden & Associates Construction as the general contractor to complete Tenant Improvements in accordance with the approved plans and specifications.   (b) Tenant and/or Tenant’s contractors and subcontractors shall be required to provide, in addition to the insurance required to be maintained by Tenant pursuant to this Lease, the following types of insurance and the following minimum amounts naming Landlord as an additional insured.    (i) Workmen’s compensation coverage with limits of at least $500,000.00 for the employer’s liability coverage thereunder or statutory limits.    (ii) Builder’s Risk-Completed Value fire and extended coverage covering damage to the construction and improvements to be made by Tenant in amounts at least equal to the estimated completed cost of said construction and improvements.         Original or duplicate policies for all of the foregoing insurance have been delivered to Landlord. In all other respects the insurance covering above-mentioned shall comply with the provisions of the Lease.   (c) Tenant hereby assumes any and all liability including any arising out of statutory or common law for any and all injuries to or death of any and all persons, including Tenant’s contractors and subcontractors and their employees and any liability for any and all damage to property caused by, or resulting from, or arising out of any act or omission on the part of the Tenant, its contractors and its or their subcontractors or employees in the performance of Tenant’s work and agrees to defend indemnify and save harmless Landlord from and against all damages, costs, liabilities, losses and/or expenses (including legal fees and expenses which Landlord may incur, suffer or pay as the result of claims or lawsuits due to, because of, or arising out of any and all such injuries, death and/or damage. Tenant agrees to insure the foregoing assumed contractual liability and deliver to Landlord evidence that it has obtained said contractual liability coverage. --------------------------------------------------------------------------------   (d) If, because of any act or omission (or alleged act or omission) of Tenant, any mechanics or other lien, charge, order or encumbrance is valid or enforceable as such shall be filed against the Premises or the Center, Tenant shall, at its costs and expense, cause same to be discharged of record or bonded within ten (10) days after notice to Tenant of the filing thereof; and Tenant shall indemnify and save harmless Landlord against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable attorneys’ fees resulting therefrom. If Tenant fails to comply with the foregoing provisions, Landlord shall have the option of discharging or bonding any such lien, charge, order or encumbrance, and Tenant agrees to reimburse Landlord for all costs, expenses and other sums of money in connection therewith (as additional rental). All materialmen, contractors, artisans, mechanics or laborers and any other persons now or hereafter contracting with Tenant for the furnishing of labor, services, materials, supplies or equipment with respect to any portion of the demised Premises at any time from the date thereof until the end of the Term, are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Landlord shall not perform any work for Tenant without written authorization by Tenant together with payment by Tenant in advance for such work.   (e) It shall be Tenant’s responsibility to cause each of Tenant’s contractors and subcontractors to maintain continuous protection of the Premises in the Building.   (f) Contractors and/or subcontractors participating in the Tenant Improvements shall be required to remove and dispose of as necessary or as Landlord may direct, all debris, rubbish of whatever kind remaining in the Building or in proximity thereto which was brought in or created by the performance of the Tenant Improvements. If at any time Tenant’s contractors and/or subcontractors shall neglect, refuse or fail to remove any debris, rubbish, surplus materials or temporary structures within 24 hours after written notice to Tenant, Landlord may remove the same at Tenant’s expense.   (g) Each of the contractors and/or subcontractors participating in the Tenant Improvements shall guarantee in writing that the work done by it will be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion and acceptance thereof. Tenant shall require and furnish Landlord evidence that any such contractors and/or subcontractors shall be responsible for the replacement or repair without additional charge to Landlord of any and all work done or furnished by or through such contractors and/or subcontractors which becomes defective within one (1) year after completion, or such longer period as may be specified in any contract for construction. Replacement or repair of such work shall include without additional charge to Landlord all expenses and damages in connection with such removal, replacement of all or any part of the work or any part of the Building which may be damaged or disturbed thereby. All warranties or guarantees as to materials or workmanship or their respect to Tenant’s work shall be contained in the contract or subcontract shall provide that said guarantees or warranties shall inure to the benefit of both Landlord and Tenant and may be directly enforced by either of them.   Landlord Contribution: Landlord does hereby grant to Tenant an allowance of Nine and 00/100 Dollars ($9.00) per square foot of floor area in the Demised Premises (said amount herein referred to as the “Landlord’s Contribution”) to be paid by Landlord to Tenant toward the completion of the Tenant Improvements as contained in this Lease. Landlord shall pay Tenant upon completion of Tenant Improvements, but no later than August 31, 2000, upon receipt of documentation of the total cost of the Tenant Improvements which has been projected to be approximately $1.5 million. 3. Expansion: Tenant shall be granted an option to expand into approximately 10,800 s.f. located at 2192 Suite G and 7,200 s.f. located at 2192 Suite F (Expansion Area). Expiration and Tenant’s written notification date are shown below:   Suite # Current Lease Expiration Tenant’s Written Notification Date   2192-F May 31, 2002 August 31, 2001   2192-G October 31, 2002 January 31, 2002 --------------------------------------------------------------------------------   Upon Landlord acceptance of Tenant’s written notification for its desire to expand on or before the dates set forth above, Landlord agrees to use commercially reasonable efforts to deliver the Expansion Area to Tenant on the expiration of the current lease term as set forth above. Within 30 days after occupancy of either of the Expansion Areas, Landlord agree to provide Tenant with a $2.50 per square foot allowance toward the cost of making tenant improvements in the Expansion Area and Tenant shall receive two (2) months free rent for each Expansion Area. The fixed minimum rent of the Expansion Area shall commence at $8.17 per square foot and shall escalate three percent (3%) annually over the previous years rental. The Expansion Area’s lease term shall expire concurrently with the term of the Lease on June 30, 2010. All other terms and conditions contained in the Lease shall apply to the Expansion Area. 4. Option to Renew: Provided Tenant is not then in default under the terms of the Lease, Tenant shall have a one (1) option to renew the Lease for an additional term of five (5) years upon giving written notice to Landlord at least nine (9) months prior to June 30, 2010, such renewal to be upon the existing terms and conditions contained in the Lease at a mutually agreed upon rental rate. If a mutually agreed upon rental rate is not agreed within six (6) months of the lease expiration of June 30, 2010 the option to renew shall become null and void and the Lease shall terminate on June 30, 2010. In the event Tenant exercises said option, Landlord shall professionally clean the floors and repaint the walls with material equivalent in quality and quantity to those installed or used in the initial Tenant finish. At Tenant’s option, Landlord shall reimburse Tenant the cost to professionally clean the floors and repaint the walls, in lieu of performance of such work on Tenant’s behalf. 5. Early Termination: Provided Tenant is not then in default, Tenant shall have the one time right to terminate the lease on June 30, 2008 by paying to Landlord the unamortized portion of the tenant improvements allowance and leasing commission costs associated with this Lease, as such amount is determined in accordance with Exhibit E, ( “Early Termination Fee” ). Said tenant improvement allowance and leasing commission costs ( “Expansion Costs” ) shall be calculated by a level amortization over the ten (10) year primary term. Tenant must notify Landlord in writing of its intent to terminate the Lease not less than two hundred seventy (270) days prior to June 30, 2008. 6. Lease Commission: Landlord agrees to compensate Corporate Realty Associates, Inc., as Tenant’s broker, a lease commission in the amount of two percent (2%) of the gross lease value for 50,150 s.f. less the remaining value of Tenant just terminated lease dated January 17, 1992. Landlord shall pay this lease commission upon receipt of Tenant’s first month’s rent under the Lease. 7. Additional Security: In addition to all Landlord’s liens provided by law of the State of Alabama, Tenant shall collaterally assign to Landlord, as additional security for the payment of rent, and performance of other obligations undertaken by Tenant in this lease, United States Treasury securities with a market value of not less than Five Hundred Twenty Thousand and No/100 Dollars ($520,000). The Treasury Securities shall be deposited in an escrow account at __________________ pursuant to the terms of a mutually acceptable escrow agreement. Provided Tenant is not in default under this lease, Landlord shall release from escrow at the end of each lease year a portion of said United States Treasury securities so long as the remaining securities have a then current market value of no less than as follows:                     Lease Year Market Value   July 1, 2000 - June 30, 2001   $520,000.00     July 1, 2001 - June 30, 2002  $455,000.00     July 1, 2002 - June 30, 2003  $390,000.00     July 1, 2003 - June 30, 2004  $325,000.00     July 1, 2004 - June 30, 2005  $260,000.00     July 1, 2005 - June 30, 2006  $195,000.00     July 1, 2006 - June 30, 2007  $130,000.00     July 1, 2007 - June 30, 2008  $65,000.00     July 1, 2008 - June 30, 2009  -0-   --------------------------------------------------------------------------------   The form and substance of said escrow agreement must be acceptable in every respect to Landlord and Landlord’s attorney. Tenant recognizes that Landlord intents to assign its rights in and to the proceeds of the escrow account as additional collateral to a lending institution to collaterize a loan to enable Landlord to obtain the funds required to be made available to Tenant by Landlord relating to this Lease. Tenant shall co-operate with Landlord’s lender to enable it to receive an appropriate assignment of Landlord’s interest in such escrow account.   In the event of a sale or transfer of the Center or any portion thereof that includes the Premises, Landlord shall assign its rights in the escrow account to the purchaser and thereafter be entirely relieved of any obligation to return the proceeds of such account to Tenant. 8. Non-Disturbance: Tenant shall receive non-disturbance agreements from present or any future mortgagees or holders of other superior interests, if any. 9. Signage: Landlord shall permit Tenant to install a monument sign on the property at a location to be designated by Landlord. Said signage shall conform to City of Hoover and the Riverchase Architectural Committee and shall be the sole cost and expense of Tenant. 10. Pest Control: Landlord agrees to maintain a service contract for termite treatment to 2190/2192 Riverchase Business Park throughout its lease term. Landlord will use its best commercially reasonable efforts to remedy any termite infestation within twenty four (24) hours of notification by Tenant. 11. Exterior Lighting: Landlord, at its sole cost and expense, shall install additional exterior lighting in the parking areas. Tenant requests Landlord to present the upgraded plan for exterior lighting to Tenant for its review prior to seeking approval from the Riverchase Architectural Committee, if required. 12. Suite K: Landlord agrees, at its sole cost and expense, to repair the following items located in Suite K consisting of 7,200 square feet: i) Reinstall a portion of the concrete floor located in the front left portion (22 ft. by 33 ft.). Estimated cost of $4,038.00 ii) Recaulk, as needed, the joints of the concrete, tilt-up, exterior wall panels. Estimated cost $344.00 iii) Remove two vents that penetrate the roof and install roof caps, Estimated cost $1,785.00. -------------------------------------------------------------------------------- “EXHIBIT E” TENANT IMPROVEMENTS AND LEASING COMMISSIONS Lease Size Tenant Improvement Allowance Leasing Commissions -------------------------------------------------------------------------------- Current Lease   50,150 s.f.   $451,350.00   $141,493.50   Expansion - 2192 F 1)  7,200 s.f.   $18,000.00   $10,677.36   Expansion - 2192 G 1)  10,800 s.f.   $27,000.00   $14,667.30   1) Expansion Costs will not be included in the Early Termination Fee in the event Tenant does not exercise its option to expand as contained in Exhibit D, Paragraph Three (3).
September 20, 2000 TO THE LENDERS PARTY TO THE REVOLVING CREDIT AGREEMENT REFERRED TO BELOW Re: First Amendment to Revolving Credit Agreement and First Amendment to Guaranty Ladies and Gentlemen:         We refer to (1) the Revolving Credit Agreement dated as of November 16, 1999 (the “Credit Agreement”) among Frontier Oil and Refining Company (the “Borrower”), the lenders referred to therein (the “Lenders”), Union Bank of California, N.A., as administrative agents for the Lenders (the “Agent”) and as documentation agent and lead arranger, and BNP Paribas (formerly known as “Paribas”), as syndication agent and lead arranger, and (2) the Guaranty dated as of November 16, 1999 (the “Guaranty”) made by Frontier Holdings Inc., Frontier Refining & Marketing Inc., Frontier Refining Inc., Frontier El Dorado Refining Company and Frontier Pipeline Inc. (the “Guarantors”) in favor of the Lenders and the Agent. Terms defined in the Credit Agreement and not otherwise defined herein have the same respective meanings when used herein, and the rules of interpretation set forth in Sections 1.2 and 1.3 of the Credit Agreement are incorporated herein by reference. 1. Subject to the terms and conditions of this letter amendment, the Guarantors, the Lenders and the Agent hereby agree that Sections 2.1(a) and 2.7(b) of the Credit Agreement are amended by deleting the amount “$100,000,000” in each such section and substituting “$125,000,000” in each case. 2. Subject to the terms and conditions of this letter amendment, the Guarantors, the Lenders and the Agent hereby agree that the Guaranty is amended as set forth below.                        (a)    Section 8(g) of the Guaranty is amended in full to read as follows:     “(g) Commodity Futures Contracts. Such Guarantor will not purchase or sell, or permit any of its Subsidiaries to purchase or sell, either by purchasing or selling directly or by purchasing or selling indirectly through FOC or any other Person acting on behalf of such Guarantor or any of its Subsidiaries, any of the following: (i) any commodity futures contract or related option that qualifies as a ‘hedge’ (as defined pursuant to generally accepted accounting principles), except that FRMI and its Subsidiaries shall be permitted to so purchase or sell any such contract or related option that is (A) for the sale or purchase of crude oil or petroleum products and is traded on the New York Mercantile Exchange, (B) entered into in the ordinary course of the business of FRMI or a Subsidiary thereof, (C) economically appropriate and consistent with such business, (D) used to offset price risks incidental to cash or spot transactions in crude oil or petroleum products, (E) established and liquidated in accordance with sound commercial practices and (F) entered into through a broker listed on Schedule 2; or (ii) any commodity futures contract or related option that does not qualify as a ‘hedge’ (as defined pursuant to generally accepted accounting principles), except that FRMI and its Subsidiaries shall be permitted to so purchase or sell any such contract or related option that (A) is for the sale or purchase of crude oil or petroleum products and is traded on the New York Mercantile Exchange, (B) is entered into through a broker listed on Schedule 2 and (C) is (1) a ‘crack spread swap’ entered into for the purpose of locking in profit margins on the output of gasoline and diesel fuel from the El Dorado Refinery, provided that all such ‘crack spread swaps’ outstanding at any time do not cover more than 50% of such output over any period of time covered thereby, (2) a commodity futures contract entered into for the purpose of managing price risk on physical inventories of crude oil and petroleum products held at the Refineries, provided that all such contracts outstanding at any time do not cover a aggregate of more than 1,500,000 barrels of crude oil and petroleum products, or (3) a commodity futures contract entered into for the purpose of managing price risk on natural gas consumed in processing at the Refineries.”                        (b)    Schedule 2 to the Guaranty is amended in full to be in the form of Schedule 2 attached to this letter amendment. 3. The Borrower and the Guarantors hereby represent and warrant for the benefit of the Lenders and the Agent that (a) the representations and warranties contained in the Credit Documents are correct in all material respects on and as of the date of this letter amendment, before and after giving effect to the same, as if made on and as of such date and (b) no Default has occurred and is continuing. 4. On and after the effective date of this letter amendment, (a) each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to the Credit Agreement, and each reference in the other Credit Documents to “the Credit Agreement,” “thereunder,” “thereof,” “therein” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this letter amendment, and (b) each reference in the Guaranty to “this Guaranty,” “hereunder,” “hereof,” “herein” or words of like import referring to the Guaranty, and each reference in the other Credit Documents to “the Guaranty,” “thereunder,” “thereof,” “therein” or words of like import referring to the Guaranty, shall mean and be a reference to the Guaranty as amended by this letter amendment. The Credit Agreement and the Guaranty, as amended by this letter amendment, are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects. 5. By its execution below, each Guarantor hereby consents to the amendment to the Credit Agreement set forth in paragraph 1. By its execution below, FOC, as obligor under the Clawback Agreement, hereby consents to this letter amendment and hereby confirms and agrees that the Clawback Agreement is and shall continue to be in full force and effect and is ratified and confirmed in all respects. 6. If you agree to the terms and conditions et forth herein, please evidence your agreement by executing and returning 12 counterparts of this letter amendment to the Agent. This letter amendment shall become effective as of the date first set forth above when and if (a) the Borrower, the Guarantors and the Lenders execute and deliver to the Agent counterparts of this letter amendment and (b) FOC, the Borrower and each of the Guarantors deliver to the Agent an incumbency and signature certificate with respect to the officer of such Credit Party executing this letter amendment on its behalf. 7. This letter amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same letter amendment. 8. THIS LETTER AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF CALIFORNIA.   Very truly yours, FRONTIER OIL AND REFINING COMPANY By: /s/ Leo J. Hoonakker ----------------------------------------------------- Leo J. Hoonakker Treasurer   FRONTIER OIL CORPORATION By: /s/ Julie H. Edwards ------------------------------------------------------ Julie H. Edwards Executive Vice President-Finance & Administration   FRONTIER HOLDINGS INC. By: /s/ Julie H. Edwards ------------------------------------------------------ Julie H. Edwards Executive Vice President-Finance & Administration   FRONTIER REFINING & MARKETING INC. By: /s/ Leo J. Hoonakker ----------------------------------------------------- Leo J. Hoonakker Treasurer   FRONTIER REFINING INC. By: /s/ Leo J. Hoonakker ----------------------------------------------------- Leo J. Hoonakker Treasurer   FRONTIER EL DORADO REFINING COMPANY By: /s/ Leo J. Hoonakker ------------------------------------------------------- Leo J. Hoonakker Treasurer FRONTIER PIPELINE INC. By: /s/ Leo J. Hoonakker ------------------------------------------------------- Leo J. Hoonakker Treasurer Agreed as of the date first written above: UNION BANK OF CALIFORNIA, N.A.,       as Administrative Agent, Documentation       Agent, Lead Arranger and a Lender       By: /s/ Walter M. Roth       ------------------------------------------       Walter M. Roth       Vice President BNP PARIBAS (f/k/a "Paribas"),       as Syndication Agent, Lead       Arranger and a Lender       By: /s/ Douglas R. Liftman       ------------------------------------------       Name: Douglas R. Liftman       Title: Director       By: /s/ Brian M. Malone       ------------------------------------------       Name: Brian M. Malone       Title: Director TORONTO DOMINION (TEXAS), INC.       By: /s/ Carolyn R. Faeth       ------------------------------------------       Name: Carolyn R. Faeth       Title: Vice President BANK ONE, NA       By: /s/ Jeanie Harman       ------------------------------------------       Name: Jeanie Harman       Title: Vice President THE BANK OF NOVA SCOTIA       By: /s/ F. C. H. Ashby       ------------------------------------------       Name: F. C. H. Ashby       Title: Senior Manager-Loan Operations WELLS FARGO BANK, N.A.       By: /s/ Mark Williamson       ------------------------------------------       Name: Mark Williamson       Title: Vice President BANK OF SCOTLAND       By: /s/ Joseph Fratus       ------------------------------------------       Name: Joseph Fratus       Title: Vice President FROST NATIONAL BANK       By: /s/ Thomas H. Dungan       ------------------------------------------       Name: Thomas H. Dungan       Title: Senior Vice President U.S. BANK NATIONAL ASSOCIATION       By: /s/ Mark E. Thompson       ------------------------------------------       Name: Mark E. Thompson       Title: Vice President HIBERNIA NATIONAL BANK       By: /s/ Spencer Gagnet       ------------------------------------------       Name: Spencer Gagnet       Title: Senior Vice President  
EXHIBIT 10.5 THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. RECOTON CORPORATION 2000 Refinancing Common Stock Purchase Warrant No. RF-___ PPN: 756268 6* 4 New York, New York October 31, 2000            RECOTON CORPORATION (the "Company"), a New York corporation, for value received, hereby certifies that ___________________ or its registered assigns is entitled to purchase from the Company _____ [AN AGGREGATE OF 20,000] duly authorized, validly issued, fully paid and nonassessable common shares of the Company, par value $0.20 per share (the "Original Common Stock"), at an initial exercise price per share equal to $13.280 (the "Initial Exercise Price") at any time or from time to time after the date hereof and prior to 5:00 p.m. (United States Eastern Time), on the fifth anniversary date of the date hereof (the "Expiration Date"), all subject to the terms, conditions and adjustments set forth below in this Warrant; provided, however, that if on the fifth anniversary date of the date hereof, the Company is then required, pursuant to an effective request therefor under the Registration Rights Agreement (as defined herein), or is in the process of effecting a registration under the Securities Act for a public offering in which Warrant Shares (as defined herein) are entitled to be included as provided in the Registration Rights Agreement, or if the Company is in default of any of such obligations to register the sale of such shares, the right to exercise this Warrant shall continue until 5:00 p.m. (United States Eastern Time) on the 30th day following the date on which such registration shall have become effective or on the 30th day following the date all such defaults shall have been cured, whichever is the later date.            This Warrant is one of the warrants (the "Warrants", such term to include all Warrants issued in substitution therefor or upon transfer thereof) issued pursuant to Section 2.(h) of the Master Restructuring Agreement (such term, and all other capitalized terms used herein without being otherwise defined, having the meaning referred to in Section 13 below) upon the occurrence of certain events as described in such section of the Master Restructuring Agreement. The Warrants originally so issued evidence rights to purchase an aggregate of 20,000 shares of Original Common Stock, subject to adjustment as provided herein.            Section 1.   Exercise of Warrant.            A. Manner of Exercise. This Warrant may be exercised by the holder hereof, in whole or in part during normal business hours on any Business Day during the Exercise Period, by surrender of this Warrant, with the form of subscription at the end hereof (or a reasonable facsimile thereof) duly executed by such holder, to the Company at the principal office of the Company located at 2950 Lake Emma Road, Lake Mary, FL 32746, or such other location in the United States which shall at the time be the principal office of the Company and of which the Company shall have notified the holder hereof in writing (or, if such exercise shall be in connection with an underwritten public offering of shares of Common Stock (or Other Securities) subject to this Warrant, at the location at which the underwriters shall have agreed to accept delivery thereof), accompanied by payment of an amount obtained by multiplying (a) the number of shares of Original Common Stock (without giving effect to any adjustment therein) designated in such form of subscription by (b) the Initial Exercise Price (the "Exercise Payment"). The Exercise Payment shall be payable (i) in cash or its equivalent, (ii) in shares of Common Stock newly acquired upon exercise of this Warrant (valued at the Market Price), (iii) by surrendering to the Company the right to purchase a number of shares of Common Stock issuable upon exercise of this Warrant (valued at the Market Price) equal to the product obtained by multiplying the number of shares of Common Stock to be purchased (including the shares relating to the surrendered rights) by a fraction, the numerator of which is the Exercise Payment per share and the denominator of which is the Market Price per share, or (iv) any combination of (i), (ii) and (iii).            B. Adjustment to Number of Shares of Common Stock. The number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of Section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to this Section 1B, by a fraction of which (x) the numerator is the Initial Exercise Price and (y) the denominator is the Exercise Price in effect on the date of such exercise. The "Exercise Price" shall initially be an amount equal to the Initial Exercise Price per share, shall be adjusted and readjusted from time to time as provided in Section 2 and, as so adjusted and readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 2.            C. When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected and the Exercise Price shall be determined immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in Section 1A, and at such time the person or persons in whose name or names any certificate or certificates for shares of Original Common Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 1D shall be deemed to have become the holder or holders of record thereof.            D. Delivery of Stock Certificates, etc. Promptly after the exercise of this Warrant, in whole or in part, and in any event within three Business Days thereafter (unless such exercise shall be in connection with an underwritten public offering of shares of Common Stock (or Other Securities) subject to this Warrant, in which event concurrently with such exercise), the Company at its expense will cause to be issued in the name of and delivered to the holder hereof or, subject to Section 8, as such holder may direct,                         (1) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise, and                        (2) in case such exercise is in part only, a new Warrant or Warrants of like tenor, specifying the aggregate on the face or faces thereof the number of shares of Common Stock equal to the number of such shares specified on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in Section 1A.            E. Company to Reaffirm Obligations. The Company will, at the time of or at any time after each exercise of this Warrant, upon the request of the holder hereof or of any shares of Common Stock (or Other Securities) issued upon such exercise, acknowledge in writing its continuing obligation to afford to such holder all rights to which such holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Company to afford such rights to such holder.            F. Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant and no payment or adjustment shall be made upon any exercise on account of any cash dividends (except as provided in Section 2B) on the Common Stock or Other Securities issued upon such conversion. If any fractional interest in a share of Common Stock would, except for the provisions of the first sentence of this Section 1F, be deliverable upon the exercise of this Warrant, the Company shall, in lieu of delivering the fractional share therefor, pay to the holder exercising this Warrant an amount in cash equal to the Market Price of such fractional interest.            Section 2.   Protection Against Dilution or Other Impairment of Rights; Adjustments of Exercise Price.           A. Issuance of Additional Shares of Common Stock. In case the Company, at any time or from time to time after October __, 2000 (the "Initial Date"), shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 2D or 2E) without consideration or for a consideration per share (determined pursuant to Section 2F) less than 95% of the Market Price in effect, in each case, on the date of and immediately prior to such issue or sale (or, in the case of issuances where the price has been fixed or finally determined by contract prior to the date of such issuance or sale, as of the date that such price is fixed or finally determined), then, and in each such case, subject to Section 2I, the Exercise Price shall be reduced, concurrently with such issue or sale, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Exercise Price by a fraction,              a)  the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at the Market Price, and              b)  the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, provided that, for the purposes of this Section 2A, (x) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to Section 2D or 2E, such Additional Shares shall be deemed to be outstanding, and (y) treasury shares shall not be deemed to be outstanding.            B. Extraordinary Dividends and Distributions; Pro Rata Repurchases. In case the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution to the holders of the Common Stock (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement and any redemption or acquisition of any such stock or Options on the Common Stock), other than (a) a dividend payable in additional Shares of Common Stock or in Options for Common Stock or (b) a regular periodic dividend payable in cash and not constituting an Extraordinary Cash Dividend, then, and in each such case, the Company shall pay over to the holder of this Warrant, on the date on which such dividend or other distribution is paid to the holders of Common Stock, the securities and property (including cash) which such holder would have received if such holder had exercised this Warrant immediately prior to the record date fixed in connection with such dividend or other distribution. In case the Company or any subsidiary thereof shall make a Pro Rata Repurchase, the Exercise Price shall be adjusted by dividing the Exercise Price in effect immediately prior to such action by a fraction (which in no event shall be less than one), the numerator of which shall be the product of (A) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase minus the number of shares of Common Stock repurchased in such Pro Rata Repurchase and (B) the Market Price as of the date immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repurchase, and the denominator of which shall be (A) the product of (x) the number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the Market Price as of the date immediately preceding the first public announcement by the Company of the intent to effect such Pro Rata Repurchase minus (B) the aggregate purchase price of the Pro Rata Repurchase.            C. Above Market Repurchases of Common Stock. In case the Company, at any time or from time to time after the date hereof shall repurchase, by self-tender offer or otherwise, any shares of Common Stock (or any Options or Convertible Securities) at a purchase price in excess of the Market Price thereof, on the Business Day immediately prior to the earliest of (i) the date of such repurchase, (ii) the commencement of an offer to repurchase, or (iii) the public announcement of either (such date being the "Determination Date"), the Exercise Price shall be determined by dividing the Exercise Price by a fraction, the numerator of which shall be the product of (A) the number of shares of Common Stock outstanding immediately prior to such Determination Date minus the number of shares of Common Stock repurchased and (B) the Market Price as of the Determination Date, and the denominator of which shall be (A) the product of (x) the number of shares of Common Stock outstanding immediately before such repurchase and (y) the Market Price as of the Determination Date, minus (B) the aggregate purchase price of such repurchase; provided, that in the case of a self-tender offer by the Company, any shares of Common Stock issued upon the exercise or partial exercise of this Warrant at an Exercise Price adjusted pursuant to this Section 2C due to such self-tender offer, shall not be eligible to be sold in such self-tender offer.            D. Treatment of Options and Convertible Securities. In case the Company, at any time or from time to time after the date hereof, shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities entitled to receive, any Options or Convertible Securities, whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options thereof, issuable upon the conversion or exchange of such Convertible Securities (or the exercise of such Options for Convertible Securities and subsequent conversion or exchange of the Convertible Securities issued), shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption of such Options or Convertible Securities or, in case such a record date shall have been fixed, as of the close of business on such record date; provided, that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 2F) of such shares would be less than 95% of the Market Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, as the case may be, and provided, further, that in any such case in which Additional Shares of Common Stock are deemed to be issued,              a)  if an adjustment of the Exercise Price shall be made upon the fixing of a record date as referred to in the first sentence of this Section 2D, no further adjustment of the Exercise Price shall be made as a result of the subsequent issue or sale of any Options or Convertible Securities for the purpose of which such record date was set;              b)   no further adjustment of the Exercise Price shall be made upon the subsequent issue or sale of Additional Shares of Common Stock or Convertible Securities upon the exercise of such Options or the conversion or exchange of such Convertible Securities;              c)  if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company, or change in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Exercise Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such change becoming effective, be recomputed to reflect such change insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are outstanding at such time;              d)  upon the expiration of any such Options or of the rights of conversion or exchange under any such Convertible Securities which shall not have been exercised (or upon purchase by the Company and cancellation or retirement of any such Options which shall not have been exercised or of any such Convertible Securities the rights of conversion or exchange under which shall not have been exercised), the Exercise Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if:                   (i)  in the case of Options for Common Stock or in the case of Convertible Securities, the only Additional Shares of Common Stock issued or sold (or deemed issued or sold) were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was (x) an amount equal to (A) the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus (B) the consideration actually received by the Company upon such exercise, minus (C) the consideration paid by the Company for any purchase of such Options which were not exercised, or (y) an amount equal to (A) the consideration actually received by the Company for the issue, sale, grant or assumption of all such Convertible Securities which were actually converted or exchanged, plus (B) the additional consideration, if any, actually received by the Company upon such conversion or exchange, minus (C) the excess, if any, of the consideration paid by the Company for any purchase of such Convertible Securities, the rights of conversion or exchange under which were not exercised, over an amount that would be equal to the Fair Value of the Convertible Securities so purchased if such Convertible Securities were not convertible into or exchangeable for Additional Shares of Common Stock, and                   (ii)  in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were issued at the time of the issue, sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was an amount equal to (x) the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus (y) the consideration deemed to have been received by the Company (pursuant to Section 2F) upon the issue or sale of the Convertible Securities with respect to which such Options were actually exercised, minus (z) the consideration paid by the Company for any purchase of such Options which were not exercised; and              e)  no recomputation pursuant to subsection (c) or (d) above shall have the effect of increasing the Exercise Price then in effect by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities.            Notwithstanding the foregoing provisions of this Section 2D, any rights, options or warrants (herein called "Special Options") distributed by the Company to all holders of Common Stock that entitle the holders thereof to purchase shares of the Company’s capital stock (either initially or under certain circumstances), and that, until the occurrence of an event (the "Trigger Event") (i) are deemed to be transferred with the Common Stock, (ii) are not exercisable and (iii) are also issued in respect of future issuances of Common Stock, shall not be deemed to have been distributed for the purposes of this Section 2D (and no adjustment of the Exercise Price shall be required) until the occurrence of the earliest Trigger Event. In addition, in the event of any distribution of Special Options, or any Trigger Event with respect thereto, that shall have resulted in an adjustment of the Exercise Price under this Section 2D, (A) in the case of any Special Options that shall have been redeemed or repurchased without exercise by any holders thereof, the Exercise Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were an Extraordinary Cash Dividend, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such Special Options (assuming such holder had retained the same), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of any such Special Options all of which shall have expired or terminated without having been exercised, redeemed or repurchased, the Exercise Price shall be readjusted as if such distribution had not occurred.            E. Treatment of Stock Dividends, Stock Splits, Etc. In case the Company, at any time or from time to time after the date hereof, shall declare or pay any dividend or other distribution on any class of securities of the Company payable in shares of Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common Stock shall be deemed to have been issued (a) in the case of any such dividend or other distribution, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend or other distribution, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective.            F. Computation of Consideration. For the purposes of this Warrant:              a)  The consideration for the issue or sale of any Additional Shares of Common Stock or for the issue, sale, grant or assumption of any Options or Convertible Securities, irrespective of the accounting treatment of such consideration,              (i)  insofar as it consists of cash, shall be computed as the amount of cash received by the Company, and insofar as it consists of securities or other property, shall be computed as of the date immediately preceding such issue, sale, grant or assumption as the Fair Value of such consideration (or, if such consideration is received for the issue or sale of Additional Shares of Common Stock and the Market Price thereof is less than the Fair Value of such consideration, then such consideration shall be computed as the Market Price of such Additional Shares of Common Stock), in each case without deducting any expenses paid or incurred by the Company, any commissions or compensation paid or concessions or discounts allowed to underwriters, dealers or others performing similar services and any accrued interest or dividends in connection with such issue or sale, and              (ii)   in case Additional Shares of Common Stock are issued or sold or Options or Convertible Securities are issued, sold, granted or assumed together with other stock or securities or other assets of the Company for a consideration which covers both, shall be the proportion of such consideration so received, computed as provided in clause (i) above, allocable to such Additional Shares of Common Stock or Options or Convertible Securities, as the case may be, all as determined in good faith by the Board of Directors of the Company.              b)  All Additional Shares of Common Stock, Options or Convertible Securities issued in payment of any dividend or other distribution on any class of stock of the Company and all Additional Shares of Common Stock issued to effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock) shall be deemed to have been issued without consideration.              c)   Additional Shares of Common Stock deemed to have been issued for consideration pursuant to Section 2D, relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing              (i) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instrument relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise in full of such Options or the conversion or exchanges of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subsection (a),           by              (ii)  the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.            G. Adjustments for Combinations, Etc. In case the outstanding shares of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Exercise Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased.            H. Minimum Adjustment of Exercise Price. If the amount of any adjustment of the Exercise Price required hereunder would be less than one percent of the Exercise Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one percent of such Exercise Price; provided, that upon the exercise of this Warrant all adjustment carried forward and not therefore made up to and including the date of such exercise shall be made to the nearest .001 of a cent.            I. Changes in Common Stock. At any time while this Warrant remains outstanding and unexpired, in case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of outstanding securities issuable upon the exercise of this Warrant) or in case of any consolidation or merger of the Company with or into another corporation (herein called a "Transaction") (other than a merger with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change, other than a change in par value, or from par value to no par value, or from no value to par value, or as a result of a subdivision or combination of outstanding securities issuable upon the exercise of this Warrant), the Company, or such successor corporation, as the case may be, shall, without payment of any additional consideration therefor, execute and deliver to the holder of this Warrant (upon surrender of this Warrant) a new Warrant providing that the holder of this Warrant shall have the right to exercise such new Warrant (upon terms not less favorable to the holder of this Warrant than those then applicable to this Warrant) and to receive upon such exercise, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money or property receivable upon such reclassification, change, consolidation or merger, by the holder of one Common Share issuable upon exercise of this Warrant had it been exercised immediately prior to such reclassification, change, consolidation or merger. Such new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustment provided for in this Section 2. Notwithstanding the foregoing, in the case of any Transaction which pursuant to this Section 2I would result in the execution and delivery by the Company or any successor of a new Warrant to the holder of this Warrant and in which the holders of shares of Common Stock are entitled only to receive money or other property exclusive of common equity securities, then in lieu of such new Warrant being exercisable as provided above, the holder of this Warrant shall have the right, at its sole option, to require the Company to purchase this Warrant (without prior exercise by the holder of this Warrant) at its fair value as of the day before such Transaction became publicly known, as determined by an unaffiliated internationally recognized accounting firm or investment bank selected by the holder of this Warrant and reasonably acceptable to the Company. The provisions of this Section 2I shall similarly apply to successive reclassifications, changes, consolidations, mergers, sales and transfers. Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property as to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof, together with such other matters as such holders may reasonably request.            J. Certain Issues Excepted. Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustments of the Exercise Price in the case of the issuance of the Warrants and the issuance of shares of Common Stock issuable upon exercise of the Warrants.            K. Notice of Adjustment. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to the holder of this Warrant an Officer's Certificate stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by the holder of this Warrant stating that such holder contemplates the exercise of such Warrant, the Company will obtain and deliver to the holder of this Warrant the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors, which opinion shall confirm the statements in the most recent Officer's Certificate delivered under this Section 2K.            L. Other Notices. In case at any time:              a)   the Company shall declare or pay any dividend upon Common Stock payable in stock or make any dividend or other distribution to the holders of Common Stock;              b)   the Company shall offer for subscription pro rata to the holders of Common Stock any additional shares of stock of any class or other rights;              c)  there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity (other than a merger or consolidation with a directly or indirectly wholly-owned subsidiary of the Company in which the Company is the survivor);              d)   there shall be voluntary or involuntary dissolution, liquidation or winding-up of the Company;              e)   there shall be made any tender offer for any shares of capital stock of the Company; or              f)   there shall be any other Transaction. then, in any one or more of such cases, the Company shall give to the holder of this Warrant (i) at least 15 days prior to the record date for any dividend or distribution referred to in subsection (a) above, at least 30 days prior to any event referred to in subsection (b), (c) or (d) above, and within five days after it has knowledge of any pending tender offer or other Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction or the date by which shareholders must tender shares in any tender offer and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or tender offer or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, tender offer or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders or any other approval requirement, if such is required.            M. Certain Events. If any event occurs as to which, in the good faith judgment of the Board of Directors of the Company, the other provisions of this Warrant are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of the holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company shall make such adjustments, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of the holders of the Warrants; provided, that no such adjustment shall have the effect of increasing the Exercise Price as otherwise determined pursuant to this Warrant. The Company may make such reductions in the Exercise Price as it deems advisable, including any reductions necessary to ensure that any event treated for Federal income tax purposes as a distribution of stock or stock rights not be taxable to recipients.            N. Prohibition of Certain Actions. The Company will not, by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all Warrants from time to time outstanding, and (c) will not take any action which results in any adjustment of the Exercise Price if the total number of shares of Common Stock or Other Securities issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock or Other Securities then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such conversion.            Section 3.   Stock to be Reserved. The Company will at all times reserve and keep available out of the authorized Common Stock, solely for the purpose of issue upon the exercise of the Warrants as herein provided, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants and the Company will maintain at all times all other rights and privileges sufficient to enable it to fulfill all its obligations hereunder. The Company covenants that all shares of Common Stock which shall be so issuable shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, free from preemptive or similar rights on the part of the holders of any shares of capital stock or securities of the Company or any other Person, and free from all taxes, liens and charges with respect to the issue thereof (not including any income taxes payable by the holders of Warrants being exercised in respect of gains thereon), and the Exercise Price will be credited to the capital and surplus of the Company. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any applicable requirements of the National Association of Securities Dealers, Inc. and of any domestic securities exchange upon which the Common Stock may be listed.            Section 4.   Registration of Common Stock. If any shares of Common Stock required to be reserved for purposes of the exercise of Warrants require registration with or approval of any governmental authority under any Federal or State law (other than the Securities Act, registration under which is governed by the Registration Rights Agreement), before such shares may be issued upon the exercise thereof, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. Shares of Common Stock issuable upon exercise of the Warrants shall be registered by the Company under the Securities Act or similar statute then in force if required by the Registration Rights Agreement and subject to the conditions stated in such agreement. At any such time as the Common Stock is listed on any national securities exchange or quoted by the Nasdaq National Market or any successor thereto or comparable system, the Company will, at its expense, obtain promptly and maintain the approval for listing on each such exchange or quoting by the Nasdaq National Market on such successor thereto a comparable systems, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing or quoting of such shares after their issuance so long as the Common Stock is so listed or quoted; and the Company will also cause to be so listed or quoted, will register under the Exchange Act and will maintain such listing or quoting of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company.            Section 5.   Expenses. The Company will pay, and save each Person which is or has been the holder of a Warrant (a "Warrantholder") harmless against liability for the payment of, all out-of-pocket expenses arising in connection with the transactions contemplated by the Warrants, including (i) all document production and duplication charges and the reasonable fees and expenses of any counsel engaged by any Warrantholder in connection with the Warrants or the transactions contemplated thereby and any subsequent proposed modification, amendment or waiver of, or proposed consent under, the Warrants, whether or not such proposed modification, amendment or waiver shall be effected or proposed consent granted, and (ii) the costs and expenses, including reasonable attorneys' fees, incurred by any Warrantholder in enforcing or defending (or determining whether or how to enforce or defend) any rights under the Warrants or in responding to any subpoena or other legal process or informal investigative demand issued in connection with the Warrants or the transactions contemplated thereby or by reason of the Warrantholder's have acquired any Warrant or any securities issuable upon exercise thereof, including without limitation costs and expenses (including the costs and expenses of financial advisors) incurred in any bankruptcy case or in connection with any work-out or restructuring of the transactions contemplated by the Warrants. The Company will pay, and will save each Warrantholder harmless from all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than those retained by any such holder). The issuance of certificates for shares of Common Stock upon exercise of the Warrants shall be made without charge to the Warrantholders for any issuance tax or other governmental charge in respect thereof, all of which shall be paid by the Company. The obligations of the Company under this Section 5 shall survive the transfer or exercise of any Warrant or any portion thereof or interest therein by the Warrantholder.            Section 6.   Closing of Books. The Company will at no time close its transfer books to the transfer of any Warrant or of any share of Common Stock issued or issuable upon the exercise of any Warrant in any manner which interferes with the timely exercise of such Warrant.            Section 7.   No Rights or Liabilities as Stockholders. This Warrant shall not entitle the holder thereof to any of the rights of a stockholder of the Company, except as expressly contemplated herein. No provision of this Warrant, in the absence of the actual exercise of such Warrant and receipt by the holder thereof of Common Stock issuable upon such conversion, shall give rise to any liability on the part of such holder as a stockholder of the Company, whether such liability shall be asserted by the Company or by creditors of the Company.            Section 8.   Restrictive Legends. Except as otherwise permitted by this Section 8, each Warrant originally issued and each Warrant issued upon direct or indirect transfer or in substitution for any Warrant pursuant to this Section 8 shall be stamped or otherwise imprinted with a legend in substantially the following or a comparable form:   "This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act."   Except as otherwise permitted by this Section 8, (a) each certificate for shares of Common Stock (or Other Securities) issued upon the exercise of any Warrant, and (b) each certificate issued upon the direct or indirect transfer of any such Common Stock (or Other Securities) shall be stamped or otherwise imprinted with a legend in substantially the following or a comparable form:   "The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exception therefrom under such Act."   The holder (or its transferee, as applicable) of any Restricted Securities shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing the applicable legend set forth above in this Section 8 when such securities shall have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering such Restricted Securities, (b) disposed of pursuant to the provisions of Rule 144 or any comparable rule under the Securities Act, or (c) when, in the written reasonable opinion of independent counsel for the holder thereof experienced in Securities Act matters, such restrictions are no longer required in order to insure compliance with the Securities Act (including when the provisions of Rule 144(k) or any comparable rule under the Securities Act have been satisfied). The Company will pay the reasonable fees and disbursements of counsel for any holder of Restricted Securities in connection with all opinions rendered pursuant to this Section 8.            Section 9.   Availability of Information. The Company will cooperate with each holder of any Restricted Securities in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Restricted Securities. The Company will furnish to each holder of any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Commission.            Section 10.   Information Required By Rule 144A. The Company will, upon the request of the holder of this Warrant, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Warrants, except at such times as the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. For the purpose of this Section 10, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act.            Section 11.   Registration Rights Agreement. The holder of this Warrant and the holders of any securities issued or issuable upon the exercise hereof are each entitled to the benefits of the Registration Rights Agreement.            Section 12.   Ownership, Transfer and Substitution of Warrants.            A. Ownership of Warrants. Except as otherwise required by law, the Company may treat the Person in whose name any Warrant is registered on the register kept at the principal office of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary except that, if and when any Warrant is properly assigned in blank, the Company, in its discretion, may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the Company to the contrary. Subject to Section 8, a Warrant, if properly assigned, may be exercised by a new holder without first having a new Warrant issued.            B. Transfer and Exchange of Warrants. Upon the surrender of any Warrant, properly endorsed, for registration of transfer or for exchange at the principal office of the Company, the Company at its expense will (subject to compliance with Section 8, if applicable) execute and deliver to or upon the order of the holder thereof a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Original Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.            C. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant held by a Person other than the original holder thereof, upon delivery of its unsecured indemnity reasonably satisfactory to the Company in form and amount or, in the case of any such mutilation, upon surrender of such Warrant for cancellation at the principal office of the Company, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.            Section 13.  Definitions. As used herein (A) capitalized terms that are not otherwise defined shall have the meanings assigned thereto in Appendix A to the Master Restructuring Agreement referred to below and (B) unless the context otherwise requires, the following terms have the following respective meanings:            "Acquiring Company" shall have the meaning specified in Section 2J.            "Acquirer's Common Stock" shall have the meaning specified in Section 2J.            "Additional Shares of Common Stock" shall mean all shares (including treasury shares) of Common Stock issued or sold (or, pursuant to Section 2D or 2E deemed to be issued) by the Company after the date hereof, whether or not subsequently reacquired or retired by the Company, other than shares of Common Stock issued upon the exercise or partial exercise of the Warrants and shares issuable upon exercise of options, warrants or rights granted to employees or consultants or directors of the Company or its subsidiaries under shareholder approved plans and other options, warrants or rights in each case providing for an exercise price of at least 95% of Market Price at the date of grant.            "Affiliate" shall have the meaning specified in the 1999 Securities Purchase Agreement.            "Announcement Date" shall have the meaning specified in Section 2J.            "Business Day" shall have the meaning specified in MRA Appendix A.            "Closing Date" shall mean the date upon which all conditions precedent to the making of the initial extensions of credit as set forth in the LIFO Credit Agreement have been satisfied.            "Commission" shall mean the Securities and Exchange Commission or any successor federal agency having similar powers.            "Common Stock" shall mean the Original Common Stock, any stock into which such stock shall have been converted or changed or any stock resulting from any reclassification of such stock and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.            "Company" shall mean Recoton Corporation, a New York corporation, and its permitted successors hereunder.            "Convertible Securities" shall mean any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock.            "Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended.            "Exercise Period" shall mean the date of this Warrant to and including the Expiration Date.            "Exercise Price" shall have the meaning specified in Section 1B.            "Expiration Date" shall have the meaning specified in the opening paragraphs of this Warrant.            "Extraordinary Cash Dividend" shall mean, with respect to any consecutive 12-month period, the amount, if any, by which the aggregate amount of all cash and non-cash dividends or distributions on any shares of Common Stock occurring in such 12-month period (or, if such Common Stock was not outstanding at the commencement of such 12-month period, occurring in such shorter period during which such Capital Stock was outstanding) exceeds on a per share basis 5% of the average of the daily Market Prices per share of such Common Stock over such 12-month period (or such shorter period during which such Common Stock was outstanding); provided that, for purposes of the foregoing definition, the amount of cash and non-cash dividends paid on a per share basis will be appropriately adjusted to reflect the occurrence during such period of any stock dividend or distribution of shares of capital stock of the Company or any subdivision, split, combination or reclassification of shares of such Common Stock.            "Fair Value" shall mean with respect to any securities or other property, the fair value thereof as of a date which is within 15 days of the date as of which the determination is to be made as determined by the Board of Directors of the Company in good faith, unless such determination is to be made in connection with a transaction with an Affiliate in which case such fair value shall be (a) determined by agreement between the Company and the Required Holders, or (b) if the Company and the Required Holders fail to agree, determined jointly by an independent investment banking firm retained by the Company and by an independent investment banking firm retained by the Required Holders, either of which firms may be an independent investment banking firm regularly retained by the Company, or (c) if the Company or the Required Holders shall fail so to retain an independent investment banking firm within 10 Business Days of the retention of such a firm by the Required Holders or the Company, as the case may be, determined solely by the firm so retained, or (d) if the firms so retained by the Company and by such holders shall be unable to reach a joint determination within 15 Business Days of the retention of the last firm so retained, determined by another independent investment banking firm which is not a regular investment banking firm of the Company chosen by the first two such firms.            "Initial Date" shall have the meaning specified in Section 2A.            "Market Price" shall mean on any date specified herein, (a) with respect to Common Stock or to common stock (or equivalent equity interests) of an Acquiring Person or its Parent, the amount per share equal to (i) the last sale price of shares of Common Stock, regular way, or of shares of such common stock (or equivalent equity interests) on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which the same are then listed or admitted to trading, or (ii) if no shares of Common Stock or no shares of such common stock (or equivalent equity interests), as the case may be, are then listed or admitted to trading on any national securities exchange, the last sale price of shares of Common Stock, regular way, or of shares of such common stock (or equivalent equity interests) on such date, in each case or, if no such sale takes place on such date, the average of the reported closing bid and asked prices thereof on such date as quoted in the Nasdaq National Market or other over-the-counter market or, if no shares of Common Stock or no shares of such common stock (or equivalent equity interests), as the case may be, are then quoted in the Nasdaq National Market or other over-the-counter market, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in any such case as reported by any member firm of the New York Stock Exchange selected by the Company, or (iii) if no shares of Common Stock or no shares of such common stock (or equivalent equity interests), as the case may be, are then listed or admitted to trading on any national securities exchange or quoted or published in the over-the-counter market, the higher of (x) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Company, as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the Fair Value thereof, and (b) with respect to any other securities, the Fair Value thereof.            "Master Restructuring Agreement" shall mean the Master Restructuring Agreement, dated as of September 8, 1999 among the Company, the subsidiaries of the Company party thereto, the creditors of the Company party thereto and The Chase Manhattan Bank, as collateral agent, as amended, supplemented or otherwise modified from time to time.            "Officer's Certificate" shall mean a certificate signed in the name of the Company by its President, one of its Vice Presidents or its Treasurer.            "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities.            "Original Common Stock" shall have the meaning specified in the opening paragraphs of this Warrant.            "Other Securities" shall mean any stock (other than Common Stock) and any other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 2J or otherwise.            "Parent" shall have the meaning specified in Section 2J.            "Person" shall have the meaning specified in MRA Appendix A.            "Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by the Company or by any of its subsidiaries whether for cash, shares of Common Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including, without limitation, shares of capital stock, other securities or evidences of indebtedness of a subsidiary of the Company), or any combination thereof, which purchase is subject to Section 13(e) of the Securities Exchange Act of 1934, as amended, or is made pursuant to an offer made available to all holders of shares of Common Stock.            "Registration Rights Agreement" shall mean the Registration Rights Agreement dated as of September 8, 1999, among the Company and the holders of "Registrable Securities" party thereto, as the same may be amended, supplemented or otherwise modified from time to time.            "Required Holders" shall mean the holders of at least 66 2/3% of all the Warrants at the time outstanding, determined on the basis of the number of shares of Common Stock then purchased upon the exercise of all Warrants then outstanding.            "Restricted Securities" shall mean (a) any Warrants bearing the applicable legend set forth in Section 8 and (b) any shares of Common Stock (or Other Securities) which have been issued upon the exercise of Warrants and which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (c) unless the context otherwise requires, any shares of Common Stock (or Other Securities) which are at the time issuable upon the exercise of Warrants and which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section.            "Securities Act" shall mean the Securities Act of 1933, as amended.            "Transaction" shall have the meaning specified in Section 2I.            "Warrant" shall have the meaning specified in the opening paragraphs of this Warrant.            Section 14.   Remedies. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.            Section 15.  Notices. All notices and other communications under this Warrant shall be in writing and shall be sent (a) by registered or certified mail, return receipt requested, or (b) by a recognized overnight delivery service, addressed (i) if to any holder or any Warrant or any holder of any Common Stock (or Other Securities), at the registered address of such holder as set forth in the applicable register kept at the principal office of the Company, or (ii) if to the Company, to the attention of its Secretary at its principal office, provided that the exercise of any Warrant shall be effected in the manner provided in Section 1.            Section 16.  Miscellaneous.              a)  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.              b)  Theagreements of the Company contained in this Warrant other than those applicable solely to the Warrants and the holders thereof shall inure to the benefit of and be enforceable by any holder or holders at the time of any Common Stock (or Other Securities) issued upon the exercise of Warrants, whether so expressed or not.              c)   This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of New York.              d)  The section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.            IN WITNESS WHEREOF, this Warrant has been executed and delivered on behalf of Recoton Corporation by one of its duly authorized officers at of the date first above written.   RECOTON CORPORATION   By:                                                              Name: Arnold Kezsbom        Title: Senior Vice President - Finance FORM OF SUBSCRIPTION (To be executed only upon exercise of Warrant) To RECOTON CORPORATION            The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder,1 shares of Original Common Stock of RECOTON CORPORATION, [and herewith makes payment of $                  therefor]2 [in a "cashless exercise" pursuant to Section 1A of the within Warrant]3, and requests that the certificates for such shares be issued in the name of, and delivered to                    whose address is                   . Dated:                                                                                                               (Signature must conform in all respects to name of holder as specified on the face of this Warrant)                                                                                     (Street Address)                                                                                     (City)           (State)                  (Zip Code) _______________            1   Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for additional Common Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise. In the case of a partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of this Warrant, to the holder surrendering the same.            2   Use in connection with an exercise involving a delivery of funds to the Company.            3   Use in connection with a cashless exercise. FORM OF ASSIGNMENT (To be executed only upon transfer of Warrant)           For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto                     the right represented by such Warrant to purchase                      4 shares of Original Common Stock of RECOTON CORPORATION, to which such Warrant relates, and appoints                       Attorney to make such transfer on the books of RECOTON CORPORATION, maintained for such purpose, with full power of substitution in the premises. Dated:                                                                                                               (Signature must conform in all respects to name of holder as specified on the face of this Warrant)                                                                                     (Street Address)                                                                                     (City)           (State)                  (Zip Code) Signed in the presence of: _______________            4   Insert here the number of shares called for on the face of the within Warrant (or, in the case of a partial assignment, the portion thereof as to which this Warrant is being assigned), in either case without making any adjustment for additional Common Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the within Warrant, may be delivered upon exercise. In the case of a partial assignment, a new Warrant or Warrants will be issued and delivered, representing the portion of the within Warrant not being assigned, to the holder assigning the same.
-------------------------------------------------------------------------------- EXHIBIT 10.4 E*TRADE GROUP, INC. 1996 STOCK INCENTIVE PLAN AS AMENDED AND RESTATED THROUGH APRIL 19, 2000 ARTICLE ONE GENERAL PROVISIONS I.  Purpose of the Plan         This 1996 Stock Incentive Plan is intended to promote the interests of E*TRADE Group, Inc., a Delaware corporation, by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation.         Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. II.  Structure of the Plan         A.  The Plan shall be divided into five separate equity programs: the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, the Salary Investment Option Grant Program under which eligible associates may elect to have a portion of their base salary invested each year in special option grants, the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), the Automatic Option Grant Program under which eligible non-associate Board members shall automatically receive option grants at periodic intervals to purchase shares of Common Stock, and the Director Fee Option Grant Program under which non-associate Board members may elect to have all or any portion of their annual retainer fee otherwise payable in cash applied to a special option grant.         B.  The provisions of Articles One and Seven shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. III.  Administration of the Plan         A.  The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. Administration of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the Board’s discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. The members of the Secondary Committee may be Board members who are Associates eligible to receive discretionary option grants or direct stock issuances under the Plan or any other stock option, stock appreciation, stock bonus or other stock plan of the Corporation (or any Parent or Subsidiary).         B.  Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. --------------------------------------------------------------------------------         C.  Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option or stock issuance thereunder.         D.  The Primary Committee shall have the sole and exclusive authority to determine which Section 16 Insiders and other highly compensated Associates shall be eligible for participation in the Salary Investment Option Grant Program for one or more calendar years. However, all option grants under the Salary Investment Option Grant Program shall be made in accordance with the express terms of that program, and the Primary Committee shall not exercise any discretionary functions with respect to the option grants made under that program.         E.  Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan.         F.  Administration of the Automatic Option Grant and Director Fee Option Grant Programs shall be self-executing in accordance with the terms of those programs, and no Plan Administrator shall exercise any discretionary functions with respect to any option grants or stock issuances made under those programs. IV.  Eligibility         A.  The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows:               1.  Associates,               2.  non-associate members of the Board or the board of directors of any Parent or Subsidiary, and               3.  consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).         B.  Only Employees who are Section 16 Insiders or other highly compensated individuals shall be eligible to participate in the Salary Investment Option Grant Program.         C.  Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine, (i) with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive option grants, the time or times when such option grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares.         D.  The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Discretionary Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program.         E.  The individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals serving as non-associate Board members on the Underwriting Date who have not previously received a stock option grant from the Corporation, (ii) those individuals who first become non-associate Board members after the Underwriting Date, whether through appointment by the Board or election by the Corporation’s stockholders, and (iii) those individuals who continue to serve as non-associate Board members at one -------------------------------------------------------------------------------- or more Annual Stockholders Meetings held after the Underwriting Date. A non-associate Board member who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-associate Board member, but shall be eligible to receive periodic option grants under the Automatic Option Grant Program while he or she continues to serve as a non-associate Board member.         F.  All non-associate Board members shall be eligible to participate in the Director Fee Option Grant Program. V.  Stock Subject to the Plan         A.  The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed 70,476,480(1) shares. Such authorized share reserve is comprised of (i) the shares subject to the outstanding options under the Predecessor Plan which have been incorporated into the Plan plus (ii) an additional increase of 16,000,000(1) shares authorized by the Board and subsequently approved by the stockholders prior to the Section 12 Registration Date, plus (iii)  an additional increase of 7,600,000(1) shares authorized by the Board on December 22, 1997, and approved by the stockholders at the 1998 Annual Meeting; plus (iv) an additional increase of 11,000,0001 shares authorized by the Board on October 21, 1998, and approved by the stockholders at the 1999 Annual Meeting; plus (v) an additional increase of 11,900,000 shares authorized by the Board and approved by the stockholders on December 21, 1999.         B.  No one person participating in the Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than 2,000,000(1) shares of Common Stock in the aggregate per calendar year, beginning with the 1996 calendar year.         C.  Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plan) shall be available for subsequent issuance under the Plan to the extent those options expire or terminate for any reason prior to exercise in full. Unvested shares issued under the Plan and subsequently cancelled or repurchased by the Corporation, at the original issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the wit hholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option or stock issuance.         D.  If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under this Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-associate Board members, (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan and (v) the number and/or class of se curities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. ______________               (1)Share number reflects 2 for 1 stock splits effective on January 29, 1999 and May 21, 1999.               -------------------------------------------------------------------------------- ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM I.  Option Terms         Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.         A.  Exercise Price.               1.  The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.               2.  The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Seven and the documents evidencing the option, be payable in one or more of the forms specified below:                      (i)  cash or check made payable to the Corporation,                      (ii)  shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or                      (iii)  to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.         Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.         B.  Exercise and Term of Options. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date.         C.  Effect of Termination of Service.               1.  The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:                      (i)  Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term.                      (ii)  Any option exercisable in whole or in part by the Optionee at the time of death may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution.                      (iii)  Should the Optionee’s Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be outstanding.                      (iv)  During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date -------------------------------------------------------------------------------- of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares.               2.  The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:                      (i)  extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or                      (ii)  permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service.         D.  Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares.         E.  Repurchase Rights. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.         F.  Limited Transferability of Options. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee’s death. However, a Non-Statutory Option may, in connection with the Optionee’s estate plan, be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Admin istrator may deem appropriate. II.  Incentive Options         The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Seven shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section II.         A.  Eligibility. Incentive Options may only be granted to Associates.         B.  Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Associate under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Associate holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.         C.  10% Stockholder. If any Associate to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per -------------------------------------------------------------------------------- share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. III.  Corporate Transaction/Change In Control         A.  In the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporat e Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Plan Administrator, and its determination shall be final, binding and conclusive.         B.  All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.         C.  Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof).         D.  Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calenda r year.         E.  The Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those options are assumed or replaced and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediat ely terminate, and the shares subject to those terminated repurchase rights shall accordingly vest in full.         F.  The Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in the event the Optionee’s Service subsequently terminates by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control. Each option so accelerated shall remain exercisable for fully-vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate, and the shares subject to those terminated repurchase rights shall ac cordingly vest in full. --------------------------------------------------------------------------------         G.  The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.         H.  The outstanding options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV.  Cancellation and Regrant of Options         The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Discretionary Option Grant Program (including outstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new grant date. V.  Stock Appreciation Rights         A.  The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights.         B.  The following terms shall govern the grant and exercise of tandem stock appreciation rights:                      (i)  One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price payable for such shares.                      (ii)  No such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.                      (iii)  If the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the later of (a) five (5) business days after the receipt of the rejection notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant date.         C.  The following terms shall govern the grant and exercise of limited stock appreciation rights:                      (i)  One or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options.                      (ii)  Upon the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at the time exercisable for vested shares of Common Stock. In return for the surrendered option, the Optionee shall receive a cash distribution from the Corporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion thereof) over (B) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date.                      (iii)  The Plan Administrator shall, at the time the limited stock appreciation right is granted, pre-approve the subsequent exercise of that right in accordance with the terms and conditions of this Section V.C. Accordingly, no additional approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. --------------------------------------------------------------------------------                      (iv)  The balance of the option (if any) shall continue in full force and effect in accordance with the documents evidencing such option.        -------------------------------------------------------------------------------- ARTICLE THREE SALARY INVESTMENT OPTION GRANT PROGRAM I.  Option Grants         The Primary Committee shall have the sole and exclusive authority to determine the calendar year or years (if any) for which the Salary Investment Option Grant Program is to be in effect and to select the Section 16 Insiders and other highly compensated Associates eligible to participate in the Salary Investment Option Grant Program for those calendar year or years. Each selected individual who elects to participate in the Salary Investment Option Grant Program must, prior to the start of each calendar year of participation, file with the Plan Administrator (or its designate) an irrevocable authorization directing the Corporation to reduce his or her base salary for that calendar year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete discretion to determine whether to approve the filed authorization in whole or in part. To the extent the Prima ry Committee approves the authorization, the individual who filed that authorization shall automatically be granted an option under the Salary Investment Grant Program on the first trading day in January of the calendar year for which the salary reduction is to be in effect. II.  Option Terms         Each option shall be a Non-Statutory Option evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below.         A.  Exercise Price.               1.  The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date.               2.  The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.         B.  Number of Option Shares. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number):               X = A ÷ (B x 66-2/3%), where               X is the number of option shares,               A is the dollar amount of the approved reduction in the Optionee’s base salary for the calendar year, and               B is the Fair Market Value per share of Common Stock on the option grant date.         C.  Exercise and Term of Options. The option shall become exercisable in a series of twelve (12) successive equal monthly installments upon the Optionee’s completion of each calendar month of Service in the calendar year for which the salary reduction is in effect. Each option shall have a maximum term of ten (10) years measured from the option grant date.         D.  Effect of Termination of Service. Should the Optionee cease Service for any reason while holding one or more options under this Article Three, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Service. Should the Optionee die while holding one or more options under this Article Three, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s cessation of Service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee’s cessation of Service. However, the option -------------------------------------------------------------------------------- shall, immediately upon the Optionee’s cessation of Service for any reason, terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable. III.  Corporate Transaction/Change in Control/Hostile Take-Over         A.  In the event of any Corporate Transaction while the Optionee remains in Service, each outstanding option held by such Optionee under this Salary Investment Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall be assumed by the successor corporation (or parent thereof) in the Corporate Transaction and shall remain exercisable for the fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service.         B.  In the event of a Change in Control while the Optionee remains in Service, each outstanding option held by such Optionee under this Salary Investment Option Grant Program shall automatically accelerate so that each such option shall immediately become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earlier of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service or (iii) the surrender of the option in connection with a Hostile Take-Over.         C.  Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each outstanding option granted him or her under the Salary Investment Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. The Primary Committee shall, at the time the option with such limited stock appreciation right is granted under the Salary Investment Option Grant Program, pre-approve any subsequent exercise of that right in accordance with the terms of t his Paragraph C. Accordingly, no further approval of the Primary Committee or the Board shall be required at the time of the actual option surrender and cash distribution.         D.  The grant of options under the Salary Investment Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV.  Remaining Terms         The remaining terms of each option granted under the Salary Investment Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program.        -------------------------------------------------------------------------------- ARTICLE FOUR STOCK ISSUANCE PROGRAM I.  Stock Issuance Terms         Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below.         A.  Purchase Price.               1.  The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the issuance date.               2.  Subject to the provisions of Section I of Article Seven, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:                      (i)  cash or check made payable to the Corporation, or                      (ii)  past services rendered to the Corporation (or any Parent or Subsidiary).         B.  Vesting Provisions.               1.  Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program, namely:                      (i)  the Service period to be completed by the Participant or the performance objectives to be attained,                      (ii)  the number of installments in which the shares are to vest,                      (iii)  the interval or intervals (if any) which are to lapse between installments, and                      (iv)  the effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule, shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement.               2.  Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.               3.  The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.               4.  Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness), the -------------------------------------------------------------------------------- Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares .               5.  The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. II.  Corporate Transaction/Change in Control         A.  All of the Corporation’s outstanding repurchase/cancellation rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent (i) those repurchase/cancellation rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement.         B.  The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation’s repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those repurchase/cancellation rights are assigned to the successor corporation (or parent thereof).         C.  The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation’s repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control. III.  Share Escrow/Legends         Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.        -------------------------------------------------------------------------------- ARTICLE FIVE AUTOMATIC OPTION GRANT PROGRAM I.  Option Terms         A.  Grant Dates. Option grants shall be made on the dates specified below:               1.  Each individual serving as a non-associate Board member on the Underwriting Date shall automatically be granted at that time a Non-Statutory Option to purchase 50,000(1) shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary and has not previously received a stock option grant from the Corporation.               2.  Each individual who is first elected or appointed as a non-associate Board member at any time after the Underwriting Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 50,000(1) shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary.               3.  On the date of each Annual Stockholders Meeting held after the Underwriting Date, each individual who is to continue to serve as an Eligible Director, whether or not that individual is standing for re-election to the Board at that particular Annual Meeting, shall automatically be granted a Non-Statutory Option to purchase 20,0001 shares of Common Stock, provided such individual has served as a non-associate Board member for at least six (6) months. There shall be no limit on the number of such 20,000(1) share option grants any one Eligible Director may receive over his or her period of Board service, and non-associate Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) or who have otherwise received a stock option grant from the Corporation prior to the Underwriting Date shall be eligible to receive one or more such annual option grants over their period of continued Board service.         B.  Exercise Price.               1.  The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.               2.  The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.         C.  Option Term. Each option shall have a term of ten (10) years measured from the option grant date.         D.  Exercise and Vesting of Options. Each option shall be immediately exercisable for any or all of the option shares. However, any shares purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee’s cessation of Board service prior to vesting in those shares. Each initial 50,000(1)-share grant shall vest, and the Corporation’s repurchase right shall lapse, in a series of four (4) successive equal annual installments over the Optionee’s period of continued service as a Board member, with the first such installment to vest upon the Optionee’s completion of one (1) year of Board service measured from the option grant date. Each annual 20,000(1)-share grant shall vest, and the Corporation’s repurchase right shall lapse, upon the Optionee’s completion of two (2) years of Board service measured from the option grant date. ______________              (1)Share number reflects 2 for 1 stock splits effective on January 29, 1999 and May 21, 1999.        --------------------------------------------------------------------------------         E.  Termination of Board Service. The following provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve as a Board member:                      (i)  The Optionee (or, in the event of Optionee’s death, the personal representative of the Optionee’s estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option.                      (ii)  During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the Optionee’s cessation of Board service.                      (iii)  Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock.                      (iv)  In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Board service for any reason other than death or Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. II.  Corporate Transaction/Change in Control/ Hostile Take-Over         A.  In the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof).         B.  In connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Each such option shall remain exercisable for such fully-vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over.         C.  Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each automatic option held by him or her. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. Stockholder approval of the Plan, as amended and restated on December 24, 1998, shall constitute pre-approval of the surrender of each automatic option in accordance with the terms and provisions of this Section II.C. No additional approval of any Plan Administrator or the consent of the Board shall be required in connection with such option surrender and cash distribution.         D.  Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. --------------------------------------------------------------------------------         E.  The grant of options under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. III.  Remaining Terms         The remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program .        -------------------------------------------------------------------------------- ARTICLE SIX DIRECTOR FEE OPTION GRANT PROGRAM I.  Option Grants         Each non-associate Board member may elect to apply all or any portion of the annual retainer fee otherwise payable in cash for his or her service on the Board to the acquisition of a special option grant under this Director Fee Option Grant Program. Such election must be filed with the Corporation’s Chief Financial Officer prior to first day of the calendar year for which the annual retainer fee which is the subject of that election is otherwise payable. Each non-associate Board member who files such a timely election shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in January in the calendar year for which the annual retainer fee which is the subject of that election would otherwise be payable in cash. II.  Option Terms         Each option shall be a Non-Statutory Option governed by the terms and conditions specified below.         A.  Exercise Price.               1.  The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date.               2.  The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.         B.  Number of Option Shares. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number):               X = A ÷ (B x 66-2/3%), where               X is the number of option shares,               A is the portion of the annual retainer fee subject to the non-associate Board member’s election, and               B is the Fair Market Value per share of Common Stock on the option grant date.         C.  Exercise and Term of Options. The option shall become exercisable in a series of twelve (12) equal monthly installments upon the Optionee’s completion of each month of Board service over the twelve (12)-month period measured from the grant date. Each option shall have a maximum term of ten (10) years measured from the option grant date.         D.  Termination of Board Service. Should the Optionee cease Board service for any reason (other than death or Permanent Disability) while holding one or more options under this Director Fee Option Grant Program, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Board service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. However, each option held by the Optionee under this Director Fee Option Grant Program at the time of his or her cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable.         E.  Death or Permanent Disability. Should the Optionee’s service as a Board member cease by reason of death or Permanent Disability, then each option held by such Optionee under this Director Fee Option Grant Program shall immediately become exercisable for all the shares of Common Stock at the time subject to that option, and the option may be exercised for any or all of those shares as fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. --------------------------------------------------------------------------------         Should the Optionee die after cessation of Board service but while holding one or more options under this Director Fee Option Grant Program, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee’s cessation of Board service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee’s cessation of Board service. III.  Corporate Transaction/Change in Control/Hostile Take-Over         A.  In the event of any Corporate Transaction while the Optionee remains a Board member, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall be assumed by the successor corporation (or parent thereof) in the Corporate Transaction and shall remain exercisable for the fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Board service.         B.  In the event of a Change in Control while the Optionee remains in Service, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall immediately become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earlier or (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee’s cessation of Service.         C.  Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each outstanding option granted him or her under the Director Fee Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan Administrator shall be required in connection with such option surrender and cash distribution.         D.  The grant of options under the Director Fee Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV.  Remaining Terms         The remaining terms of each option granted under this Director Fee Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program.        -------------------------------------------------------------------------------- ARTICLE SEVEN MISCELLANEOUS I.  Financing         The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. II.  Tax Withholding         A.  The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.         B.  The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan (other than the options granted or the shares issued under the Automatic Option Grant or Director Fee Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:               Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder.               Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent (100%)) designated by the holder. III.  Effective Date and Term of the Plan         A.  The Plan was initially adopted by the Board on May 31, 1996, and was subsequently approved by the stockholders. The Discretionary Option Grant and the Stock Issuance Programs became effective immediately upon the Plan Effective Date.         B.  The Automatic Option Grant Program became effective on the Underwriting Date. The Plan was subsequently amended by the Board on December 22, 1997 to (i) increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 7,600,000(1) shares, (ii) allow individuals who administer the Plan to be included in the group of non-associate Board members eligible to receive option grants and direct stock issuances under the Discretionary Option Grant and Stock Issuance Programs, (iii) remove certain restrictions on the eligibility of non-associate Board members to serve as Plan Administrator, and (iv) effect a series of technical changes to the provisions of the Plan (including stockholder approval requirements, certain holding period restrictions, and the frequency of which the Automatic Option Grant Program may be amended) in order to take advantage of the November 1996 amendments to Ru le 16b-3 of the 1934 Act which exempts certain officer and director transactions under the Plan from the short-swing liability provisions of the federal securities laws (“December 1997 Amendment”). The December 1997 Amendment was approved by the stockholders at the 1998 Annual Meeting. ______________              (1)Share number reflects 2 for 1 stock splits effective on January 29, 1999 and May 21, 1999.        --------------------------------------------------------------------------------         C.  On October 21, 1998, the Board amended and restated the Plan to increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 11,000,0001 shares, to 58,576,480(1) shares of Common Stock. On December 24, 1998 the Board again amended and restated the Plan to incorporate the Salary Investment Option Grant and Director Fee Option Grant Programs. Both Amendments were approved by the stockholders at the 1999 Annual Meeting. The Salary Investment Option Grant Program and Director Fee Option Program shall not be implemented until such time as the Primary Committee may deem appropriate. The option grants made prior to the October 1998 Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances and nothing in the October 1998 Amendment shall be deemed to modify or in any away affect those outstanding options or issuances. Subject to the foregoing limitations, the Plan Administrator may make option grants under the Plan at any time before the date fixed herein for the termination of the Plan.         D.  On December 21, 1999, the Board amended and restated the Plan to increase the maximum number of shares of Common Stock authorized for issuance under the Plan by 11,900,0001 shares, to 70,476,4801 shares of Common Stock. The Amendment was concurrently approved by the stockholders on December 21, 1999. The option grants made prior to the December 1999 Amendment shall remain outstanding in accordance with the terms and conditions of the respective instruments evidencing those options or issuances and nothing in the December 1999 Amendment shall be deemed to modify or in any away affect those outstanding options or issuances. Subject to the foregoing limitations, the Plan Administrator may make option grants under the Plan at any time before the date fixed herein for the termination of the Plan.         E.  The Plan shall serve as the successor to the Predecessor Plan, and no further option grants or direct stock issuances shall be made under the Predecessor Plan after the Section 12(g) Registration Date. All options outstanding under the Predecessor Plan on the Section 12(g) Registration Date shall be incorporated into the Plan at that time and shall be treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock.         F.  One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate Transactions and Changes in Control, may, in the Plan Administrator’s discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions.         G.  The Plan shall terminate upon the earliest of (i) May 30, 2006, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Upon such plan termination, all outstanding option grants and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances. IV.  Amendment of the Plan         A.  The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations.         B.  Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant and Salary Investment Option Grant Programs and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtaine d ______________              (1)Share number reflects 2 for 1 stock splits effective on January 29, 1999 and May 21, 1999.        -------------------------------------------------------------------------------- stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. V.  Use of Proceeds         Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. VI.  Regulatory Approvals         A.  The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it.         B.  No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. VII.  No Employment/Service Rights         Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.        -------------------------------------------------------------------------------- APPENDIX         The following definitions shall be in effect under the Plan:         A.  Associate shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.         B.  Automatic Option Grant Program shall mean the automatic option grant program in effect under the Plan.         C.  Board shall mean the Corporation’s Board of Directors.         D.  Change in Control shall mean a change in ownership or control of the Corporation effected through either of the following transactions:                      (i)  the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept, or                      (ii)  a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.         E.  Code shall mean the Internal Revenue Code of 1986, as amended.         F.  Common Stock shall mean the Corporation’s common stock.         G.  Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party:                      (i)  a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or                      (ii)  the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation.         H.  Corporation shall mean E*TRADE Group, Inc. and any corporate successor to all or substantially all of the assets or voting stock of E*TRADE Group, Inc. which shall by appropriate action adopt the Plan.         I.  Discretionary Option Grant Program shall mean the discretionary option grant program in effect under the Plan.         J.  Director Fee Option Grant Program shall mean the special stock option grant in effect for non-associate Board members under Article Six of the Plan.         K.  Eligible Director shall mean a non-associate Board member eligible to participate in the Automatic Option Grant Program in accordance with the eligibility provisions of Article One.         L.  Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise.         M.  Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: A-1. --------------------------------------------------------------------------------                      (i)  If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the average of the high and low selling prices per share of Common Stock on the date in question, as the price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no average of the high and low selling prices per share for the Common Stock on the date in question, then the Fair Market Value shall be the average of the high and low selling prices per share on the last preceding date for which such quotation exists.                      (ii)  If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the average of the high and low selling prices per of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no average of the high and low selling prices per share for the Common Stock on the date in question, then the Fair Market Value shall be the average of the high and low selling prices per share on the last preceding date for which such quotation exists.                      (iii)  For purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement.                      (iv)  For purposes of any option grants made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, after taking into account such factors as it deems appropriate.         N.  Hostile Take-Over shall mean a change in ownership of the Corporation effected through the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders which the Board does not recommend such stockholders to accept.         O.  Incentive Option shall mean an option which satisfies the requirements of Code Section 422.         P.  Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:                      (i)  such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or                      (ii)  such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent.         Q.  Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary).         R.  1934 Act shall mean the Securities Exchange Act of 1934, as amended.         S.  Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. A-2. --------------------------------------------------------------------------------         T.  Optionee shall mean any person to whom an option is granted under the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option Grant or Director Fee Program.         U.  Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.         V.  Participant shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.         W.  Permanent Disability or Permanently Disabled shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant and Director Fee Option Grant Programs, Permanent Disability or Permanently Disabled shall mean the inability of the non-associate Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.         X.  Plan shall mean the Corporation’s 1996 Stock Incentive Plan, as set forth in this document.         Y.  Plan Administrator shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction.         Z.  Plan Effective Date shall mean May 31, 1996, the date on which the Plan was adopted by the Board.         AA.  Predecessor Plan shall mean the Corporation’s pre-existing 1993 Stock Option Plan (which is the successor to the 1983 Employee Incentive Stock Option Plan) in effect immediately prior to the Plan Effective Date hereunder.         BB.  Primary Committee shall mean the committee of two (2) or more non-associate Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to Section 16 Insiders and to administer the Salary Investment Option Grant Program solely with respect to the selection of the eligible individuals who may participate in such program.         CC.  Salary Investment Option Grant Program shall mean the salary investment option grant program in effect under the Plan.         DD.  Secondary Committee shall mean a committee of one (1) or more Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs with respect to eligible persons other than Section 16 Insiders.         EE.  Section 12 Registration Date shall mean the date on which the Common Stock was first registered under Section 12(g) of the 1934 Act.         FF.  Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act.         GG.  Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Associate, a non-associate member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance.         HH.  Stock Exchange shall mean either the American Stock Exchange or the New York Stock Exchange.         II.  Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. A-3. --------------------------------------------------------------------------------         JJ.  Stock Issuance Program shall mean the stock issuance program in effect under the Plan.         KK.  Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.         LL.  Take-Over Price shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share.         MM.  Taxes shall mean the Federal, state and local income and employment tax liabilities incurred by the holder of Non-Statutory Options or unvested shares of Common Stock in connection with the exercise of those options or the vesting of those shares.         NN.  10% Stockholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).         OO.  Underwriting Agreement shall mean the agreement between the Corporation and the underwriter or underwriters who managed the initial public offering of the Common Stock.         PP.  Underwriting Date shall mean August 15, 1996, which is the date on which the Underwriting Agreement was executed and priced in connection with an initial public offering of the Common Stock.              A-4. --------------------------------------------------------------------------------
CREDIT AGREEMENT Exhibit 10.2 CREDIT AGREEMENT among RECOTON CORPORATION, INTERACT ACCESSORIES, INC. RECOTON AUDIO CORPORATION AAMP OF FLORIDA, INC. RECOTON HOME AUDIO, INC. As Borrowers and The Other Loan Parties Party Hereto and The Several Lenders from Time to Time Parties Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of October 31, 2000 TABLE OF CONTENTS Page SECTION 1. SECTION 1. DEFINITIONS 1   1.1 Defined Terms 1   1.2 Other Definitional Provisions 14 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 15   2.1 Term Loan Commitments 15   2.2 Procedure for Borrowing 15   2.3 Repayment of Loans; Evidence of Debt 15   2.4 Optional Prepayments 16   2.5 Mandatory Prepayments 16   2.6 Interest Rates and Payment Dates 17   2.7 Computation of Interest 17   2.8 Pro Rata Treatment and Payments 17   2.9 Taxes 18   2.10 Change of Lending Office 19   2.11 Joint and Several Liability of Borrowers 20   2.12 Recoton as Agent for Borrowers 22 SECTION 3. REPRESENTATIONS AND WARRANTIES 23   3.1 Organization, Powers, Capitalization 23   3.2 Authorization of Borrowing, No Conflict 23   3.3 Financial Condition 24   3.4 Indebtedness and Liabilities 24   3.5 Title to Properties; Liens 24   3.6 Litigation; Adverse Facts 25   3.7 Payment of Taxes 25   3.8 Performance of Agreements 25   3.9 Employee Benefit Plans 25   3.10 Broker's Fees 26   3.11 Environmental Matters 26   3.12 Solvency 27   3.13 Disclosure 27   3.14 Insurance 28   3.15 Compliance with Laws 28   3.16 Employee Matters 28   3.17 Governmental Regulation 28   3.18 Currency Controls 28   3.19 Customer and Trade Relations 28   3.20 Subordinated Debt 29 SECTION 4. CONDITIONS PRECEDENT 29 SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS; FINANCIAL COVENANTS 30   5.1 Financial Statements and Other Reports 30   5.2 Maintenance of Properties 30   5.3 Compliance with Laws 31   5.4 Use of Proceeds and Margin Security 31   5.5 Year 2000 31   5.6 Environmental Matters 31   5.7 Notices 32   5.8 Collateral Inspection Rights 32   5.9 Inspection of Property; Books and Records; Discussions 33   5.10 Use of Proceeds 33 SECTION 6. NEGATIVE COVENANTS 33   6.1 Indebtedness and Liabilities 33   6.2 Guaranties 35   6.3 Transfers, Liens and Related Matters 35   6.4 Investments and Loans 37   6.5 Restricted Junior Payments 38   6.6 Restriction on Fundamental Changes 38   6.7 Changes Relating to Subordinated Debt 39   6.8 Transactions with Affiliates 40   6.9 Conduct of Business 40   6.10 Tax Consolidations 40   6.11 Subsidiaries 40   6.12 Fiscal Year; Tax Designation 40   6.13 Press Release; Public Offering Materials 40   6.14 Sale-leasebacks 40   6.15 Inactive Subsidiaries 40   6.16 Parity with Senior Lender 40 SECTION 7. DEFAULT, RIGHTS AND REMEDIES 41   7.1 Event of Default 41   7.2 Application of Payments and Proceeds 45 SECTION 8. THE ADMINISTRATIVE AGENT 45   8.1 Appointment 45   8.2 Delegation of Duties 46   8.3 Exculpatory Provisions 46   8.4 Reliance by Administrative Agent 46   8.5 Notice of Default; Notices Under Subordination Agreement 47   8.6 Non-reliance on Administrative Agent and Other Lenders 47   8.7 Indemnification 48   8.8 Administrative Agent in Its Individual Capacity 48   8.9 Successor Administrative Agent 48 SECTION 9. MISCELLANEOUS 49   9.1 Amendments and Waivers 49   9.2 Notices 50   9.3 No Waiver; Cumulative Remedies 51   9.4 Survival of Representations and Warranties 51   9.5 Payment of Expenses 51   9.6 Successors and Assigns; Participations and Assignments 52   9.7 Adjustments; Set-off 54   9.8 Counterparts 55   9.9 Severability 55   9.10 Integration 55   9.11 Governing Law 55   9.12 Submission to Jurisdiction; Waivers 56   9.13 Acknowledgements 56   9.14 Waivers of Jury Trial 57   9.15 Confidentiality 57   9.16 Joint and Several Obligations 57   9.17 Legend 57 SCHEDULES: 1.1(A) Tranche A Term Loan Commitments 1.1(B) Tranche B Term Loan Commitments 1.1(C) Mortgaged Property 1.1(D) Liens 3.1(A) Organization and Powers 3.5 Real Estate 3.8 Taxes 3.9 Employee Benefit Plans 3.14 Insurance 3.16 Employee Matters 5.1 Reporting Requirements 6.1 Indebtedness 6.2 Guaranties 6.4(c) Closing Date Employee Loans 6.4(e) Investments 6.6 Inactive Subsidiaries 6.11 Subsidiaries 9.2 Addresses for Notice EXHIBITS: A Form of Assignment and Acceptance B-1 Form of Tranche A Term Note B-2 Form of Tranche B Term Note C Form of Subordination and Intercreditor Agreement D Form of Security Agreement E Form of Mortgages F-1 Form of Guaranty F-2 Form of Canada Guaranty G Form of Pledge Agreement                      CREDIT AGREEMENT, dated as of October 31, 2000, among RECOTON CORPORATION, a New York corporation ("Recoton"), INTERACT ACCESSORIES, INC., a Delaware corporation, RECOTON HOME AUDIO, INC., a California corporation, RECOTON AUDIO CORPORATION, a Delaware corporation, and AAMP OF FLORIDA, Inc., a Florida corporation (collectively with Recoton, the "Borrowers"), the several banks and other financial institutions or entities from time to time parties to this Agreement, and THE CHASE MANHATTAN BANK, as administrative agent (in such capacity, the "Administrative Agent"). W I T N E S S E T H :                      WHEREAS, the Lenders (as defined below) have previously extended loans and other financial accommodations to or for the benefit of Recoton pursuant to the Existing Credit Agreement, the 1997 Note Purchase Agreements and the 1998 Note Purchase Agreement (each as defined below), which loans were guaranteed by certain of Recoton's Subsidiaries and secured by liens upon substantially all of the assets of Recoton and such Subsidiaries;                      WHEREAS, concurrently herewith the Borrowers and certain of their respective Subsidiaries have entered into the Senior Loan Documents (as defined below) pursuant to which the Borrowers shall borrow sufficient funds to repay a portion of Recoton's outstanding obligations under the Existing Credit Agreement, the 1997 Note Purchase Agreements and the 1998 Note Purchase Agreement (such obligations, collectively, the "Existing Lender Obligations"); and                      WHEREAS, the Borrowers have requested and the Lenders have agreed to extend $15,000,000 of new credit to the Borrowers for the purpose of repaying the remainder of the Existing Lender Obligations in full on the following terms and conditions;                      NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. DEFINITIONS                      1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.              "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus1/2of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors); and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.              "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR.              "Administrative Agent": as defined in the introductory paragraph hereto.              "Administrative Borrower": as defined in Section 2.12 hereto.              "Affiliate": any Person (other than the Administrative Agent or Lender): (a) directly or indirectly controlling, controlled by, or under common control with, any Loan Party; (b) directly or indirectly owning or holding 10% or more of any equity interest in any Borrower; (c) 10% or more of whose stock or other equity interest having ordinary voting power for the election of directors or the power to direct or cause the direction of management, is directly or indirectly owned or held by any Borrower; or (d) which has a senior officer who is also a senior officer of any Borrower. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other equity interest, or by contract or otherwise.              "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time.              "Agents": the "Agents" as defined in the Senior Loan Agreement on the date hereof and their successors and assigns.              "Asset Disposition": the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise, of any or all of the assets of Borrowers or any of their Subsidiaries other than sales of Inventory in the ordinary course of business.              "Assignee": as defined in Section 9.6(c).              "Assignor": as defined in Section 9.6(c).              "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).              "Borrowers": as defined in the introductory paragraph hereto.              "Borrowing Date": any Business Day specified by the Borrowers as a date on which the Borrowers request the relevant Lenders to make Loans hereunder.              "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.              "Canada Guaranty": the Guaranty Agreement dated as of even date herewith between Recoton Canada and the Senior Agent on behalf of the Agents, Senior Lenders, the Administrative Agent and the Lenders, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with its terms attached as Exhibit F-2 hereto.              "Canada Security Agreement": the Security Agreement dated as of even date herewith between Recoton Canada and the Senior Agent on behalf of the Agents, Senior Lenders, the Administrative Agent and the Lenders, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with its terms.              "Capital Lease": any lease of any property (whether real, personal or mixed) that, in conformity with GAAP, should be accounted for as a capital lease.              "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.              "Chase": The Chase Manhattan Bank.              "Cleanup": all actions required to: (a) cleanup, remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (b) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (c) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (d) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous Materials in the indoor or outdoor environment.              "Closing Date": the date upon which all conditions set forth in Section 4 hereof have been satisfied.              "Code": the Internal Revenue Code of 1986, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.              "Collateral": the collective reference to any and all property upon which a Lien is purported to be created by any Security Document.              "Commitment": as to any Lender, the collective amounts of such Lender's commitment hereunder set forth opposite such Lender's name on Schedule 1.1(A) and Schedule 1.1(B).              "Copyright Security Agreement": the Copyright Security Agreement dated as of even date herewith among the Loan Parties and the Senior Agent on behalf of the Agents, Senior Lenders, the Administrative Agent and the Lenders, as the same may be amended, supplemented, restate or otherwise modified from time to time in accordance with its terms.              "Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.              "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof.              "Dollars" and "$": dollars in lawful currency of the United States of America.              "Employee Benefit Plan": any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party or any ERISA Affiliate or (b) has at any time within the preceding 6 years been maintained for the employees of any Loan Party or any current or former ERISA Affiliate.              "Environmental Claim": any claim, action, cause of action, investigation or notice (written or oral) by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or Release of any Hazardous Materials at any location, whether or not owned, leased or operated by the Loan Party or any of its Subsidiaries, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.              "Environmental Law": all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials, laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials and laws relating to the management or use of natural resources.              "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.              "ERISA Affiliate": as applied to any Loan Party, any Person who is a member of a group which is under common control with any Loan Party, who together with any Loan Party is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. Any former ERISA Affiliate of a Loan Party shall continue to be considered an ERISA Affiliate within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Loan Party and with respect to liabilities arising after such period for which such Loan Party could be liable under the Code or ERISA.              "ERISA Event": (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the Pension Benefit Guaranty Corporation has been waived by regulation); (ii) the withdrawal by any Loan Party or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (iii) the institution by the Pension Benefit Guaranty Corporation of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (iv) the imposition of liability on any Loan Party or any of its ERISA Affiliates pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; or (v) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any Loan Party or any of its ERISA Affiliates in connection with any Employee Benefit Plan.              "Exchange Act": the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder.              "Existing Credit Agreement": the Amended and Restated Credit Agreement, dated as of June 18, 1998, among Recoton, the lenders party thereto and Chase, as administrative agent.              "Existing Lender Obligations": as defined in the recitals hereto.              "Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.              "Fiscal Year": each twelve month period ending on the last day of December in each year.              "Foreign Subsidiary": any Subsidiary (other than Recoton Canada) that is not incorporated or organized in the United States of America, any state thereof or in the District of Columbia.              "Funding Office": the office of the Administrative Agent set forth in Section 9.2.              "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time.              "German Facility": means the DM 50,000,000 financing arrangement between Recoton Germany and its Subsidiaries and Heller Bank A.G. or, if such facility is not renewed during the term of this Agreement, a replacement facility on terms and pursuant to documentation substantially consistent with those in existence on the date hereof and otherwise reasonably satisfactory to the Senior Agent and the Requisite Lenders (as defined in the Senior Loan Agreement).              "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 (including, without limitation, the National Association of Insurance Commissioners).              "Guaranties": collectively the Guaranty and the Canada Guaranty.              "Guarantors": the collective reference to the Loan Parties party to the Guaranty.              "Guaranty": the Guaranty dated as of October 31, 2000, made by the Guarantors in favor of the Senior Agent on behalf of the Agents, the Senior Lenders, the Administrative Agent and the Lenders, as attached as Exhibit F-1 hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms.              "Hazardous Material": all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.ss.300.5, or defined as such by, or regulated as such under, any Environmental Law.              "Hedge Agreements": all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Borrowers or any of their Subsidiaries providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.              "Indebtedness": as applied to any Person, means without duplication: (a) all indebtedness for borrowed money; (b) obligations under Capital Leases; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six months from the date the obligation is incurred or is evidenced by a note or similar written instrument; (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non recourse to the credit of that Person; (f) obligations in respect of letters of credit; (g) all obligations under Hedge Agreements, including, as of any date of determination, the net amounts, if any, that would be required to be paid by such Person if such Hedge Agreements were terminated on such date and (h) any amounts due to the U.S. Custom Service pursuant to the outstanding note.              "InterAct International IPO": an underwritten public offering of common stock made by Inter Act International, Inc., a Delaware corporation, and its Subsidiaries, pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder.              "Interest Payment Date": as to any Loan, the last day of each calendar month, the Maturity Date and the date of any repayment or prepayment made in respect thereof.              "Inventory": means "inventory" (as defined in the UCC), including, without limitation, finished goods, raw materials, work in process and other materials and supplies used or consumed in a Person's business, and goods which are returned or repossessed, including any Inventory in the possession of any consignee, bailee, warehouseman, agent or processor and/or subject to, described in or covered by any document, and including, without limitation, any Inventory in transit from one location to another, including on the "high seas" and otherwise outside the United States and its territorial waters.              "Lenders": collectively, the Tranche A Lenders and the Tranche B Lenders.              "Lien": any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest).              "LIFO Loan Documents": the "LIFO Loan Documents" as defined in Appendix B to the Master Restructuring Agreement.              "Loan": as defined in Section 2.1.              "Loan Documents": this Agreement, the Subordination Agreement, the Security Documents and the Notes.              "Loan Parties": the Borrowers and the Subsidiaries of the Borrowers party to a Loan Document.              "Master Restructuring Agreement": the Master Restructuring Agreement dated as of September 8, 1999, among Recoton Corporation, certain of its Subsidiaries, the financial institutions party thereto and The Chase Manhattan Bank, as Collateral Agent.              "Material Adverse Effect": (i) any material adverse effect on the business, financial position, results of operations or prospects of the Borrowers and their Subsidiaries, considered as a whole, (ii) any material impairment of the legality, validity and enforceability of the Loan Documents (including without limitation, the validity, enforceability or priority of security interests to be granted), or the rights and remedies of the Administrative Agent and Lenders, or (iii) any material impairment of the Loan Parties' ability to perform their obligations under the Loan Documents.              "Maturity Date": October 31, 2003.              "Mortgage": each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust or other similar real estate security documents delivered by any Loan Party to the Senior Agent, on behalf of the Agents, the Senior Lenders, the Administrative Agent and the Lenders, with respect to Mortgaged Property, as attached as Exhibit E hereto.              "Mortgaged Property": all of the real property owned by any Borrower or its Subsidiaries, each as listed on Schedule 1.1(C).              "Multiemployer Plan": any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.              "Net Proceeds": (a) with respect to any Asset Disposition constituting a casualty or condemnation, the insurance or condemnation proceeds received in connection therewith net of any expenses, if any, incurred by any of the Agents or (after the Obligations under the Senior Loan Agreement have been paid in cash in full) the Administrative Agent in the collection or handling thereof and (b) with respect to any other Asset Disposition, the proceeds received in connection therewith net of (i) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrowers or any of their Subsidiaries in connection therewith (in each case, paid to non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (iv) an appropriate reserve for income taxes in accordance with GAAP in connection therewith.              "Net Securities Proceeds": the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses) from the issuance of Securities of or incurrence of Indebtedness by a Borrower or its Subsidiaries.              "New Information System": the enterprise resource planning system consisting of licensed software, purchased or leased hardware, consulting services and related expenses which Recoton and its Subsidiaries are in the process of contracting for and implementing.              "Non-Excluded Taxes": as defined in Section 2.9.              "Notes": the collective reference to any promissory note evidencing Loans.              "1997 Note Purchase Agreements": collectively, the separate Note Purchase Agreements, each dated January 6, 1997, between Recoton and each of the purchasers named in Annex 1 thereto as amended, supplemented or modified prior to the closing of the transactions contemplated hereunder.              "1998 Note Purchase Agreement": the Note Purchase Agreement, dated as of September 1, 1998, between Recoton and the purchaser named in Annex 1 thereto as amended, supplemented or modified prior to the closing of the transactions contemplated hereunder.              "1999 Securities Purchase Agreement": the Securities Purchase Agreement dated as of February 4, 1999, between the Borrower and each of the purchasers named in Annex 1 thereto as amended, supplemented or modified time to time.              "Obligations": the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of any Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrowers pursuant hereto) or otherwise.              "Patent Security Agreement": the Patent Security Agreement dated as of even date herewith among the Loan Parties and the Senior Agent on behalf of the Agents, Senior Lenders, the Administrative Agent and the Lenders, as the same way be amended, supplemented, restated or otherwise modified from time to time in accordance with its terms.              "Participant": as defined in Section 9.6(b).              "Payment Office": the office of the Administrative Agent set forth in Section 9.2.              "Payoff Letter": The letter agreement dated the date hereof delivered pursuant to the Senior Loan Agreement by The Chase Manhattan Bank and the other existing creditors of Recoton signatory thereto and pursuant to which the Master Restructuring Agreement dated as of September 8, 1999 is terminated.              "Permitted Encumbrances": the following types of Liens: (a) Liens (other than Liens relating to Environmental Claims or ERISA) for taxes, assessments or other governmental charges not yet due and payable or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such Loan Party or such Subsidiary has established appropriate reserves as shall be required in conformity with GAAP; (b) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than 30 days delinquent and that attach only to Real Estate, fixtures and equipment; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) easements, rights-of-way, zoning restrictions, licenses and other similar charges or encumbrances affecting the use of real property not interfering in any material respect with the ordinary conduct of the business of any Loan Party or any of its Subsidiaries; (e) Liens for purchase money obligations, provided that (i) the Indebtedness secured by any such Lien is permitted under subsection 7.1, and (ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of the Senior Agent, on behalf of the Agents, the Senior Lenders, the Administrative Agent and Lenders; (g) Liens on deposits on other property of the Borrower or any Subsidiary to secure up to $500,000 of insurance obligations incurred in the ordinary course of business; (h) Liens on the Inventory of the Borrowers or any of their Subsidiaries that is consigned in an aggregate amount not to exceed $500,000 at any one time outstanding; (i) any interest or title of a lessor or sublessor under any real property lease not prohibited by this Agreement; (j) Liens set forth on Schedule 1.1(D); and; (k) Liens arising in respect of judgments in an aggregate amount of less than $2,000,000 at any one time outstanding in circumstances not constituting a Default or an Event of Default.              "Person": includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.              "Pledge Agreements": the collective reference to the Pledge Agreement dated as of October 31, 2000 delivered by the Pledgors (as defined therein) in favor of the Senior Agent on behalf of the Agents, the Senior Lenders, the Administrative Agent and the Lenders, as the same may be amended, supplemented or otherwise modified from time to time, as attached as Exhibit G hereto and any other agreements pursuant to which some or all of the Capital Stock of a Foreign Subsidiary is pledged by any Loan Party or Foreign Subsidiary to the Senior Agent, on behalf of the Agents (as defined in the Senior Loan Agreement as of the date hereof), the Senior Lenders, the Administrative Agent and the Lenders, on or after the date hereof, (including, without limitation, the German Pledge Agreement, the Hong Kong Pledge Agreement, the Italy Pledge Agreement and the UK Pledge Agreement, each as defined in the Senior Loan Agreement) as amended, supplemented or modified.              "Real Estate": as defined in Section 3.5.              "ReCone": Recone, Inc., a Delaware corporation.              "Recoton" has the meaning assigned to that term in the preamble.              "Recoton Canada": Recoton Canada Ltd., an Ontario corporation.              "Recoton Germany": Recoton German Holdings GmbH, a corporation organized under the laws of the Federal Republic of Germany.              "Recoton Italy": Recoton Italia s.r.l., a corporation incorporated under the laws of Italy.              "Recoton UK": Recoton (UK) Limited, a corporation incorporated under the laws of England and Wales.              "Register": as defined in Section 9.6(d).              "Regulation T": Regulation T of the Board as in effect from time to time.              "Regulation U": Regulation U of the Board as in effect from time to time.              "Regulation X": Regulation X of the Board as in effect from time to time.              "Related Agreements": the Senior Loan Documents, the 1999 Securities Purchase Agreement, the Payoff Letter, the documents and agreements evidencing the German Facility and all other documents, agreements and instruments in connection with the foregoing.              "Release": any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), or into or out of any property, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property.              "Required Lenders": at any time prior to the funding of the Commitments the holders of at least 51% of the Commitments and thereafter the holders of at least 51% of the aggregate principal amount of Loans then outstanding.              "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.              "Responsible Officer": any president, vice president, chief financial officer, treasurer or assistant treasurer of the Borrower, but in any event, with respect to financial matters, the chief financial officer, treasurer or assistant treasurer of the Borrower.              "Restricted Junior Payment": (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or other equity interest of any Borrower or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely with shares of the class of stock on which such dividend is declared or any properly and legally declared dividend which is not paid in cash; (b) any payment or prepayment of principal of, premium, if any, or interest on, or any redemption, conversion, exchange, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Subordinated Debt or any shares of any class of stock of any Borrower or any of its Subsidiaries now or hereafter outstanding, or the issuance of a notice of an intention to do any of the foregoing; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of a Borrower or any of its Subsidiaries now or hereafter outstanding; and (d) any payment by a Borrower or any of its Subsidiaries of any management, consulting or similar fees to any Affiliate other than a Loan Party, whether pursuant to a management agreement or otherwise in excess of $100,000 as to any Person per Fiscal Year, or in excess of $250,000 in the aggregate in any Fiscal Year (it being understood that fees paid to directors of Recoton for services as directors or on committees of the Board are not considered as management, consulting or similar fees).              "Securities": stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing..              "Security Agreement": the Agreement, dated as of October 31, 2000 (as amended, supplemented or modified from time to time), made by the Debtors (as defined therein) in favor of the Senior Agent for the benefit of the Agents (as defined in the Senior Loan Agreement), the Senior Lenders, the Administrative Agent and the Lenders, as attached as Exhibit D hereto.              "Security Documents": the collective reference to the Guaranties, the Mortgages, the Security Agreement, the Pledge Agreements, Copyright Security Agreement, Patent Security Agreement, Trademark Security Agreement, Canada Security Agreement, and all other security documents including, without limitation, any pledge of the stock of an Foreign Subsidiary and any financing statements now or hereafter delivered to the Senior Agent purporting to grant a Lien on any assets of any Person to secure the obligations and liabilities of any Loan Party (as defined in the Senior Loan Agreement) under any Senior Loan Document or any Loan Party under any Loan Document.              "Senior Agent": Heller Financial, Inc. and its successors and assigns.              "Senior Debt": subject to the Subordination Agreement, at any time the outstanding extensions of credit under the Senior Loan Agreement.              "Senior Lenders": the financial institutions from time to time party to the Senior Loan Agreement.              "Senior Loan Agreement": the Loan Agreement dated as of October 31, 2000, among the Borrowers (as defined therein), Heller Financial, Inc., General Electric Capital Corporation as agents and the financial institutions from time to time party thereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms and the terms of the Subordination Agreement.              "Senior Loan Documents": the "Loan Documents" as defined in the Senior Loan Agreement on the date hereof.              "Solvent": with respect to the Loan Parties on a consolidated basis that they (a) own assets the fair salable value of which are greater than the total amount of their liabilities (including contingent liabilities); (b) have capital that is not unreasonably small in relation to their business as presently conducted or any contemplated or undertaken transaction; and (c) do not intend to incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due.              "Subordinated Debt": (i) the $35,000,000 of Senior Subordinated Notes of Recoton due February 4, 2004 issued pursuant to the 1999 Securities Purchase Agreement and (ii) any other debt which by its terms is subordinate and junior in right of payment to the Obligations.              "Subordination Agreement": the Subordination and Intercreditor Agreement dated as of the date hereof among the Administrative Agent and the Lenders (as Subordinated Creditors), Heller Financial, Inc., in its capacity as administrative agent on behalf of the Agents and all Senior Lenders, and the Loan Parties, substantially in the form of Exhibit C, as the same may be amended, supplemented or otherwise modified from time to time.              "Subsidiary": with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person or a combination thereof.              "Trademark Security Agreement": the Trademark Security Agreement dated as of even date herewith among the Loan Parties and the Senior Agent on behalf of the Agents, Senior Lenders, the Administrative Agent and the Lenders, as the same may be amended, supplemented restated or otherwise modified from time to time in accordance with its terms.              "Tranche A Commitment": as to any Tranche A Lender, the amount of such Lender's commitment hereunder set forth opposite such Lender's name on Schedule 1.1(A).              "Tranche B Commitment": as to any Tranche B Lender, the amount of such Lender's commitment hereunder set forth opposite such Lender's name on Schedule 1.1(B).              "Tranche A Lender": each Lender listed on Schedule 1.1(A).              "Tranche B Lender": each Lender listed on Schedule 1.1(B).              "Tranche A Loans": as defined in Section 2.1.              "Tranche B Loans": as defined in Section 2.1.              "Tranche A Note": a promissory note substantially in the form attached as Exhibit B-1 hereto.              "Tranche B Note": a promissory note substantially in the form attached as Exhibit B-2 hereto.              "Transferee": as defined in Section 9.15.                      1.2 Other Definitional Provisions. Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.                      (a) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.                      (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.                      (c) The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation."                      (d) Unless the context otherwise requires, and except as otherwise provided herein a reference to any document, instrument or agreement includes, except as otherwise specified in a particular document, instrument or agreement, any amendment or supplement to, or modification of, such document, instrument or agreement, entered into from time to time in accordance with the terms of the document, instrument or agreement.                      (e) Unless the context otherwise requires, a reference to any Person includes its successors and permitted assigns.                      (f) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS                      2.1 Term Loan Commitments. Subject to the terms and conditions hereof, (a) each Tranche A Lender severally agrees to make a term loan (each a "Tranche A Loan") to the Borrowers in an amount not to exceed the amount of the Tranche A Commitment of such Tranche A Lender and (b) each Tranche B Lender severally agrees to make a term loan (each a "Tranche B Loan" and collectively with the Tranche A Loans, the "Loans") to the Borrowers in an amount not to exceed the amount of the Tranche B Commitment of such Tranche B Lender. The Loans shall be made without the exchange of any cash by setting off the amount of the Loans to be made by each Lender against the amount owed by the Borrowers to such Lenders on the Closing Date with respect to the Existing Lender Obligations. The Loans shall at all times be ABR Loans. Any such Loans that are repaid or prepaid hereunder shall not be reborrowed.                      2.2 Procedure for Borrowing. The Borrowers shall give the Administrative Agent irrevocable telephonic notice (which notice shall be received prior to 2:00 p.m. on the Closing Date) requesting that the Lenders make the Loans on the Closing Date. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof.                      2.3 Repayment of Loans; Evidence of Debt. The Borrowers hereby unconditionally promise to pay to the Administrative Agent (1) for the account of the appropriate Tranche A Lender the principal amount of the Tranche A Loan of such Tranche A Lender and (2) for the account of the appropriate Tranche B Lender the principal amount of the Tranche B Loan of such Tranche B Lender on the Maturity Date (or on such earlier date on which the Loans become due and payable pursuant to Section 7); provided, however, that on the Maturity Date (or such earlier date on which the Loans become due and payable pursuant to Section 7) all principal and interest outstanding on all Tranche A Loans shall be paid in full before any principal and interest outstanding on any Tranche B Loans shall be paid. The Borrowers hereby further agree to pay interest on the unpaid principal amount of the Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.6. So long as the Loans have not been accelerated pursuant to Section 7.1, prior to the Maturity Date, interest payments may be made to Tranche B Lenders on the Tranche B Loans in accordance with Section 2.6 prior to repayment in full of the Tranche A Loans.                      (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrowers to such Lender resulting from each Loan of such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.                      (b) The Administrative Agent, on behalf of the Borrowers, shall maintain the Register pursuant to Section 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrowers and each Lender's share thereof.                      (c) The entries made in the Register and the accounts of each Lender maintained pursuant to Sections 2.3(b) and 9.6(d) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrowers to repay (with applicable interest) the Loans made to such Borrowers by such Lender in accordance with the terms of this Agreement.                      The Borrowers agree that, upon the request to the Administrative Agent by any Lender, the Borrowers will execute and deliver (1) to such Tranche A Lender a promissory note of the Borrowers evidencing the Tranche A Loans of such Tranche A Lender and (2) to such Tranche B Lender a promissory note of the Borrowers evidencing the Tranche B Loans of such Tranche B Lender, substantially in the forms of Exhibit B-1 and Exhibit B-2, respectively, with appropriate insertions as to date and principal amount.                      2.4 Optional Prepayments. Subject to the terms of the Subordination Agreement, the Borrowers may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least one Business Day prior thereto, which notice shall specify the date and amount of prepayment; provided, however, that the Tranche B Loans may not be prepaid pursuant hereto until all outstanding principal and interest due on the Tranche A Loans has been paid in full. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Loans shall be in an aggregate principal amount of $500,000 or a whole multiple thereof. Amounts so prepaid may not be reborrowed.                      2.5 Mandatory Prepayments. (a) Subject to the terms of the Subordination Agreement if on any date the Borrowers or any of their respective Subsidiaries shall receive any Net Proceeds or Net Securities Proceeds, then 100% of such Net Proceeds or Net Securities Proceeds shall be applied on such date toward the prepayment in full of the outstanding Loans; provided, however, that with respect to any Net Securities Proceeds generated by the InterAct International IPO, such Net Securities Proceeds shall prepay the Obligations only after the indefeasible repayment in full in cash of the Senior Debt and only in an amount equal to the amounts that would have been applied to the Senior Debt (had it been outstanding) under the terms of Sections 2.4(B)(6) of the Senior Loan Agreement as in effect on the date hereof.                      (b) Without duplication of the amounts referred to in Section 2.5(a), subject to the terms of the Subordination Agreement and after the indefeasible repayment in full in cash of the Senior Debt, the Borrowers shall prepay the Obligations in an amount equal to the amounts that would have been applied to the Senior Debt (had it been outstanding) under the terms of Sections 2.4(B) (3) through (5) of the Senior Loan Agreement as in effect on the date hereof.                      (c) Amounts prepaid under this Section 2.5 shall not be reborrowed.                      (d) All payments made pursuant to this Section 2.5 shall be applied in accordance with the order of application of proceeds set forth in Section 7.2 hereof.                      2.6 Interest Rates and Payment Dates. Each Loan shall bear interest at a rate per annum equal to the ABR plus 5.75%.                      (a) (i) If all or a portion of the principal amount of any Loan, (ii) any interest payable thereon or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans (whether or not overdue) and any such overdue amounts shall bear interest at a rate per annum which is equal to ABR plus 7.75% from the date of such non-payment until such overdue amount is paid in full (as well after as before judgment).                      (b) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (b) of this Section 2.6 shall be payable from time to time on demand.                      2.7 Computation of Interest. Interest payable pursuant hereto shall be calculated on the basis of a 365- (or 366- as the case may be) day year for the actual days elapsed. Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error.                      2.8 Pro Rata Treatment and Payments. The borrowing by the Borrowers from the Tranche A Lenders hereunder shall be made pro rata according to the respective Tranche A Commitment of the relevant Tranche A Lenders. The borrowing by the Borrowers from the Tranche B Lenders hereunder shall be made pro rata according to the respective Tranche B Commitment of the relevant Tranche B Lenders.                      (a) Each payment (including each prepayment) by the Borrowers on account of principal and interest on the Tranche A Loans shall be made pro rata according to the respective outstanding principal amounts of the Tranche A Loans then held by the Tranche A Lenders. Each payment (including each prepayment) by the Borrowers on account of principal and interest on the Tranche B Loans shall be made pro rata according to the respective outstanding principal amounts of the Tranche B Loans then held by the Tranche B Lenders. Amounts prepaid on account of the Loans may not be reborrowed.                      (b) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Payment Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension.                      (c) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment being made hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days of such required date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.                      2.9 Taxes. All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.                      (a) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:              (i) deliver to the Borrower and the Administrative Agent (A) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be;              (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and              (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender pursuant to subsection 9.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection.                      2.10 Change of Lending Office. Each Lender agrees that if it makes any demand for payment under subsection 2.9(a), it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or eliminate the need for the Borrower to make payments under subsection 2.9(a).                      2.11 Joint and Several Liability of Borrowers. Each of Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Administrative Agent and the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of Borrowers and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.                      (a) Each of Borrowers, jointly and severally, hereby, irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this subsection 2.11), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Person comprising Borrowers without preferences or distinction among them.                      (b) Each Borrower expects to derive substantial benefit, directly or indirectly, from the making of the Loans.                      (c) If and to the extent that any of Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Persons comprising Borrowers will make such payment with respect to, or perform, such Obligation.                      (d) The Obligations of each Borrower under the provisions of this subsection 2.11 constitute the absolute and unconditional, full recourse Obligations of such Borrower enforceable against such Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever.                      (e) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by the Administrative Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement). Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by the Administrative Agent or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each of Borrowers assents to any other action or delay in acting or failure to act on the part of the Administrative Agent or any Lender with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this subsection 2.11 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this subsection 2.11, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Borrower under this subsection 2.11 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each Borrower under this subsection 2.11 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or the Administrative Agent or any Lender. The joint and several liability of Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, constitution or place of formation of any Borrower or Agent or any Lender.                      (f) The provisions of this subsection 2.11 are made for the benefit of the Administrative Agent, the Lenders and their respective successors and assigns, and may be enforced by it or them from time to time against any or all of Borrowers as often as occasion therefor may arise and without requirement on the part of the Administrative Agent, any Lender, or any successor or assign to first marshal any of its or their claims or to exercise any of its or their rights against any of other Borrowers or to exhaust any remedies, available to it or them against any of the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this subsection 2.11 shall remain in effect until all of the Obligations shall have been indefeasibly paid in full in cash or otherwise fully satisfied to the satisfaction of the Administrative Agent and the Lenders. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any of the Administrative Borrowers, or otherwise, the provisions of this subsection 2.11 will forthwith be reinstated in effect, as though such payment had not been made.                      (g) Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against the other Borrowers with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Administrative Agent or the Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been indefeasibly paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to Administrative Agent or any Lender hereunder or under any other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior indefeasible payment in full, in cash, of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be indefeasibly paid in full, in cash, before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.                      (h) Each Borrower hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the Indebtedness owing by any Borrower to any other Borrower is hereby subordinated to the prior payment in full, in cash, of the Obligations. Each Borrower hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Borrower will not demand, sue for or otherwise attempt to collect any Indebtedness of any other Borrower owing to such Borrower until the Obligations shall have been indefeasibly paid in full in cash. If, notwithstanding the foregoing sentence, such Borrower shall collect, enforce or receive any amounts in respect of such Indebtedness, such amounts shall be collected, enforced and received by such Borrower as trustee for Administrative Agent, and such Borrower shall at any time following the indefeasible payment in full of the Senior Debt deliver any such amounts to Administrative Agent for application to the Obligations in accordance with subsection 7.1.                      (i) Each Borrower hereby agrees that to the extent that a Borrower shall have paid more than its proportionate share of any payment made hereunder, such Borrower shall be entitled to seek and receive contribution from and against any other Borrower hereunder in accordance with the terms and provisions of Section 2.5 of the Guaranty. Each Borrower's right of contribution shall be subject to the terms and conditions of this subsection 2.11. The provisions of this subsection 2.11(j) shall in no respect limit the obligations and liabilities of any Borrower or Guarantor to the Administrative Agent and the Lenders, and each Borrower and Guarantor shall remain liable to the Administrative Agent or the Lenders for the full amount of the Obligations.                      2.12 Recoton as Agent for Borrowers. Each Borrower hereby irrevocably appoints Recoton as the borrowing agent and attorney-in-fact for all Borrowers ("Administrative Borrower") which appointment shall remain in full force and effect unless and until Administrative Agent shall have received prior written notice signed by each Borrower that such appointment has been revoked and that another Borrower has been appointed Administrative Borrower. Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower to (i) provide all notices and instructions under this Agreement, (ii) take such action as the Administrative Borrower deems appropriate on its behalf to obtain Loans and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement and (iii) receive and distribute accordingly the proceeds from the Loans. Each Borrower hereby jointly and severally agrees to indemnify each Lender and the Administrative Agent and hold each Lender and the Administrative Agent harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lenders and the Administrative Agent by any Borrower or by any third party whosoever, arising from or incurred by reason of (a) the Lenders' or the Administrative Agent's relying on any instructions of the Administrative Borrower, or (b) any other action taken by the Lenders or the Administrative Agent hereunder or under the other Loan Documents, except that Borrowers will have no liability under this subsection 2.12 with respect to any liability that has been finally determined by final non-appealable judgment by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Lender or the Administrative Agent. SECTION 3. REPRESENTATIONS AND WARRANTIES            To induce the Administrative Agent and each Lender to enter into the Loan Documents and to make the Loans on the Closing Date, each Loan Party represents, warrants and covenants to the Administrative Agent and each Lender that the following statements are and will be true, correct and complete and, unless specifically limited, shall remain so for so long as any of the Commitments hereunder shall be in effect and until payment in full of all Obligations:                      3.1 Organization, Powers, Capitalization.                      (a) Organization and Powers. Each of the Loan Parties is a corporation duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation (which jurisdiction is set forth on Schedule 3.1(a)) and qualified to do business in all jurisdictions where such qualification is required except where failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Each of the Loan Parties (i) has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted and to enter into each Loan Document and any Related Agreements to which it is a party, (ii) subject to specific representations regarding Environmental Laws, has all material licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all material notices to, all national, federal, state, provincial, municipal or other governmental authorities having jurisdiction, to the extent required for such ownership, operation and conduct and (iii) is in compliance with its charter and bylaws or partnership, operating agreement or other organizational and governing documents, as applicable.                      (b) Capitalization. The authorized and issued capital stock or other equity interest of each of the Loan Parties and its respective Subsidiaries is as set forth on Schedule 3.1(a), including all preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Loan Party (other than the Borrower) of any shares of capital stock or other equity interest or other securities of any such entity. All issued and outstanding shares of capital stock or other equity interest of each of the Loan Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of the Senior Agent for the benefit of the Agents, the Administrative Agent and Lenders, and such shares were issued in compliance with all applicable state, provincial, federal and foreign laws concerning the issuance of securities. Each Loan Party (other than the Borrower) will promptly notify the Administrative Agent and the Senior Agent of any change in its ownership or corporate structure.                      3.2 Authorization of Borrowing, No Conflict. Each Loan Party has the power and authority to incur the Obligations and to grant liens or security interests in the Collateral. On the Closing Date, the execution, delivery and performance of the Loan Documents and each Related Agreement by each Loan Party signatory thereto will have been duly authorized by all necessary corporate and shareholder or equivalent action. The execution, delivery and performance by each Loan Party of each Loan Document and each Related Agreement to which it is a party and the consummation of the transactions contemplated by the Loan Documents by each Loan Party (i) do not contravene any applicable law, the corporate charter or bylaws (or equivalent governing and organizational documents) of any Loan Party or any material agreement or any order by which any Loan Party or any Loan Party's property is bound, (ii) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Loan Party is a party or by which such Loan Party or any of its property is bound; (iii) do not result in the creation or imposition of any Lien upon any of the property of such Loan Party other than those in favor of the Senior Agent, on behalf of the Agents, the Senior Lenders, the Administrative Agent and the Lenders, pursuant to the Security Documents and any Related Agreements; and (iv) do not require the consent or approval of any Governmental Authority or any other Person, except those which will have been duly obtained, made or complied with prior to the Closing Date. The Loan Documents are the legally valid and binding obligations of the applicable Loan Parties respectively, each enforceable against the Loan Parties party thereto, as applicable, in accordance with their respective terms.                      3.3 Financial Condition. All financial statements concerning the Borrower and its Subsidiaries furnished by or on behalf of the Borrower or its Subsidiaries to the Senior Agent pursuant to the Senior Loan Documents and the Administrative Agent pursuant to this Agreement have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as disclosed therein) and present fairly, in all material respects, the financial condition of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. The Projections (as defined in the Senior Loan Agreement on the date hereof) delivered by the Borrower and certain of its Subsidiaries pursuant to the Senior Loan Agreement, copies of which will be delivered to the Administrative Agent and the Lenders, will be prepared in light of the past operations of the business of the Borrower and its Subsidiaries, and such Projections will represent the good faith estimate of each Borrower and its senior management concerning the most probable course of its business as of the date such Projections are delivered.                      3.4 Indebtedness and Liabilities. As of the Closing Date, neither the Borrower nor any of its Subsidiaries has (a) any Indebtedness over $100,000 in the aggregate except as reflected on the most recent consolidating financial statements delivered to Administrative Agent and Lenders; or (b) any Liabilities over $100,000 in the aggregate other than as reflected on the most recent consolidating financial statements delivered to Administrative Agent and Lenders or as incurred in the ordinary course of business following the date of the most recent financial statements delivered to Administrative Agent and Lenders. The Borrower shall promptly deliver to the Senior Agent and the Administrative Agent copies of all notices given or received by Borrowers and any of its Subsidiaries with respect to noncompliance with any term or condition related to any Senior Debt, any Subordinated Debt or other Indebtedness, and shall promptly notify Administrative Agent of any potential or actual Event of Default with respect to such Senior Debt, Subordinated Debt or other Indebtedness.                      3.5 Title to Properties; Liens. Each Loan Party and each of its Subsidiaries has good, sufficient and legal title to or valid leasehold interests in, all of its respective material properties (including, without limitation, the Collateral) and assets, in each case, free and clear of all Liens except Permitted Encumbrances. As of the Closing Date, the real estate ("Real Estate") listed on Schedule 3.5 constitutes all of the real property owned, leased, subleased, or used by any Loan Party. Each Loan Party owns good and marketable fee simple title to all of its owned Real Estate, and valid and subsisting leasehold interests in all of its leased Real Estate, all as described on Schedule 3.5, and copies of all such leases or a summary of terms thereof reasonably satisfactory to the Senior Agent have been delivered to the Senior Agent. Schedule 3.5 further describes any Real Estate with respect to which any Loan Party is a lessor, sublessor or assignee as of the Closing Date.                      3.6 Litigation; Adverse Facts. As of the Closing Date, there are no judgments outstanding against any Loan Party or affecting any property of any Loan Party nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or, to the best knowledge of the Loan Parties after due inquiry, threatened against or affecting any Loan Party or any property of any Loan Party which could reasonably be expected to result in any Material Adverse Effect. Promptly upon any executive officer of the Borrower obtaining knowledge of (a) the institution of any action, suit, proceeding, governmental investigation or arbitration against or affecting any Loan Party or any property of any Loan Party not previously disclosed by the Borrowers to the Administrative Agent or (b) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting any Loan Party or any property of any Loan Party, in each case which could reasonably be expected to have a Material Adverse Effect, the Borrower will promptly give notice thereof to the Administrative Agent and provide such other information as may be reasonably available to enable the Administrative Agent and its counsel to evaluate such matter.                      3.7 Payment of Taxes. All material tax returns and reports of each Loan Party and each of its Subsidiaries required to be filed by any of them have been timely filed and are complete and accurate in all material respects. All taxes, assessments, fees and other governmental charges which are due and payable by each Loan Party and each of its Subsidiaries have been paid when due; provided that no such tax need be paid if a Loan Party or one of its Subsidiaries is contesting same in good faith by appropriate proceedings promptly instituted and diligently conducted and if such Loan Party or such Subsidiary has established appropriate reserves as shall be required in conformity with GAAP. As of the Closing Date, except as set forth in Schedule 3.7, none of the income tax returns of any Loan Party or any of their Subsidiaries are under audit and each Loan Party shall promptly notify Administrative Agent in the event that any of such Loan Party's or any of its Subsidiaries' income tax returns become the subject of an audit. No tax liens have been filed against a Loan Party or any of its Subsidiaries. The charges, accruals and reserves on the books of each Loan Party and its Subsidiaries in respect of any taxes or other governmental charges are in accordance with GAAP.                      3.8 Performance of Agreements. None of the Loan Parties and none of their respective Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material contractual obligation of any such Person, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default.                      3.9 Employee Benefit Plans. With respect to Employee Benefit Plans, each Loan Party, each of its respective Subsidiaries and each ERISA Affiliate (other than Recoton Canada) are in compliance, and will continue to remain in compliance, in all material respects with all applicable provisions of ERISA, the Code and all other applicable laws and the regulations and interpretations thereof with respect to all Employee Benefit Plans and with the terms of such Employee Benefit Plans. No material liability has been incurred by any Loan Party, any Subsidiaries or any ERISA Affiliate which remains unsatisfied for any funding obligation, taxes or penalties with respect to any Employee Benefit Plan. No ERISA Event has occurred or is reasonably likely to occur. No Loan Party or its ERISA Affiliates contribute to or have any liability with respect to any Multiemployer Plan. As to any Canadian Pension Plans (as defined in the Senior Loan Agreement) of the Borrowers or the other Loan Parties: (1) the Canadian Pension Plans are duly registered under all applicable provincial pension benefits legislation; (2) all obligations of the Borrowers or the other Loan Parties (including fiduciary, funding, investment and administration obligations) required to be performed in connection with the Canadian Pension Plans or the funding agreements therefor have been performed in a timely fashion. There are no outstanding disputes concerning the assets held pursuant to any such funding agreement; (3) all contributions or premiums required to be made by the Borrowers or the other Loan Parties to the Canadian Pension Plans have been made in a timely fashion in accordance with the terms of the Canadian Pension Plans and applicable laws and regulations; (4) all employees contributions to the Canadian Pension Plans required to be made by way of authorized payroll deduction have been properly withheld by the Borrowers or the other Loan Parties, as applicable, and fully paid into the Canadian Pension Plans in a timely fashion; (5) all reports and disclosures relating to the Canadian Pension Plans required by any applicable laws or regulations have been filed or distributed in a timely fashion; (6) there have been no improper withdrawals, or applications of, the assets of any of the Canadian Pension Plans; (7) no amount is owning by any of the Canadian Pension Plans under the Income Tax Act (Canada) or any provincial taxation statute; (8) the Canadian Pension Plans are fully funded both on an ongoing basis and on a solvency basis (using actuarial assumptions and methods which are consistent with the valuations last filed with the applicable governmental authorities and which are consistent with generally accepted actuarial principles); (9) the Borrowers, after diligent enquiry, have neither any knowledge, nor any grounds for believing, that any of the Canadian Pension Plans is the subject of an investigation, any other proceeding, an action or a claim. There exists no state of facts which after notice or lapse of time or both could reasonably be expected to give rise to any such proceeding, action or claim. The Loan Parties or any of their Subsidiaries shall not establish any new Employee Benefit Plan or amend any existing Employee Benefit Plan if the liability or increased liability resulting from such establishment or amendment is material. Schedule 3.9 lists all the Employee Benefit Plans of the Loan Parties.                      3.10 Broker's Fees. No broker's or finder's fee or commission will be payable with respect to any of the transactions contemplated hereby.                      3.11 Environmental Matters. Each Loan Party (including without limitation, all operations and conditions at or in the real estate presently owned and operated by such Loan Party) is in compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by such Loan Party of all permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof), except where failure to be in compliance could not reasonably be expected to have a Material Adverse Effect. Each Loan Party has not received any written communication, whether from a Governmental Authority, citizens group, employee or otherwise, alleging that such Loan Party is not in such compliance, and there are no past or present actions, activities, circumstances conditions, events or incidents that may prevent or interfere with such compliance in the future.                      (a) There is no Environmental Claim pending or threatened against any Loan Party or, to the best knowledge of such Loan Party, against any Person whose liability for any Environmental Claim such Loan Party has or may have retained or assumed either contractually or by operation of law, in each such case which, individually or in the aggregate, would have a Material Adverse Effect.                      (b) There are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the Release, threatened Release or presence of any Hazardous Material, which could reasonably be expected to form the basis of any Environmental Claim against any Loan Party, or to the best knowledge of such Loan Party, against any Person whose liability for any Environmental Claim such Loan Party has or may have retained or assumed either contractually or by operation of law, in each such case which would have a Material Adverse Effect.                      (c) Each Loan Party has not, and to the best knowledge of such Loan Party, no other Person has placed, stored, deposited, discharged, buried, dumped or disposed of Hazardous Materials or any other wastes produced by, or resulting from, any business, commercial or industrial activities, operations or processes, on, beneath or adjacent to any property currently or formerly owned, operated or leased by such Loan Party, except for inventories of such substances to be used, and wastes generated therefrom, in the ordinary course of business of such Loan Party (which inventories and wastes, if any, were and are stored or disposed of in accordance with applicable Environmental Laws and in a manner such that there has been no Release of any such substances), in each case, which, individually or in the aggregate, would have a Material Adverse Effect.                      (d) No Lien in favor of any Person relating to or in connection with any Environmental Claim has been filed or has been attached to any real estate owned or leased by a Loan Party.                      3.12 Solvency. From and after the date of this Agreement, the Loan Parties are and will be Solvent.                      3.13 Disclosure. No representation or warranty of a Loan Party or any of its Subsidiaries contained in this Agreement, the financial statements, the other Loan Documents, any Related Agreements, or any other document, certificate or written statement furnished to the Administrative Agent or any Lender by or on behalf of a Loan Party for use in connection with the Loan Documents or any Related Agreements contains any untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. There is no material fact known to any Loan Party that has had or could have a Material Adverse Effect and that has not been disclosed herein or in such other documents, certificates and statements furnished to the Administrative Agent or any Lender for use in connection with the transactions contemplated hereby.                      3.14 Insurance. Each Loan Party and its Subsidiaries maintains adequate insurance policies for public liability, property damage, product liability, and business interruption with respect to its business and properties and the business and properties of its Subsidiaries against loss or damage of the kinds customarily carried or maintained by corporations of established reputation engaged in similar businesses and in amounts acceptable to the Senior Agent. Schedule 3.14 lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Loan Party.                      3.15 Compliance with Laws. Each Loan Party and its Subsidiaries are not in violation of any law, ordinance, rule, regulation, order, policy, guideline or other requirement of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, including, without limitation, any Environmental Law, which violation would subject such Loan Party or its Subsidiaries, or any of their respective officers to criminal liability or have a Material Adverse Effect and no such violation has been alleged.                      3.16 Employee Matters. Except as set forth on Schedule 3.16, (a) no Loan Party nor any of such Loan Party's employees is subject to any collective bargaining agreement, (b) no petition for certification or union election is pending with respect to the employees of any Loan Party and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of any Loan Party and (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of Borrowers after due inquiry, threatened between any Loan Party and its respective employees, other than employee grievances arising in the ordinary course of business, which could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 3.16, the Borrower and its Subsidiaries are not subject to any written employment contract.                      3.17 Governmental Regulation. None of the Loan Parties is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal, state or foreign statute or regulation limiting its ability to incur indebtedness for borrowed money.                      3.18 Currency Controls. There are no controls on payments by any Governmental Authority which could interfere with payments of obligations under the Loan Documents.                      3.19 Customer and Trade Relations. As of the Closing Date, there exists no actual or, to the knowledge of any Loan Party, threatened termination or cancellation of, or any material adverse modification or change in the business relationship of any Loan Party with any of the material customers or the business relationship of any Loan Party with any supplier material to its operations.                      3.20 Subordinated Debt. As of the Closing Date, the Borrowers have delivered to the Administrative Agent a complete and correct copy of the First Amendment to Securities Purchase Agreement dated as of the date hereof among Recoton Corporation, The Prudential Insurance Company of America and ING (U.S.) Capital LLC (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). The subordination provisions of the 1999 Securities Purchase Agreement are enforceable against the holders of the Subordinated Debt by the Administrative Agent and the Lenders. All Obligations constitute senior Indebtedness entitled to the benefits of the subordination provisions contained in the 1999 Securities Purchase Agreement. Borrowers acknowledge that the Administrative Agent and each Lender are entering into this Agreement and are extending the Commitments in reliance upon the subordination provisions of the 1999 Securities Purchase Agreement and this subsection 3.20. SECTION 4. CONDITIONS PRECEDENT            The agreement of each Lender to make the Loans requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loans on the Closing Date, of the following conditions precedent:              (i) Senior Loan Agreement Conditions. All conditions set forth in Section 3 of the Senior Loan Agreement shall have been satisfied.              (ii) Repayment of Existing Lender Obligations. The obligations under the LIFO Loan Documents and the Existing Lender Obligations shall have been repaid in full and all commitments under the LIFO Loan Documents and the Existing Credit Agreement shall have been terminated.              (iii) Loan Documents. The Administrative Agent shall have received each Loan Document, executed and delivered by a duly authorized officer of the Borrower or other relevant Loan Party, with a counterpart for each Lender.              (iv) Corporate Proceedings of the Loan Parties; Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower and each Subsidiary authorizing (A) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and (B) the performance of all transactions contemplated under the Loan Documents, certified by the Secretary or an Assistant Secretary of such Loan Party as of the Closing Date, which certificate shall be (x) in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded, and (y) executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower and each Subsidiary.              (v) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a Borrowing Certificate, dated the Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower.              (vi) Fees. The Borrower shall have (A) paid to the Administrative Agent for the Administrative Agent's own account any fee due to the Administrative Agent and (B) reimbursed, with respect to invoices received at least one Business Day prior to the Closing Date, each Lender and the Administrative Agent for all its reasonable costs and expenses, including without limitation, the reasonable fees and disbursements of counsel to each Lender and the Administrative Agent (including the allocated fees and expenses of in-house counsel) as provided in Section 9.5; provided that with respect to invoices received on or after the Closing Date, the Borrower shall reimburse the entity submitting such invoice in accordance with this Agreement as soon as practicable thereafter.              (vii) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of the Closing Date as if made on and as of such date except that if they relate to an earlier time shall be true and correct as of such earlier time.              (viii) No Default. No Default or Event of Default shall have occurred and be continuing on the Closing Date or after giving effect to the extensions of credit requested to be made on such date.              (ix) Legal Opinions. The Administrative Agent shall have received, with a copy for each Lender, (i) with respect to this Agreement, the executed legal opinion of Stroock & Stroock & Lavan L.L.P., as counsel to the Borrowers and the other Loan Parties and (ii) with respect to each Security Document, a copy of each legal opinion delivered with respect thereto, which legal opinions shall be delivered for the benefit of the Senior Lenders and the Lenders. SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS; FINANCIAL COVENANTS            Borrowers covenant and agree that, so long as any of the Commitments hereunder shall be in effect and until payment in full of all Obligations, Borrowers shall perform, and shall cause each of their Subsidiaries to perform, all covenants in this Section 5.                      5.1 Financial Statements and Other Reports. Recoton will deliver to Administrative Agent the financial statements and other reports contained in the Reporting Rider attached as Schedule 5.1 hereto.                      5.2 Maintenance of Properties. Each Loan Party will and will cause each of its Subsidiaries to maintain or cause to be maintained in good repair, working order and condition all material properties used in the business of each Loan Party and its Subsidiaries and will make or cause to be made all appropriate repairs, renewals and replacements thereof.                      5.3 Compliance with Laws. Each Loan Party will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority as now in effect and which may be imposed in the future in all jurisdictions in which such Loan Party or any of its Subsidiaries is now doing business or may hereafter be doing business, other than those laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.                      5.4 Use of Proceeds and Margin Security. Borrowers shall use the proceeds of all Loans for ordinary working capital and general corporate purposes (and as described in the recitals to this Agreement) consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of any Loan shall be used by Borrowers or any of their Subsidiaries for the purpose of purchasing or carrying margin stock within the meaning of Regulation U, or in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act.                      5.5 Year 2000. Each Borrower and each of its Subsidiaries has assessed the microchip and computer-based systems and the software used in its business and has determined that such systems and software are "Year 2000 Compliant". Borrowers have not experienced any disruption in its business or any material expense as a result of its systems and software, and those of its principal vendors, suppliers, and customers, failing to be Year 2000 Compliant, and Borrowers are not aware of any circumstances that would be reasonably likely to result in a material adverse change in the business or financial condition of any Borrower or any of their Subsidiaries as a result of the failure of Borrowers or any of their Subsidiaries to have become Year 2000 Compliant prior to January 1, 2000. For purposes of this paragraph, "Year 2000 Compliant" means that all software, embedded microchips and other processing capabilities utilized by, and material to the business operations or financial condition of, each Borrower and its Subsidiaries are able to interpret, store, transmit, receive and manipulate data on and involving all calendar dates correctly and without causing any abnormal ending scenarios in relation to dates in and after the Year 2000.                      5.6 Environmental Matters.                      (a) Each Loan Party shall comply with all Environmental Laws and shall promptly take any and all necessary Cleanup action in connection with the Release or threatened Release of any Hazardous Materials on, under or affecting any real estate in order to comply with all applicable Environmental Laws and governmental authorizations, unless the failure to so comply could not reasonably be expected to have a Material Adverse Effect. In the event a Loan Party undertakes any Cleanup action with respect to the Release or threatened Release of any Hazardous Materials on or affecting any real estate, such Loan Party shall conduct and complete such Cleanup action in material compliance with all applicable Environmental Laws, and in accordance with the policies, orders and directives of all federal, state and local governmental authorities except when, and only to the extent that, such Loan Party's liability for such presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Hazardous Materials is being contested in good faith by such Loan Party.                      (b) Each Loan Party shall promptly advise the Administrative Agent in writing and in reasonable detail of (i) any Release or threatened Release of any Hazardous Materials required to be reported to any federal, state, local or foreign governmental or regulatory agency under any applicable Environmental Laws, (ii) any and all material written communications with respect to any pending or threatened Environmental Claims or Releases of Hazardous Materials, in each such case which, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect; (iii) any Cleanup performed by a Loan Party or any other Person in response to (x) any Hazardous Materials on, under or about any Real Estate, the existence of which has a reasonable possibility of resulting in an environmental liability having a Material Adverse Effect, or (y) any environmental liabilities that could have a Material Adverse Effect, and (iv) a Loan Party's discovery of any occurrence or condition on any property that could cause any Real Estate presently owned or operated by the Loan Party or its Subsidiaries or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws.                      (c) Each Loan Party shall promptly notify the Administrative Agent of (i) any proposed acquisition of stock, assets, or property by such Loan Party that could reasonably be expected to expose such Loan Party and (ii) any proposed action to be taken by such Loan Party to commence manufacturing, industrial or other similar operations that could reasonably be expected to subject such Loan Party to additional Environmental Laws or governmental authorizations, that are materially different from the Environmental Laws applicable to the operations of such Loan Party.                      Each Loan Party shall, at its own expense, provide copies of such documents or information as the Administrative Agent may reasonably request in relation to any matters disclosed pursuant to this subsection.                      5.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:              (a) the occurrence of any Default or Event of Default of which it is aware under this Agreement or under the Senior Loan Agreement;              (b) any development or event of which it is aware which has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto.                      5.8 Collateral Inspection Rights. Permit employees, representatives and/or agents of the Administrative Agent, at any time upon the Administrative Agent's reasonable request, during normal business hours, to enter into the premises of the Borrower and any of its Subsidiaries to conduct an audit, the reasonable cost and expense of which will be borne by the Borrower, of the assets of the Borrower and its Subsidiaries that comprise the Collateral.                      5.9 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all material dealing and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers of the Borrower and its Subsidiaries and with its independent certified public accountants so long as representatives of the Borrower are given the opportunity to be present.                      5.10 Use of Proceeds. Use the proceeds of the Loans only to refinance the portion of the Existing Lender Obligations that are outstanding on the Closing Date after the application of the proceeds of the Senior Loan Agreement. SECTION 6. NEGATIVE COVENANTS            Borrowers covenant and agree that so long as any of the Commitments remain in effect and until indefeasible payment in full of all Obligations and termination of all Lender Letters of Credit, each Borrower shall not and will not permit any of its Subsidiaries to:                      6.1 Indebtedness and Liabilities. Directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable, on a fixed or contingent basis, with respect to any Indebtedness except:              (a) the Obligations;              (b) Indebtedness (excluding Capital Leases) not to exceed $1,500,000 in the aggregate at any time outstanding;              (c) Indebtedness under Capital Leases (excluding Capital Leases in connection with the New Information System) in existence as of the Closing Date plus an additional $1,000,000 outstanding at any time in the aggregate; provided, however, that amounts of such Indebtedness reduced shall be allowed to be incurred again;              (d) Indebtedness in connection with the New Information System not to exceed $15,000,000 outstanding at any time in the aggregate;              (e) (i) Indebtedness of any Loan Party to any other Loan Party; (ii) Indebtedness of any Foreign Subsidiary to any Loan Party to the extent permitted under subsection 6.4(f); (iii) Indebtedness of any Foreign Subsidiary to any other Foreign Subsidiary; (iv) Indebtedness of any Loan Party to any Foreign Subsidiary; provided, however, that (1) any intercompany Indebtedness of any Loan Party permitted under this subsection 6.1(e) shall be subordinated in right of payment to the Obligations on terms satisfactory to the Senior Agent and evidenced by intercompany notes in form and substance satisfactory to the Administrative Agent, (2) all such intercompany notes shall be endorsed in blank or accompanied by note powers endorsed in blank and pledged and delivered to the Senior Agent, for the benefit of the Agents, Senior Lenders, Administrative Agent and the Lenders, (3) at the time any intercompany Indebtedness is incurred by any Loan Party pursuant to this subsection 6.1(e), and after giving effect thereto, the Loan Parties shall be Solvent; and (4) no Default or Event of Default exists or would occur and be continuing after giving effect to any proposed intercompany Indebtedness pursuant to this subsection 6.1(e).              (f) Indebtedness of Recoton in an amount not to exceed $5,518,399 plus accrued interest evidenced by a promissory note payable to the United States of America or an agency thereof delivered in settlement of obligations of Recoton arising out of the customs investigation discussed in Recoton's Form 8-K for an event which occurred on July 27, 1999;              (g) the Subordinated Debt;              (h) Indebtedness under the German Facility; provided, that the terms of the Indebtedness permitted under this subsection 6.1(h) can not be amended, increased, replaced or terminated without the prior written consent of the Required Lenders;              (i) Indebtedness existing on the Closing Date and identified on Schedule 6.1;              (j) Indebtedness of the type described in subsection 2.3(C) of the Senior Loan Agreement with respect to the issuance of debt securities of Recoton in a public offering or a private placement and which (1) the Net Securities Proceeds are used to pay down the Senior Debt or the Obligations as set forth in subsection 2.5, (2) shall be subordinate to the Obligations; (3) the terms and conditions shall be satisfactory to the Administrative Agent and the Required Lenders and (4) the documentation shall be satisfactory to the Administrative Agent and the Required Lenders;              (k) Indebtedness incurred by STD and its Subsidiaries to the extent supported by Lender Letters of Credit (as defined in the Senior Loan Agreement) (which amount as of the Closing Date is $12,400,000); and              (l) Indebtedness with respect to the obligations of Recoton Italy and Recoton UK referred to in subsection 6.2(e) and (f);              (m) Indebtedness of Recoton Italy with respect to letters of credit that are cash collateralized; and              (n) Senior Debt and any Permitted Refinancing (as defined in the Subordination Agreement).            Borrowers will not, and will not permit any of their Subsidiaries to, incur any Liabilities except for Indebtedness permitted herein and trade and other payables and expenses arising in the ordinary course of business that are paid in accordance with the prior existing practices of the Borrowers.                      6.2 Guaranties. Guaranty, endorse, or otherwise in any way become or be responsible for any obligations of any other Person, whether directly or indirectly by agreement to purchase the indebtedness of any other Person or through the purchase of goods, supplies or services, or maintenance of working capital or other balance sheet covenants or conditions, or by way of stock purchase, capital contribution, advance or loan or issuance of a letter of credit for the purpose of paying or discharging any indebtedness or obligation of such other Person or otherwise except for:              (a) endorsements of instruments or items of payment for collection in the ordinary course of business;              (b) guaranties in existence on the date hereof and listed on Schedule 6.2; provided, that any such guaranty of the Subordinated Debt is subordinated to the Obligations in a manner satisfactory to the Administrative Agent;              (c) guaranties pursuant to this Agreement or the Senior Loan Documents;              (d) guaranties of the Indebtedness permitted under subsections 6.1 (b), (c) and (d);              (e) guaranties made in the ordinary course of business by a Loan Party with respect to Recoton Italy's obligations not to exceed in the aggregate $2,000,000 for all Loan Parties;              (f) guaranties made in the ordinary course of business by a Loan Party with respect to Recoton UK's obligations not to exceed in the aggregate $2,000,000 for all Loan Parties; and              (g) guaranties made in the ordinary course of business by (i) a Loan Party with respect to obligations of another Loan Party and (ii) a Foreign Subsidiary with respect to obligations of a Loan Party or any other Foreign Subsidiary, which obligations in each case are not otherwise prohibited by this Agreement; and              (h) The guaranty made by Recoton of the obligation incurred by Recoton Germany under the German Facility.                      6.3 Transfers, Liens and Related MattersTransfers. Sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to any of the Collateral or the assets of such Person, except that Borrowers and their Subsidiaries may (i) sell or otherwise dispose of Inventory in the ordinary course of business; (ii) sell, transfer or discount without recourse, in the ordinary course of business, accounts receivables arising in the ordinary course of business in connection with the compromise or collection thereof or in connection with the receipt of proceeds under credit insurance; provided, that such proceeds are applied to prepay the Senior Debt in accordance with its terms or as otherwise provided in Section 2.5; (iii) sell or otherwise dispose of worn out, obsolete or surplus equipment and fixtures, so long as the Net Proceeds are applied to the prepayment of the Senior Debt in accordance with its terms or as otherwise provided in Section 2.5; (iv) subject to the provisions of the Security Documents, transfer, sell or assign Collateral or other assets to another Loan Party (including in connection with the dissolution, liquidation or winding up of any Subsidiary set forth on Schedule 6.6); (v) make other Asset Dispositions if all of the following conditions are met: (1) the market value of assets sold or otherwise disposed of in one or a series of related transactions does not exceed $250,000 and the aggregate market value of assets sold or otherwise disposed of in any Fiscal Year does not exceed $1,000,000; (2) the consideration received is at least equal to the fair market value of such assets; (3) the sole consideration received is cash; provided, that trade-ins for which the cash value of such trade-in is applied against the purchase price of new equipment so purchased shall be deemed to be cash; (4) the Net Proceeds of such Asset Disposition are applied to the prepayment of Senior Debt in accordance with its terms or as otherwise provided in Section 2.5; (5) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayments required above with the proceeds thereof, each Borrower is in compliance on a pro forma basis with the covenants set forth in the Financial Covenants Rider (as defined in the Senior Loan Agreement on the date hereof) recomputed for the most recently ended month for which information is available and showing it will be in compliance as of the date thereof and in the future, and is in compliance with all other terms and conditions contained in this Agreement; and (6) no Default or Event of Default shall then exist or result from such sale or other disposition; and (vii) consummate the InterAct International IPO. Notwithstanding anything to the contrary contained herein (x) Recoton shall be permitted to sell its stock (provided that the proceeds thereof shall be applied to the Senior Debt in accordance with its terms; and grant options in accordance with its existing stock option plans and warrants in its reasonable business judgment, (y) InterAct International shall be permitted to sell its stock in accordance with subsection 2.4(B)(6) of the Senior Loan Agreement; and options on the stock of InterAct International may be granted, and stock may be issued upon exercise of such options, to employees and directors of InterAct International as described in Schedule 11.1(C) of the Senior Loan Agreement and (z) subject to the provisions of the Security Documents any Subsidiary can sell stock to its parent to the extent permitted by subsection 6.4(c), (g), (h) and (i).                      (b) Liens. Except for Permitted Encumbrances, directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of the Collateral or the assets of such Person or any proceeds, income or profits therefrom.                      (c) No Negative Pledges. Enter into or assume any agreement (other than the Loan Documents, the Notes under the 1999 Securities Purchase Agreement or the Senior Loan Documents) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired.                      (d) No Restrictions on Subsidiary Distributions to Borrowers. Except as provided herein (or in the Senior Loan Documents or the 1999 Securities Purchase Agreement), directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to: (1) pay dividends or make any other distribution on any of such Subsidiary's capital stock or other equity interest owned by a Borrower or any Subsidiary of a Borrower; (2) pay any indebtedness owed to a Borrower or any other Subsidiary; (3) make loans or advances to a Borrower or any other Subsidiary; or (4) transfer any of its property or assets to a Borrower or any other Subsidiary.                      6.4 Investments and Loans. Make or permit to exist any Investments in any other Person, except:              (a) Borrowers may make and maintain Investments in Cash Equivalents consistent with the cash management system and subject to securities account control agreements in form and substance satisfactory to the Senior Agent;              (b) Foreign Subsidiaries may make and maintain Investments in Cash Equivalents;              (c) Borrowers and their Subsidiaries may (i) continue loans made to employees and former employees as set forth in Schedule 6.4(c) which loans, after the Closing Date, may not be increased or reborrowed, (ii) InterAct International may make loans to employees of InterAct International for the purpose of exercising options to purchase capital stock in InterAct International as described in Schedule 11.1(C) to the Senior Loan Agreement and (iii) the Borrowers and their Subsidiaries may make and maintain additional loans and advances to employees in an aggregate outstanding amount not in excess of $2,000,000 at any time;              (d) Borrowers and their Subsidiaries may make and maintain extensions of trade credit in the ordinary course of business;              (e) Borrowers and their Subsidiaries may make and maintain Investments existing as of the Closing Date in their respective Subsidiaries as set forth in Schedule 6.4(e);              (f) after the Closing Date, Loan Parties may make and replenish Investments in:              (1) Recoton UK up to $2,000,000 in the aggregate (including guaranties);              (2) Recoton Italy up to $2,000,000 in the aggregate (including guaranties); and              (3) Recoton Germany up to $7,000,000 in the aggregate (including guaranties);              (g) each Loan Party may make and maintain additional equity Investments in their respective Subsidiaries which are Loan Parties;              (h) Borrowers and their Subsidiaries may make additional equity Investments in existing and new Subsidiaries in connection with the STD Restructuring to the extent permitted under subsection 6.11;              (i) Foreign Subsidiaries may make and maintain additional equity Investments in their respective Subsidiaries;              (j) Borrowers and their Subsidiaries may make intercompany loans to the extent permitted pursuant to subsection 6.1(e);              (k) Borrowers and their Subsidiaries may make loans and advances to suppliers for the purchase and preparation of Inventory in the ordinary course of business not to exceed $2,000,000 at any one time outstanding; provided that no such loan or advance shall be outstanding for more than 180 days; and              (l) debt held by any Loan Party or any of their Subsidiaries in a Subsidiary may be converted to equity of that Subsidiary.                      6.5 Restricted Junior Payments. Directly or indirectly declare, order, pay, make or set apart any sum for any Restricted Junior Payment, except that: (i) Subsidiaries of any Borrower may make Restricted Junior Payments with respect to their common stock or other equity interest which Restricted Junior Payment shall be applied to pay the Senior Debt in accordance with its terms and, after payment in full thereof, the Obligations; (ii) so long as no Default or Event of Default is occurring or continuing and after giving effect to such payment no Default or Event of Default results (1) provided that, Recoton may repurchase capital stock issued to its employees, directors or consultants and the employees, directors or consultants, of its Subsidiaries, in an aggregate amount not to exceed $3,000,000 in cash during the term of this Agreement and (2) Borrowers may make regularly scheduled interest payments on the Subordinated Debt. Notwithstanding anything to the contrary contained herein, Recoton may repurchase shares of its capital stock which are surrendered by optionees which consideration for repurchase shall be made solely with the issuance of shares of additional stock issued upon the exercise of options granted under Recoton's stock option plans.                      (a) Directly or indirectly pay or prepay any account payables to STD provided, however, so long as no Default or Event of Default has then occurred or is continuing or would be caused thereby, the account payables to STD may be paid on a monthly basis, provided that all the following conditions have been met:                      (1) the payment to STD is within normal and customary terms and shall be payment for invoices that have remained unpaid for at least 90 days from the date of issuance;                      (2) the amount to be paid shall not be in excess of $25,000,000 per month; and                      (3) the amounts to be repaid shall be for account payables with respect to the purchase of Inventory from STD.                      6.6 Restriction on Fundamental Changes. (a) Enter into any transaction of merger, amalgamation or consolidation (other than a merger, amalgamation or consolidation among Loan Parties); (b) other than the Subsidiaries set forth in Schedule 6.6, liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business or assets, or the capital stock or other equity interest of any of its Subsidiaries, whether now owned or hereafter acquired other than pursuant to the establishment of Subsidiaries as described in Schedule 6.11 or the liquidation, winding up or dissolution of the Subsidiaries set forth on Schedule 6.6; provided, that, in connection with the transfer of assets or creation of Subsidiaries in connection with the transactions described on Schedule 6.11, Agents shall have received, with a copy for the Administrative Agent and the Lenders, (1) such amendments and counterparts to the Security Documents, Guaranties and the other Loan Documents as may be requested by Agents to bind newly created Subsidiaries or existing Subsidiaries to the terms of this Agreement and Related Agreements and other applicable Loan Documents, (2) copies of organizational documents, resolutions and incumbency certificates of any Persons executing any of the foregoing amendments or counterparts, and such other documents and instruments in connection therewith as may be reasonably requested by Senior Agent, and (3) a favorable opinion of counsel to Loan Parties as to due authorization, execution, and delivery of such amendments or counterparts, the enforceability thereof and such other matters as may be reasonably requested by Agents (including as to the creation and perfection of Liens pursuant to the Security Documents), all of the foregoing in form and substance reasonably satisfactory to Agents; or (d) acquire by purchase or otherwise all or any substantial part of the business or assets of, or stock or other beneficial ownership of, any Person; provided, however, that any Subsidiary may be merged, amalgamated or consolidated with or into a Borrower (provided that such Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Borrowers that are Guarantors (provided that the wholly owned Subsidiary or Subsidiaries that are Guarantors shall be the continuing or surviving corporations). It is understood and agreed that the InterAct International IPO shall be permitted if the following conditions are met:              (i) the Net Securities Proceeds of the InterAct International IPO shall be applied in payment of the Senior Debt pursuant to and, to the extent required by and in accordance with subsection 2.4(B)(6) of the Senior Loan Agreement;              (ii) Borrowers shall deliver a certificate showing pro forma compliance with the financial covenants and Minimum Excess Availability (as defined in the Senior Loan Agreement on the date hereof) after giving effect to the InterAct International IPO; and              (iii) upon the indefeasible payment in full in cash of the Senior Debt in accordance with subsection 2.4(B)(6) of the Senior Loan Agreement, InterAct International will no longer be a Loan Party and the Collateral with respect to InterAct International shall be released.                      6.7 Changes Relating to Subordinated Debt. Change or amend the terms of the Subordinated Debt (including any guaranties thereof) if the effect of such amendment is an attempt to: (a) increase the interest rate on such Indebtedness; (b) change the dates upon which payments of principal or interest are due on such Indebtedness; (c) change any event of default or add any covenant with respect to such Indebtedness; (d) change the payment or amendment and modification provisions of such Indebtedness; (e) change the subordination provisions thereof; or (f) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to Borrowers, any of their Subsidiaries, the Administrative Agent or any Lender.                      6.8 Transactions with Affiliates. Directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale or exchange of property or the rendering of any service) with any Affiliate or with any officer, director or employee of any Loan Party, except for transactions in the ordinary course of a Borrower's business and upon fair and reasonable terms and except for the transactions set forth in subsection 6.4(c) on terms which are no less favorable to such Borrower than it would obtain in a comparable arm's length transaction with an unaffiliated Person.                      6.9 Conduct of Business. From and after the Closing Date, engage in any business other than businesses of the type engaged in by Borrowers or their Subsidiaries on the Closing Date or those in or directly related to the consumer electronics industry.                      6.10 Tax Consolidations. File or consent to the filing of any consolidated income tax return with any Person other than any other Borrowers or any of their Subsidiaries, or any Guarantor, provided that in the event a Borrower files a consolidated return with any such Person, such Borrower's contribution with respect to taxes as a result of the filing of such consolidated return shall not be greater, nor the receipt of tax benefits less, than they would have been had such Borrower not filed a consolidated return with such Person.                      6.11 Subsidiaries. Other than the Subsidiaries set forth on Schedule 6.11, establish, create or acquire any new Subsidiaries.                      6.12 Fiscal Year; Tax Designation. Change its Fiscal Year; or elect to be designated as an entity other than a C corporation as defined in the Code.                      6.13 Press Release; Public Offering Materials. Without the prior written consent of the applicable party, such consent not to be unreasonably withheld or delayed, disclose the name of the Agent or any Lender in any press release or in any prospectus, proxy statement or other materials filed with any governmental entity relating to a public offering of the capital stock or other equity interest of any Loan Party except as may be required by law or regulators of applicable self regulatory organizations.                      6.14 Sale-Leasebacks. No Loan Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.                      6.15 Inactive Subsidiaries. Each of the Inactive Subsidiaries (as defined in the Senior Loan Agreement as of the date hereof) shall not conduct any business, acquire any assets or otherwise become liable for any obligation except for nominal amounts as may be required to liquidate, wind-up or dissolve such Inactive Subsidiaries.                      6.16 Parity with Senior Lender. No Loan Party shall grant any security interest in property or deliver a guarantee to the Senior Agent on behalf of the Senior Lenders to secure payment and performance of the Obligations (as defined in the Senior Loan Agreement) that is not also granted to the Senior Agent on behalf of the Lenders (as subordinated creditors) to secure payment and performance of the Obligations hereunder. SECTION 7. DEFAULT, RIGHTS AND REMEDIES                      7.1 Event of Default. "Event of Default" shall mean the occurrence or existence of any one or more of the following:                      (a) Payment. Failure to make payment of the principal of or interest on any Loan, or failure to pay any other Obligation pursuant to this Agreement within five days after such amount becomes due in accordance with this Agreement; or                      (b) Default in Other Agreements. (1) Failure of Borrowers or any of their Subsidiaries to pay when due any principal or interest on any Indebtedness (other than the Obligations) or (2) breach or default of Borrowers or any of their Subsidiaries with respect to any Indebtedness (other than the Obligations); if such failure to pay, breach or default entitles the holder or trustee to cause such Indebtedness having an aggregate principal amount in excess of $1,000,000 to become or be declared due prior to its stated maturity in each case regardless of whether such default is waived or such right is exercised by such holder or trustee; or                      (c) Breach of Certain Provisions. Failure of any Borrower to perform or comply with any term or condition contained in paragraphs (A), (B), (C) and (K) of Schedule 5.1 or subsection 5.2 or contained in Section 3 or Section 6; or                      (d) Breach of Warranty. Any representation, warranty, certification or other statement made by any Loan Party in any Loan Document or in any statement or certificate at any time given by such Person in writing pursuant or in connection with any Loan Document is false in any material respect on the date made; or                      (e) Other Defaults Under Loan Documents. Any Loan Party defaults in the performance of or compliance with any term contained in this Agreement or the other Loan Documents and such default is not remedied or waived within 15 days after receipt by such Loan Party of notice from Administrative Agent, or Required Lenders, of such default (other than occurrences described in other provisions of this subsection 7.1, for which a different grace or cure period is specified, or, if no grace or cure period is specified, constitute immediate Events of Default); or                      (f) Change in Control. (i) Any Person (other than Robert L. Borchardt and/or any trust established by him) or "group" within the meaning of Section 13(d) or 14(d) of the Exchange Act (other than a group controlled by Robert L. Borchardt or any trust established by him) (a) shall have acquired beneficial ownership of 20% or more of any outstanding class of capital stock having ordinary voting power in the election of directors of Recoton or (b) shall obtain the power (whether or not exercised) to elect a majority of Recoton's directors, (ii) the Board of directors of Recoton shall not consist of a majority of Continuing Directors ("Continuing Directors" means the directors of Recoton on the date of this Agreement and each other director, if such director's nomination for election to the Board of Directors of Recoton is recommended by a majority of then Continuing Directors), (iii) Recoton ceases to own, directly or indirectly, 100% of the other Borrowers, ReCone or Recoton Canada other than with respect to options to acquire InterAct International stock and (iv) Robert L. Borchardt or any trust established by him shall cease to beneficially own and control 4% of the outstanding capital stock of Recoton.                      (g) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court enters a decree or order for relief with respect to any Loan Party or any of its Subsidiaries in an involuntary case under any applicable bankruptcy, reorganization insolvency, receivership or other similar law now or hereafter in effect, which decree or order is not stayed or other similar relief is not granted under any applicable federal, provincial or state law; or (2) the continuance of any of the following events for 60 days unless dismissed, bonded or discharged: (a) an involuntary case petition or proceeding is commenced against any Loan Party or any of its Subsidiaries, under any applicable bankruptcy, reorganization, insolvency, arrangement, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity); or (b) a receiver, receiver-manager, administrator, manager, liquidator, sequestrator, trustee, custodian or other fiduciary having similar powers over any Loan Party or any of its Subsidiaries, or over all or a substantial part of their respective property, is appointed; or                      (h) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) Any Loan Party or any of its Subsidiaries commences a voluntary petition, proceeding or case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity), or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, receiver-manager, administrator, manager, trustee or other custodian for all or a substantial part of its property; or (2) any Loan Party or any of its Subsidiaries makes any assignment for the benefit of creditors; (3) the board of directors of any Loan Party or any of its Subsidiaries adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 7.1(h); or (4) any Loan Party or any of its Subsidiaries is unable, or admits in writing its inability to pay its debts as they mature, or commits any other act of bankruptcy; or                      (i) Liens. Any lien, levy or assessment is filed or recorded with respect to or otherwise imposed upon all or any part of the Collateral or the assets of any Loan Party or any of its Subsidiaries by the United States or any foreign government or any department or instrumentality thereof or by any federal, state, provincial, county, municipality or other governmental agency (other than Permitted Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or discharged within 10 days; or                      (j) Judgment and Attachments. Any money judgment, writ or warrant of attachment, or similar process involving (1) an amount in any individual case in excess of $2,000,000 or (2) an amount in the aggregate at any time in excess of $2,000,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against any Loan Party or any of its Subsidiaries or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of 30 days, but in any event not later than 5 days prior to the date of any proposed sale thereunder; or                      (k) Dissolution. Any order, judgment or decree is entered against any Loan Party or any of its Subsidiaries decreeing the dissolution or winding up or split up of such Loan Party or that Subsidiary and such order remains undischarged or unstayed for a period in excess of 20 days, but in any event not later than 5 days prior to the date of any proposed dissolution or split up or winding up; or                      (l) Solvency. The Loan Parties cease to be Solvent or admit in writing their present or prospective inability to pay their debts as they become due; or                      (m) Injunction. Any Loan Party or any of its Subsidiaries is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency (including, but not limited to, those of any foreign country) from conducting all or any material part of the business of Borrowers' and their Subsidiaries, on a consolidated basis, and such order continues for 30 days or more; or                      (n) Invalidity of Loan Documents. Any of the Loan Documents for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void, or any Loan Party denies that it has any further liability under any Loan Documents to which it is party, or gives notice to such effect; or                      (o) Failure of Security. Senior Agent, on behalf of Agents, Senior Lenders, the Administrative Agent and the Lenders, does not have or ceases to have a valid and perfected first priority security interest in the Collateral (other than in de minimis amounts and subject to Permitted Encumbrances), in each case, for any reason other than the failure of Senior Agent or any Senior Lender to take any action within its control; or                      (p) Damage, Strike, Casualty. Any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than ten consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities at any facility of any Loan Party or any of its Subsidiaries if any such event or circumstance could reasonably be expected to have a Material Adverse Effect; or.                      (q) Licenses and Permits. The loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any Borrower or any of its Subsidiaries, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect; or.                      (r) Forfeiture. There is filed against any Loan Party or any of its Subsidiaries any civil or criminal action, suit or proceeding under any federal or state racketeering statute (including, without limitation, the Racketeer Influenced and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is not dismissed within 120 days; and (2) could reasonably be expected to result in the confiscation or forfeiture of any material portion of the Collateral; or.                      (s) Currency Controls. There are controls on payments imposed by a Governmental Authority which interfere with the payment of obligations under the Loan Documents; or                      (t) Environmental Matters. Except as to any of the following for which such Loan Party has provided timely notice and has been granted a reasonable period to cure (but only for the duration of such cure period): (i) Any Environmental Claim shall have been asserted against a Loan Party which could reasonably be expected to have a Material Adverse Effect, (ii) any Release or threatened Release of any Hazardous Materials on, under or affecting any real estate shall have occurred, and such event could reasonably form the basis of an Environmental Claim against a Loan Party which, if determined adversely, could reasonably be expected to have a Material Adverse Effect, or (iii) a Loan Party shall have failed to obtain any governmental authorization necessary under any Environmental Law for the management, use, control, ownership or operation of its business or any of the real estate or any such governmental authorization shall be revoked, terminated, modified, or otherwise cease to be in full force and effect, in each case, if the existence of such condition could reasonably be expected to have a Material Adverse Effect; or                      (u) Default Under German Facility. There shall occurred a default under the loan documents evidencing the German Facility and to the extent a cure period is provided under such documents with respect to such default, such default shall continue unremedied for such period of time during which cure of such default is permitted thereunder; or                      (v) Recoton Germany. Recoton Germany shall have failed to comply with the terms of subsection 5.12 of the Senior Loan Agreement; or                      (w) Employee Benefit Plans. There occurs one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of any Loan Party or any of its ERISA Affiliates in excess of $500,000 during the term of this Agreement; or there exists, an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) which exceeds $500,000; or                      (x) Foreign Exchange. There occurs a fluctuation in the foreign exchange affecting the Deutsche Mark which results in the aggregate amount of commitments outstanding under the German Facility and the Senior Loan Documents and the aggregate amounts outstanding hereunder to exceed $275,000,000; or                      (y) Resignation of Borrowers' Accountants. The Borrowers' Accountants (as defined in the Senior Loan Agreement on the date hereof) shall resign because of impropriety or irregularity in the conduct of the Loan Parties or their Subsidiaries.                      (z) Income Tax Act. A requirement from the Minister of National Revenue for payment pursuant to Section 224 or any successor section of the Income Tax Act (Canada) or Section 317, or any successor section of the Excise Tax Act (Canada) or any comparable provision or similar legislation shall have been received by any Agent or any Senior Lender or any other Person in respect of any Borrower or its Subsidiaries or otherwise issued in respect of any Borrower or any of its Subsidiaries. Then, (1) upon the occurrence of any Event of Default described in the foregoing paragraphs (g) and (h), all Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Borrowers and (2) upon the occurrence and during the continuance of any other Event of Default, subject to the terms of the Subordination Agreement, and with the consent of the Required Lenders the Administrative Agent may, and upon the request of the Required Lenders the Administrative Agent shall, by notice to the Borrowers, declare all or any portion of the Obligations to be, and the same shall forthwith become, immediately due and payable.                      7.2 Application of Payments and Proceeds. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall apply any payments or proceeds received by it pursuant to Section 2.7 of the Subordination Agreement as follows:                      first, to the payment in full of all unpaid fees and expenses of the Administrative Agent incurred in connection with the enforcement of the Administrative Agent's and the Lenders' rights hereunder;                      second, to the payment in full of all Obligations relating to the Tranche A Loans, including principal and accrued but unpaid interest with respect to the Tranche A Loans, and if such moneys shall be insufficient to pay such amounts in full, then ratably (without priority of any one over the other) to the holders of such Tranche A Loans in proportion to the unpaid amounts thereof;                      third, to the payment in full of all Obligations relating to the Tranche B Loans, including principal and accrued but unpaid interest with respect to the Tranche B Loans, and if such moneys shall be insufficient to pay such amounts in full, then ratably (without priority of any one over the other) to the holders of such Tranche B Loans in proportion to the unpaid amounts thereof;                      fourth, to pay to the Borrowers or the applicable Loan Party, or their respective representatives as a court of competent jurisdiction may direct, any surplus remaining. SECTION 8. THE ADMINISTRATIVE AGENT                      8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.                      8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.                      8.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.                      8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.                      8.5 Notice of Default; Notices Under Subordination Agreement. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or any Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.                      (b) The Administrative Agent shall promptly deliver to the Lenders any notice that it receives pursuant to the Subordination Agreement.                      8.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.                      8.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrowers and without limiting the obligation of the Borrowers to do so), ratably according to their respective Commitments in effect on the date on which indemnification is sought (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Commitments immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements which are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section 8.7 shall survive the payment of the Loans and all other amounts payable hereunder. The Administrative Agent shall have the right to deduct any amount owed to it by any Lender under this Section 8.7 from any payment made by it to such Lender hereunder.                      8.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though the Administrative Agent was not the Administrative Agent. With respect to its Loans made or renewed by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity.                      8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders and the Borrowers. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After the Administrative Agent's resignation as the Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement and the other Loan Documents. SECTION 9. MISCELLANEOUS                      9.1 Amendments and Waivers. Neither this Agreement, any other Loan Document (other than the Subordination Agreement, which shall be governed by the terms thereof), nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or (with the written consent of the Required Lenders) the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders, or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the scheduled or final date of maturity of any Loan, extend any scheduled date of payment or reduce the stated rate of any interest payable hereunder, increase the amount or extend the expiration date of any Lender's Commitment, modify the provisions of Section 2.8 with regard to the pro-rata treatment of Lenders or modify Section 3.1 of the Subordination Agreement in each case without the consent of each Lender directly affected thereby; (ii) amend, modify or waive any provision of this Section 9.1, or reduce any percentage specified in the definition of Required Lenders, consent to the release of all or substantially all of the Collateral, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all Lenders; or (iii) amend, modify or waive any provision of Section 8 without the written consent of the Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.                       (a) Notwithstanding anything to the contrary set forth in this Agreement:                       (1) Any amendment, supplement, modification, consent or waiver in respect of the observance or performance of the covenants set forth Sections 5, 6 and 7 of the Senior Loan Agreement shall be binding on each of the parties hereto and shall be deemed an amendment, supplement, modification, consent or waiver of or the corresponding provision of to this Agreement if such amendment, supplement, modification, consent or waiver is executed and delivered in accordance with the terms of Section 9.4 of the Senior Loan Agreement.                       (2) Any waiver of the occurrence of a Default or Event of Default under the Senior Loan Agreement shall be deemed a waiver of the corresponding Default or Event of Default of Section 7.1 hereof, and shall be binding on each of the parties hereto and shall be deemed an amendment, supplement, modification, consent or waiver of or to this Agreement if such amendment, supplement, modification, consent or waiver is executed and delivered in accordance with the terms of Section 9.4 of the Senior Loan Agreement, provided that no such waiver shall be effective to waive a Default or Event of Default in pursuant to Section 7.1(a) hereof without the written consent of each Lender.                      (3) Upon the occurrence of a Permitted Refinancing (as defined in the Subordination Agreement) the covenants and Events of Default set forth herein shall be modified in a manner consistent with any covenants and events of default contained in any agreement providing for such refinancing.                      9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by registered or certified mail, five days (or ten days, in the case of mailings between locations inside and outside of the United States) after being deposited in the mails, postage prepaid (airmail, in the case of mailings between locations inside and outside of the United States), or (c) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule 9.2 in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto:    The Borrower: Recoton Corporation 2950 Lake Emma Road Lake Mary, Florida 32746 Attention: Arnold Kezsbom Fax: 407-444-0559 With a copy to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038 Fax: 212-806-6006 Attn: Theodore S. Lynn, Esq.    The Administrative    Agent: The Chase Manhattan Bank 241-02 Northern Boulevard, 3rd Floor Douglaston, New York 11362 Attention: Recoton Account Officer Fax: 718-279-8326 with a copy to: Mr. Roger Odell The Chase Manhattan Bank 380 Madison Avenue, 9th Floor New York, New York 10017    with a copy to: HELLER FINANCIAL, INC. 500 West Monroe Chicago, Illinois, 60661 Attn: Account Manager - Heller Corporate Finance - Recoton Corporation Fax/Telecopy No.: (312) 441-7367 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders shall not be effective until received.                      9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of either the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.                      9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.                      9.5 Payment of Expenses. The Borrower and each other Loan Party agree (a) to pay or reimburse each of the Administrative Agent and each Lender for all their reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, including, without limitation, the reasonable fees and disbursements of professionals to the Administrative Agent or counsel to any such Lender, (b) to pay or reimburse the Administrative Agent, The Prudential Insurance Company of America and John Hancock Life Insurance Company for all their reasonable out of pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the other Loan Documents and any other documents prepared in connection therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of professionals to the Administrative Agent and counsel to The Prudential Insurance Company of America and John Hancock Life Insurance Company, (c) to pay or reimburse the Administrative Agent and each Lender for all their reasonable costs and expenses incurred in connection with the enforcement or preservation, whether in a bankruptcy or insolvency proceeding or otherwise, of any rights under this Agreement, the other Loan Documents and any such other documents including, without limitation, the reasonable fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to the Administrative Agent and each Lender, (d) to pay, indemnify, and hold the Administrative Agent and each Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (e) to pay, indemnify, and hold the Administrative Agent and each Lender, their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the violation of, noncompliance with or liability under, any environmental law applicable to the operations or properties of the Borrower, any of its Subsidiaries, all the foregoing in this clause (e), collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to any indemnitee with respect to indemnified liabilities to the extent such indemnified liabilities result from the gross negligence or willful misconduct of such indemnitee. The agreements in this subsection shall survive repayment of the Obligations and all other amounts payable under the Loan Documents.                      9.6 Successors and Assigns; Participations and Assignments. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender.                      (a) Any Lender may, without the consent of the Borrower, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final maturity of the Loans, in each case to the extent subject to such participation. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 9.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.8 and 2.9 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 2.9, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.                      (b) Any Lender (an "Assignor") may, in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Administrative Agent (which shall not be unreasonably withheld or delayed), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit A, executed by such Assignee, such Assignor and the Administrative Agent and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that the Administrative Agent's consent shall not be required with respect to assignments made by any Lender that is an insurance company; and provided, further, that, unless otherwise agreed by the Administrative Agent, no such assignment (other than to an Assignee that is a Lender or any affiliate thereof or an assignment of all of an Assignor's interests under this Agreement) shall (i) be in an aggregate principal amount of less than $1,000,000 or (ii) result in such Assignor's aggregate Loans then outstanding being less than $1,000,000. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment and/or Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto).                      (c) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time and any Notes evidencing such Loans. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of the Loan and any Note evidencing such Loan recorded therein for all purposes of this Agreement. Any assignment of any Loan whether or not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly so provide). Any assignment or transfer of all or part of a Loan evidenced by a Note shall be registered on the Register only upon surrender for registration of assignment or transfer of the Note evidencing such Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the designated Assignee and the old Notes shall be returned by the Administrative Agent to the Borrower marked "cancelled". The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.                      (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof or a Person under common management with such Lender, by the Borrower, the Administrative Agent and the Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,500 by the Assignee (except that no such registration and processing fee shall be payable in the case of an Assignee which is already a Lender or is an affiliate of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Note of the assigning Lender) a new Note to the order of such Assignee in an amount equal to the Commitment and/or applicable Loans, as the case may be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment and/or Loans, as the case may be, upon request, a new Note to the order of the assigning Lender in an amount equal to the Commitment and/or applicable Loans, as the case may be, retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Note replaced thereby.                      (e) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law.                      9.7 Adjustments; Set-off. Subject to the terms of the Subordination Agreement, if any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7.1(g) or (h), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans owing to such other Lender, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.                      (a) In addition to any rights and remedies of the Lenders provided by law and, subject to the terms of the Subordination Agreement, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.                      9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.                      9.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.                      9.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.                      9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.                      9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:           (a) submits for itself and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;           (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;           (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;           (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and           (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 9.12 any special, exemplary, punitive or consequential damages.                      9.13 Acknowledgements. The Borrower hereby acknowledges that:            (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;           (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and           (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.                      9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.                      9.15 Confidentiality. The Administrative Agent and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each, a "Transferee") or prospective Transferee which agrees to comply with the provisions of this Section, (c) to the employees, directors, agents, attorneys, accountants and other professional advisors of such Lender or its affiliates, (d) upon the request or demand of any Governmental Authority having jurisdiction over the Administrative Agent or such Lender, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) which has been publicly disclosed other than in breach of this Section 9.15, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document.                      9.16 Joint and Several Obligations. Notwithstanding anything to the contrary contained herein or in any other Loan Documents, the Borrower and the Guarantors are jointly and severally responsible for their respective agreements, covenants, representations, warranties and obligations contained and set forth in this Agreement or in any other Loan Document to which they are a party.                      9.17 Legend. This instrument and the rights and obligations evidenced hereby are subordinate in the manner and the extent set forth in that certain Subordination and Intercreditor Agreement (the "Subordination Agreement") dated as of October 31, 2000 among the parties set forth in the signature pages under the name "Subordinated Creditors, RECOTON CORPORATION, a New York corporation ("Recoton"), INTERACT ACCESSORIES, INC., a Delaware corporation ("InterAct"), RECOTON AUDIO CORPORATION, a Delaware corporation ("Audio"), AAMP OF FLORIDA, INC., a Florida corporation ("AAMP"), and RECOTON HOME AUDIO, INC., a California corporation (RHAI"); (Recoton, InterAct, Audio, AAMP and RHAI are collectively referred to, as "Borrowers"), CHRISTIE DESIGN CORPORATION, Delaware corporation ("CDC"), RECOTON INTERNATIONAL HOLDINGS, INC., a Delaware corporation ("RHI"), RECOTON EUROPEAN HOLDINGS, INC., a Delaware corporation ("REH"), RECONE, INC., a Delaware corporation (RECONE) and RECOTON JAPAN INC., RECONE, INC., a Delaware corporation (RECONE) and RECOTON JAPAN INC., and Illinois corporation (JAPAN); (CDC, RHI, REH, RECONE and JAPAN are collectively referred to , as Guarantors"; the Borrowers and the Guarantors are collectively, as Loan Parties"); and HELLER FINANCIAL, INC., a Delaware corporation, as Senior Agent and as Administrative Agent, to the indebtedness (including interest) owed by the Loan Parties pursuant to that certain Loan Agreement dated as of the date hereof among the Loan Parties, Administrative Agent and General Electric Capital Corporation, as Collateral Agent, and the lenders from time to time party thereto, as such Loan Agreement has been and hereafter may be amended, supplemented or otherwise modified from time to time and to indebtedness refinancing the indebtedness under that agreement as contemplated by the Subordination Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination Agreement.                      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.         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.   RECOTON CORPORATION INTERACT ACCESSORIES, INC. RECOTON HOME AUDIO, INC. RECOTON AUDIO CORPORATION AAMP OF FLORIDA, INC., each of the foregoing as a Borrower By:  /s/ Arnold Kezsbom                                                 Name: Arnold Kezsbom       Title: Senior Vice President--Finance of                 Recoton Corporation and Vice President                 of all other Borrowers   CHRISTIE DESIGN CORPORATION RECOTON INTERNATIONAL HOLDINGS, INC. RECOTON EUROPEAN HOLDINGS, INC. RECOTON JAPAN, INC. RECOTON CANADA, LTD. RECONE, INC., each of the foregoing in its capacity as Guarantor By:  /s/ Arnold Kezsbom                                                     Name: Arnold Kezsbom           Title: Vice President   THE CHASE MANHATTAN BANK, as Administrative Agent and a Lender By:  /s/ R. A. Odell                                                     Name: R. A. Odell           Title: Managing Director   HARRIS TRUST AND SAVINGS BANK, as a Lender By:  /s/ Janet Maxwell-Wickett                                                     Name: Janet Maxwell-Wickett           Title: Vice President   HSBC BANK U.S.A. (formerly known as MARINE MIDLAND BANK), as a Lender By:  /s/ Joseph E. Salonia                                                     Name: Joseph E. Salonia           Title: Vice President   FIRST UNION NATIONAL BANK, as a Lender By:  /s/ James R. Connors                                                     Name: James R. Connors           Title: Senior Vice President   THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, as a Lender By:  /s/ Gwendolyn S. Foster                                                     Name: Gwendolyn S. Foster           Title: Vice President   JOHN HANCOCK LIFE INSURANCE COMPANY, as a Lender By:  /s/ Marlene J. DeLeon                                                     Name: Marlene J. DeLeon           Title: Director   JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY, as a Lender By:  /s/ Marlene J. DeLeon                                                     Name: Marlene J. DeLeon           Title: Authorized Signatory   MELLON BANK, N.A., AS TRUSTEE FOR THE LONG-TERM INVESTMENT TRUST, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company), as a Lender By:  /s/ Bernadette Rist                                                     Name: Bernadette Rist           Title: Authorized Signatory   MELLON BANK, N.A. AS TRUSTEE FOR BELL ATLANTIC MASTER TRUST, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company), as a Lender By:  /s/ Bernadette Rist                                                     Name: Bernadette Rist           Title: Authorized Signatory   THE NORTHERN TRUST COMPANY, AS TRUSTEE OF THE LUCENT TECHNOLOGIES INC. MASTER PENSION TRUST, as a Lender BY: John Hancock Life Insurance Company, as Investment Manager By:  /s/ Scott S. Hartz                                                     Name: Scott S. Hartz           Title: Managing Director   INVESTORS PARTNER LIFE INSURANCE COMPANY, as a Lender By:  /s/ Marlene J. DeLeon                                                     Name: Marlene J. DeLeon           Title: Authorized Signatory   SUNTRUST BANK, as a Lender By:  /s/ Byron P. Kurtgis                                                     Name: Byron P. Kurtgis           Title: Director SCHEDULE 1.1(A) TRANCHE A TERM LOAN COMMITMENT LENDER    COMMITMENT AMOUNT The Chase Manhattan Bank    $2,283,766.05 First Union National Bank   1,321,031.10 HSBC Bank U.S.A.   1,319,586.15 Harris Trust and Savings Bank   914,611.20 Sun Trust Bank   1,319,586.15 The Prudential Insurance Company of America   3,217,015.34 John Hancock Life Insurance Company   1,570,968.05 John Hancock Variable Life Insurance Company   216,685.25 Investors Partner Life Insurance Company   54,171.24 Mellon Bank, N.A., as Trustee for Long-Term Investment Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company)   34,670.33 Mellon Bank, N.A., as Trustee for Bell Atlantic Master Pension Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company)    81,256.48 The Northern Trust Company, as Trustee of the Lucent Technologies, Inc. Master Pension Trust.    73,673,05 TOTAL:    $12,407,056.40 SCHEDULE 1.1(B) TRANCHE B TERM LOAN COMMITMENT LENDER    COMMITMENT AMOUNT The Prudential Insurance Company of America    $1,708,944.46 John Hancock Life Insurance Company    683,626.00 John Hancock Variable Life Insurance Company    94,293.25 Investors Partner Life Insurance Company    23,573.31 Mellon Bank, N.A., as Trustee for Long-Term Investment Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company)    15,086.92 Mellon Bank, N.A., as Trustee for Bell Atlantic Master Pension Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company)    35,359.97 The Northern Trust Company, as Trustee of the Lucent Technologies, Inc. Master Pension Trust.    32,059.70 TOTAL:    $2,592,943.60 Schedule 5.1 REPORTING RIDER                     (a) Monthly Financials.               (i) As soon as available and in any event no later than thirty (30) days after the end of each April, May, July, August, October and November, Recoton will deliver to the Administrative Agent (1) the consolidated and consolidating balance sheet of Recoton and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Recoton and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.               (ii) As soon as available and in any event no later than sixty (60) days after the end of each January and February, Recoton will deliver to the Administrative Agent (1) the consolidated and consolidating balance sheet of Recoton and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Recoton and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.               (iii) No later than ten (10) days after the submission of the monthly financial statements required under clauses A (i) and A (ii) above, Recoton will deliver to The Administrative Agent a statement of cash flow from the beginning of the then current Fiscal Year to the end of such month. Unless otherwise requested by the Administrative Agent there will not be a required submission of monthly financials for any month that ends on a calendar quarter.                      (b) Quarterly Financials.               (i) As soon as available and in any event no later than forty-six (46) days (or if the 45th day is not a Business Day, the day immediately succeeding the date on which the SEC filing for such period is due) after the end of each of the first three calendar quarters of a Fiscal Year, Recoton will deliver to the Administrative Agent (1) the consolidated and consolidating balance sheet of Recoton and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such quarter of a Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Recoton and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.               (ii) As soon as available and in any event no later than sixty-five (65) days after the end of the fourth calendar quarter of a Fiscal Year, Recoton will deliver to the Administrative Agent the consolidated and consolidating balance sheet of Recoton and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders' equity and cash flow from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Recoton and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.               (iii) Together with the delivery of all financial statements pursuant to clause (B)(i), Recoton shall deliver to the Administrative Agent a copy of the officer's certificate delivered to the Senior Agent executed by the chief executive officer, the chief financial officer or the chief operating officer certifying that Borrowers' Accountants (as such term is defined in the Senior Loan Agreement) have reviewed all such Quarterly Financials.                      (c) Year-End Financials. As soon as available and in any event no later than ninety-one (91) days (or if the 90th day is not a Business Day, the day immediately succeeding the date on which the filing with the Securities and Exchange Commission for such period is due) after the end of each Fiscal Year, Recoton will deliver to the Administrative Agent: (1) the consolidated balance sheet of Recoton and its Subsidiaries as at the end of such year and the related consolidated statements of income, stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the consolidated outstanding Indebtedness of Recoton and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan; and (3) a report with respect to the financial statements from Borrowers' Accountants, which report shall be unqualified as to going concern and scope of audit of Recoton and its Subsidiaries and shall state that (a) such consolidated financial statements present fairly the consolidated financial position of Recoton and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with accounting principles generally accepted in the United States of America and (b) that the examination by Borrowers' Accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; and (4) copies of the consolidating financial statements of Recoton and its Subsidiaries, including (a) consolidating balance sheets of Recoton and its Subsidiaries as at the end of such Fiscal Year showing inter company eliminations and (b) related consolidating statements of income of Recoton and its Subsidiaries showing inter company eliminations.                      (d) Accountants' Certification and Reports. Together with each delivery of consolidated financial statements of Recoton and its Subsidiaries pursuant to paragraph (C) above, Recoton will deliver to the Administrative Agent a copy of the written statement by Borrowers' Accountants delivered to the Senior Agent stating whether, in connection with the examination, any condition or event that constitutes a Default or an Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof. Promptly upon receipt thereof, Recoton will deliver to The Administrative Agent copies of all significant reports submitted to the Recoton by Borrowers' Accountants in connection with each annual, interim or special audit of the financial statements of the Recoton made by Borrowers' Accountants, including the comment letter submitted by Borrowers' Accountants to management in connection with their annual audit.                      (e) Compliance Certificate.               (i) Together with the delivery of each set of financial statements referenced in clauses (B)(i) and (C) above, Recoton will deliver to the Administrative Agent a copy of the Compliance Certificate delivered to the Senior Agent in substantially the form attached to the Senior Loan Agreement and addressed to the Administrative Agent (the "Compliance Certificate"), including copies of the calculations and work-up employed to determine Recoton's compliance or noncompliance with the financial covenants set forth in the Financial Covenants Rider. Together with the delivery of each set of financial statements referenced in clauses (A), (B)(i) and (C) above, Recoton will confirm in the Compliance Certificate that the accounts payables to third parties have been paid for the last ninety (90) days in the ordinary course of business consistent with historical customary payment practices and that the Recoton is in compliance with all other covenants in the Loan Agreement.                      (f) Borrowing Base Certificates, Registers and Journals.               (i) [Intentionally Omitted]               (ii) [Intentionally Omitted]               (iii) An executive officer of the Administrative Borrower shall deliver to the Administrative Agent a copy of the Consolidating Borrowing Base Certificate (as defined in the Senior Loan Agreement) ("Monthly Borrowing Base Certificate") substantially in the form of Exhibit B-2 to the Senior Loan Agreement when delivered to Senior Agent in accordance with the Senior Loan Agreement.                      (g) [Intentionally Omitted]                      (h) Management Report. Together with each delivery of financial statements of Recoton and its Subsidiaries pursuant to paragraphs (B) and (C) above, Recoton will deliver to the Administrative Agent the corresponding form 10-Q or 10-K, as the case may be, which forms will include management's analysis of the Recoton's financial performance on both a consolidated basis and by business segment. Management will also provide a copy of the report being provided to the Senior Agent comparing the financial results for the quarter than ended to the corresponding figures from the most recent Projections for the current Fiscal Year delivered to the Senior Agent pursuant to paragraph (L) below. The information above shall be certified by the chief financial officer, chief operating officer or chief executive officer of Recoton and shall be presented in summary comparison form on a consolidated basis setting forth the differences in actual and projected revenue, gross profit, operating expenses and net income for such period. Recoton will also provide a copy of any detailed comparisons of the foregoing information provided to the Senior Agent.                      (i) [Intentionally Omitted]                      (j) Government Notices. Promptly after the receipt thereof, Recoton will deliver to the Administrative Agent copies of all notices, requests, subpoenas, inquiries or other writings received from any governmental agency concerning any Employee Benefit Plan, the violation or alleged violation of any Environmental Laws, the storage, use or disposal of any Hazardous Material, the violation or alleged violation of the Fair Labor Standards Act or Recoton's non-payment of any taxes including any tax audit if the failure to timely comply or respond to any such notices, requests, subpoenas, inquiries or other writings would give such governmental agency the right to seek to impose a lien on or take other action with respect to any of Recoton's assets.                      (k) Events of Default, etc. Promptly upon an executive officer of Recoton obtaining knowledge of any of the following events or conditions, Recoton shall deliver to the Administrative Agent a certificate of Recoton's chief executive officer, chief operating officer or chief financial officer specifying the nature and period of existence of such condition or event and what action the Recoton has taken, is taking and proposes to take with respect thereto: (1) any condition or event that constitutes an Event of Default or Default; or (2) any Material Adverse Effect.                      (l) Projections. As soon as provided to the Senior Agent, Recoton will deliver to the Administrative Agent all Projections provided to the Senior Agent.                      (m) Subordinated Debt and Equity Notices. As soon as practicable, Recoton will deliver to the Administrative Agent copies of all material written notices given or received by any Loan Party with respect to any Subordinated Debt or capital stock or equity interest of such Loan Party, and, within two Business Days after any Loan Party obtains knowledge of any matured or unmatured event of default with respect to any Subordinated Debt, notice of such event of default.                      (n) Litigation. Promptly upon learning thereof, Recoton will deliver to The Administrative Agent in writing notice of any litigation commenced or threatened against any Loan Party that (i) seeks damages in excess of $2,000,000,(ii) seeks injunctive relief, (iii) is asserted or instituted against any Employee Benefit Plan, its fiduciaries or its assets or against any Loan Party or ERISA Affiliate in connection with any Employee Benefit Plan, (iv) alleges criminal misconduct by any Loan Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Claims or (vi) involves any product recall.                      (o) Lease Default Notices. Within two Business Days after receipt thereof, the Administrative Borrower will deliver to the Administrative Agent copies of (i) any and all default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (ii) such other notices or documents as the Administrative Agent may reasonably request.                      (p) SEC Filings and Press Releases. Promptly upon their becoming available, Recoton will deliver to the Administrative Agent copies of: (i) all financial statements, reports, notices and proxy statements made publicly available by any Loan Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Loan Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Loan Party to the public concerning material changes or developments in the business of any such Person.                      (q) Other Information. With reasonable promptness, Recoton will deliver to the Administrative Agent such other information and data as the Administrative Agent may reasonably request from time to time.                      (r) Casualty. The Administrative Borrower shall promptly notify the Administrative Agent of any loss, damage, or destruction to the Collateral in the amount of $250,000 or more, whether or not covered by insurance.                      (s) ERISA Matters. Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, Recoton will deliver to the Administrative Agent a written notice specifying the nature thereof, what action any Loan Party or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation with respect thereto. SCHEDULE 9.2 ADDRESSES FOR NOTICE First Union National Bank Overnight Delivery 800 No. Magnolia Ave, Suite 700 Orlando, FL 32803 Attention: James R. Connors, Sr. Vice President Tel: 407-649-5620 Fax: 407-649-5628 U.S. Mail Delivery: P.O. Box 1000 (SL 2202) Orlando, Florida 32802 HSBC Bank USA One HSBC Center, 26th Floor Buffalo, NY 14203 Attention: Gerald A. Nagle, Sr. Vice President & Manager Special Credits Unit Tel: 716-841-1153 Fax: 716-841-1968 Harris Trust and Savings Bank 111 West Monroe Street, 4th Floor Chicago, IL 60603 Attention: Diana Williams Tel: 312-461-2334 Fax: 312-765-1724 The Prudential Insurance Company of America Address for all notices relating to payments: The Prudential Insurance Company of America c/o Prudential Capital Group Four Gateway Center, 7th Floor 100 Mulberry Street Newark, New Jersey 07102-4077 Attn: Trade Management Group Fax: 973-802-9425 Recipient of telephonic prepayment notices: Attn: Manager, Trade Management Group Tel: (973) 367-3623 Address for all other communications, deliveries and notices: The Prudential Insurance Company of America c/o Prudential Capital Group Corporate and Project Workouts 7th Floor, Gateway Center Four 100 Mulberry Street Newark, New Jersey 07102-4069 Facsimile (973) 802-2333 Attention: Managing Director John Hancock Life Insurance Company, on its own behalf and behalf of the following entities: John Hancock Life Insurance Company, as a Lender John Hancock Variable Life Insurance Company Mellon Bank, N.A., as Trustee for the Long-Term Investment Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company) Mellon Bank, N.A. as Trustee for Bell Atlantic Master Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company) The Northern Trust Company, as Trustee of the Lucent Technologies Inc. Master Pension Trust Investors Partner Life Insurance Company 200 Clarendon Street, 57th Floor Boston, MA 02117 Attention: Daniel Budde Tel: 617-572-9644 Fax: 617-572-1628 Attn: Pam Memishian, Esq. Tel: 617-572-9208 Fax: 617-572-9268 Attn: Christine Marquis Tel: 617-572-1867 Fax: 617-572-9475 Attn: Bond & Corporate Finance Group, T-57 Fax: 617-572-1605   Mellon Bank, N.A., as Trustee for the Long-Term Investment Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company) Mellon Bank, N.A. as Trustee for Bell Atlantic Master Trust, solely in its capacity as Trustee and not in its individual capacity (as directed by John Hancock Life Insurance Company) One Mellon Bank Center Room 1935 Pittsburgh, PA 15258 Attn: Bernadette T. Rist Tel: 412-234-6340 Fax: 412-234-0555 SunTrust Banks, Inc. 201 4th Avenue, N/12 Fl. Nashville, Tennessee 37219 Fax: 615-748-5700 Attn: Byron Kurtgis
EXHIBIT 10.(iii)B Insurance 1. The Board shall periodically review insurance coverage of the Association. The President/CEO shall report to the Board annually on such insurance coverage. 2. Directors shall be provided life insurance coverage according to the following terms:      a) Upon being elected by the voting membership to a first term of office, a Split Dollar Life Insurance Program will be provided with Farmland Industries owning the policy and paying the premiums. The director’s beneficiary(s) will receive $100,000 in benefits if death occurs during a term of office as a director and $50,000 if death occurs following retirement from the Board.      b) Each director will be eligible for a supplemental life insurance benefit upon commencement of a second-elected term of office. While serving as a director, a policy with a benefit of $100,000 will be owned by the director and collaterally assigned to Farmland with Farmland paying the premiums. Farmland shall pay the premiums for the greater of ten years or the length of the director’s term. Upon retirement from the Board or the ten-year Farmland obligation period, the director will have the following options:       * continue paying the full premium and continue $100,000 in coverage * reduce the benefit and premium * elect to take a reduced paid-up policy * surrender the policy for cash
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 REUTER MANUFACTURING, INC. CERTIFICATE OF DESIGNATION SERIES A CONVERTIBLE PREFERRED STOCK 1.Designation.  The designation of the series of shares is "Series A Convertible Preferred Stock" (the "Series A Preferred" or the "Preferred Stock"), and the number of shares of such series will be One Million (1,000,000). 2.Voting Rights.   2.1General.  At all meetings of the shareholders of the Corporation and in the case of any actions of shareholders in lieu of a meeting, each holder of Series A Preferred shall have that number of votes on all matters submitted to the shareholders that is equal to the number of whole shares of Common Stock into which such holder's shares of Series A Preferred are then convertible, as provided in Section 5, at the record date for the determination of the shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of such shareholders is effected. This provision for determination of the number of votes to which each holder of the Series A Preferred is entitled shall also apply in cases in which the holders of the Series A Preferred have the right to vote together as a separate class. Except as may be otherwise provided in this Certificate or by agreement, the holders of the Common Stock and the holders of the Series A Preferred shall vote together as a single class on all actions to be taken by the shareholders of the Corporation. 2.2Quorums.  The presence in person or by proxy of the holders of a majority of the aggregate number of shares of Common Stock and Series A Preferred then outstanding (on an as-if converted to Common Stock basis) shall constitute a quorum of the Common Stock and Series A Preferred. 3.Dividends.   3.1Dividends.  The holders of Series A Preferred then outstanding shall be entitled to receive cumulative cash dividends, out of any funds and assets of the Corporation legally available therefor, prior and in preference to any declaration or payment of any dividend (other than a Common Stock Dividend) payable on Common Stock of the Corporation at the annual rate of nine percent (9%) for the Series A Preferred, and such dividends shall be payable only if, as and when declared by the Board of Directors of the Corporation (the "Board"). Other than as set forth in the preceding sentence, no dividend or other distribution shall accrue or be paid with respect to any shares of capital stock of the Corporation for any period, whether before or after the effective date of this Certificate, unless and until declared by the Board. In the event any dividend or distribution is declared or made with respect to outstanding shares of Common Stock, a comparable dividend or distribution shall be simultaneously declared or made with respect to the outstanding shares of Series A Preferred (as if fully converted into Common Stock, including fractions of shares). Dividends on shares of capital stock of the Corporation shall be payable only out of funds legally available therefor. 3.2Non-Cash Dividends.  Whenever a dividend provided for in this Section 3 shall be payable in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board. 4.Liquidation Rights.   4.1No Preference of Series A Preferred.  In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets of the Corporation available for distribution to its shareholders, whether such assets are capital, surplus, or earnings, shall be distributed equally, on a per share basis, among the holders of the Common Stock and the Series A Preferred (on an as-if converted to Common Stock basis). -------------------------------------------------------------------------------- 4.2Reorganization; Sale of Assets.  The merger, acquisition or consolidation of the Corporation into or with any other entity or entities which results in the exchange of outstanding shares of the Corporation for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof pursuant to which the shareholders of the Corporation immediately prior to the transaction do not own a majority of the outstanding shares of the surviving corporation immediately after the transaction, or any sale, lease, license (on an exclusive basis) or transfer by the Corporation of all or substantially all its assets, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of the provisions of this Section 4. 4.3Determination of Consideration.  To the extent any distribution pursuant to Section 4.1 consists of property other than cash, the value thereof shall, for purposes of Section 4.1, be the fair value at the time of such distributions as determined in good faith by the Board. 5.Conversion.  The holders of the Series A Preferred shall have the following conversion rights (the "Conversion Rights"): 5.1Optional Conversion of the Series A Preferred.  The Series A Preferred shall be convertible, without the payment of any additional consideration by the holder thereof and at the option of the holder thereof, at any time after the first issuance of shares of Series A Preferred by the Corporation, at the office of the Corporation or any transfer agent for the Common Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $0.1777778 by the Conversion Price, determined as hereinafter provided, in effect at the time of conversion and then multiplying such quotient by each share of Series A Preferred to be converted. The Conversion Price at which shares of Common Stock shall be deliverable upon conversion without the payment of any additional consideration by the holder thereof (the "Conversion Price") shall at the time of the filing of this Certificate initially be $0.1777778 in the case of the Series A Preferred. Such initial Conversion Price shall be subject to adjustment, in order to adjust the number of shares of Common Stock into which the Series A Preferred is convertible, as hereinafter provided. 5.2Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred. In lieu of any fractional share to which any holder would otherwise be entitled upon conversion of the Series A Preferred owned by such holder, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price or round up to the nearest whole share. 5.3Mechanics of Optional Conversion.  Before any holder of Series A Preferred shall be entitled to convert the same into full shares of Common Stock, such holder shall surrender the certificate or certificates therefor, endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by such holder's attorney duly authorized in writing, at the office of the Corporation or of any transfer agent for the Common Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state therein such holder's name or the name of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred, or to such holder's nominee or nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid, together with cash in lieu of any fraction of a share. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. From and after 2 -------------------------------------------------------------------------------- such date, all rights of the holder with respect to the Series A Preferred so converted shall terminate, except only the right of such holder, upon the surrender of his, her or its certificate or certificates therefor, to receive certificates for the number of shares of Common Stock issuable upon conversion thereof and cash for fractional shares. 5.4Certain Adjustments to Conversion Price for Stock Splits, Dividends, Mergers, Reorganizations, Etc.   A.Adjustment for Stock Splits, Stock Dividends and Combinations of Common Stock.  In the event the outstanding shares of Common Stock shall, after the filing of this Certificate be further subdivided (split), or combined (reverse split), by reclassification or otherwise, or in the event of any dividend or other distribution payable on the Common Stock in shares of Common Stock, the applicable Conversion Price in effect immediately prior to such subdivision, combination, dividend or other distribution shall, concurrently with the effectiveness of such subdivision, combination, dividend or other distribution, be proportionately adjusted. B.Adjustment for Merger or Reorganization, Etc.  In the event of a reclassification, reorganization or exchange (other than described in subsection 5.4.A. above) or any consolidation or merger of the Corporation with another Corporation (other than a merger, acquisition or other reorganization as defined in Section 4.2, which shall be considered a liquidation pursuant to Section 4 above), each share of Series A Preferred shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of the Series A Preferred would have been entitled upon such reclassification, reorganization, exchange, consolidation, merger or conveyance had the conversion occurred immediately prior to the event; and, in any such case, appropriate adjustment (as determined by the Board) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of the Series A Preferred, to the end that the provisions set forth herein (including provisions with respect to changes in and other adjustments of the applicable Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series A Preferred. C.Adjustments for Other Dividends and Distributions.  In the event the Corporation, at any time or from time to time after the filing of this Certificate, makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event, provision shall be made so that the holders of Series A Preferred shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation which they would have received had their Series A Preferred been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 5.4 with respect to the rights or the holders of the Series A Preferred. 5.5Notices of Record Date.  In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, any capital reorganization of the Corporation, any reclassification or recapitalization of the Corporation's capital stock, any consolidation or merger with or into another Corporation, any transfer of all or substantially all of the assets of the Corporation or any dissolution, liquidation or winding up of the Corporation, the Corporation shall mail to each holder of Series A Preferred at least ten (10) days prior to the date specified for the taking of a record, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution. 3 -------------------------------------------------------------------------------- SIGNATURES     REUTER MANUFACTURING, INC.   Dated: October 12, 2000       By:       /s/ Michael J. Tate --------------------------------------------------------------------------------     Michael Tate     Its:   President and Chief Executive Officer 4 -------------------------------------------------------------------------------- QUICKLINKS REUTER MANUFACTURING, INC. CERTIFICATE OF DESIGNATION SERIES A CONVERTIBLE PREFERRED STOCK SIGNATURES
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Among SYSTEMAX INC. and THE SUBSIDIARIES OF SYSTEMAX INC. NAMED HEREIN, as Borrowers and THE BANKS PARTY HERETO, and THE CHASE MANHATTAN BANK, as Agent, and THE BANK OF NEW YORK as Documentation Agent -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Dated as of November 30, 2000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT TABLE OF CONTENTS Page No. SECTION 1. DEFINITIONS 1   SECTION 1.01 Defined Terms 1   SECTION 1.02 Terms Generally 11 SECTION 2. AMOUNT AND TERMS OF CREDIT 12   SECTION 2.01 Restructuring of Existing Obligations; Revolving Loans; Uncommitted Facility 12   SECTION 2.02 Letters of Credit; Existing Letters of Credit 13   SECTION 2.03 Issuance 15   SECTION 2.04 Nature of Letter of Credit Obligations Absolute 15   SECTION 2.05 Making of Loans 16   SECTION 2.06 Repayment of Loans; Evidence of Debt 17   SECTION 2.07 Interest on Loans 17   SECTION 2.08 Default Interest 18   SECTION 2.09 Alternate Rate of Interest 18   SECTION 2.10 Refinancing of Loans 18   SECTION 2.11 Cash Collateral 19   SECTION 2.12 Optional Prepayment of Loans; Reimbursement of Banks 19   SECTION 2.13 Reserve Requirements; Change in Circumstances 21   SECTION 2.14 Change in Legality 22   SECTION 2.15 Pro Rata Treatment, etc. 23   SECTION 2.16 Taxes 23   SECTION 2.17 Letter of Credit Fees 25   SECTION 2.18 Nature of Letter of Credit Fees 26   SECTION 2.19 Right of Set-Off 26   SECTION 2.20 Security Interest in Letter of Credit Account 26   SECTION 2.21 Payment of Obligations 26 SECTION 3. REPRESENTATIONS AND WARRANTIES 26   SECTION 3.01 Organization and Authority 27   SECTION 3.02 Due Execution 27   SECTION 3.03 Statements Made 27   SECTION 3.04 Financial Statements 27   SECTION 3.05 Ownership 28   SECTION 3.06 Liens 28   SECTION 3.07 Compliance with Law 28   SECTION 3.08 Insurance 28   SECTION 3.09 Use of Proceeds 29   SECTION 3.10 Litigation 29 SECTION 4. CONDITIONS OF LENDING 29   SECTION 4.01 Conditions Precedent to Initial Loans and Initial Letters of Credit 29   SECTION 4.02 Conditions Precedent to Each Loan and Each Letter of Credit 30 SECTION 5. AFFIRMATIVE COVENANTS 31   SECTION 5.01 Financial Statements, Reports, etc. 31   SECTION 5.02 Corporate Existence 33   SECTION 5.03 Insurance 33   SECTION 5.04 Obligations and Taxes 34   SECTION 5.05 Notice of Event of Default, etc. 34   SECTION 5.06 Access to Books and Records 34   SECTION 5.07 Business Plan 34   SECTION 5.08 Appointment of Financial Consultant 34   SECTION 5.09 Best Efforts Regarding Sale/Leaseback Transaction 35   SECTION 5.10 Future Subsidiaries 35 SECTION 6. NEGATIVE COVENANTS 35   SECTION 6.01 Liens 35   SECTION 6.02 Consolidations, Mergers and Sales of Assets 35   SECTION 6.03 Indebtedness 36   SECTION 6.04 Guarantees and Other Liabilities 36   SECTION 6.05 Dividends; Capital Stock 36   SECTION 6.06 Transactions with Affiliates 36   SECTION 6.07 Investments, Loans and Advances 36   SECTION 6.08 Disposition of Assets 37   SECTION 6.09 Nature of Business 37 SECTION 7. EVENTS OF DEFAULT 37   SECTION 7.01 Events of Default 37 SECTION 8. THE AGENT 40   SECTION 8.01 Administration by Agent 40   SECTION 8.02 Payments 40   SECTION 8.03 Sharing of Setoffs 40   SECTION 8.04 Liability of Agent 41   SECTION 8.05 Reimbursement and Indemnification 42   SECTION 8.06 Rights of Agent 42   SECTION 8.07 Independent Banks 42   SECTION 8.08 Notice of Transfer 42   SECTION 8.09 Successor Agent 42 SECTION 9. MISCELLANEOUS 43   SECTION 9.01 Notices 43   SECTION 9.02 Survival of Agreement, Representations and Warranties, etc. 43   SECTION 9.03 Successors and Assigns 44   SECTION 9.04 Confidentiality 46   SECTION 9.05 Expenses 46   SECTION 9.06 Indemnity 47   SECTION 9.07 CHOICE OF LAW 47   SECTION 9.08 No Waiver 47   SECTION 9.09 Extension of Maturity 47   SECTION 9.10 Amendments, etc. 47   SECTION 9.11 Severability 48   SECTION 9.12 Headings 48   SECTION 9.13 Execution in Counterparts 48   SECTION 9.14 Prior Agreements 48   SECTION 9.15 Further Assurances 48   SECTION 9.16 WAIVER OF JURY TRIAL 48 EXHIBIT A SCHEDULE 3.04 SCHEDULE 3.05 SCHEDULE 3.06 SCHEDULE 3.10 SCHEDULE 5.01 SCHEDULE 5.10 SCHEDULE 6.03 - - - - - - - - Form of Assignment and Acceptance Financial Statement Exceptions Subsidiaries Liens Litigation Inventory Reporting Subsidiaries Sale/Leaseback Transaction Properties Indebtedness REVOLVING CREDIT AGREEMENT Dated as of November 30, 2000            REVOLVING CREDIT AGREEMENT, dated as of November 30, 2000, among SYSTEMAX INC., a Delaware corporation ("Systemax"), certain of the direct or indirect subsidiaries of Systemax signatory hereto (each, together with Systemax, a Borrower, and collectively, the "Borrowers"), THE CHASE MANHATTAN BANK ("Chase"), THE BANK OF NEW YORK ("BNY"), each of the other financial institutions from time to time party hereto (together with Chase and BNY, the "Banks") and THE CHASE MANHATTAN BANK, as agent (in such capacity, the "Agent") for the Banks. INTRODUCTORY STATEMENT            Systemax is obligated (i) to BNY in connection with loans and advances made by BNY to Systemax and certain of the other Borrowers pursuant to that certain Amended and Restated Master Promissory Note, dated April 19, 2000 (the "BNY Note") in an aggregate outstanding principal amount of $22,740,000 as of the Closing Date, and (ii) to Chase in connection with loans and advances made by Chase to Systemax and letters of credit issued by Chase for the account of Systemax pursuant to that certain Master Grid Note, dated June 30, 2000, as the same has been modified, extended or replaced from time to time (the "Chase Note") in an aggregate outstanding principal amount of $23,145,000 as of the Closing Date (the obligations under the BNY Note and Chase Note, hereinafter referred to as the "Existing Obligations").            The Borrowers desire to restructure the Existing Obligations as revolving loans to be made on an uncommitted basis by the Banks in an amount not to exceed $70,000,000 in the aggregate.            The proceeds of the Loans will be used for working capital purposes of the Borrowers.            Accordingly, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS            SECTION 1.01 Defined Terms.            As used in this Agreement, the following terms shall have the meanings specified below:            "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.            "ABR Loan" shall mean any Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Section 2.            "ACH Obligations" shall mean any obligations incurred from time to time to any Bank in the form of overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with automated clearing house transfers of funds.            "Adjusted LIBOR Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest Period divided by (b) a percentage (expressed as a decimal) equal to 100% minus Statutory Reserves. For purposes hereof, the term "LIBOR Rate" shall mean the rate at which dollar deposits approximately equal in principal amount to such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.            "Affiliate" shall mean, 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. For purposes of this definition, a Person (a "Controlled Person") shall be deemed to be "controlled by" another Person (a "Controlling Person") if the Controlling Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise.            "Agent" shall have the meaning set forth in the Introduction.            "Agreement" shall mean this Revolving Credit Agreement, as the same may from time to time be further amended, modified or supplemented.            "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "Base CD Rate" shall mean the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a percentage expressed as a decimal equal to 100% minus Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.            "Amounts" shall have the meaning set forth in Section 2.16(a).            "Assessment Rate" shall mean for any date the annual rate (rounded upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Agent to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or any successor) of time deposits made in dollars at the Agent's domestic offices.            "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Bank and an Eligible Assignee, and accepted by the Agent, substantially in the form of Exhibit A.            "Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq.            "Banks" shall have the meaning set forth in the Introduction.            "BNY" shall have the meaning set forth in the Introduction.            "BNY Note" shall have the meaning set forth in the Introductory Statement.            "Board" shall mean the Board of Governors of the Federal Reserve System of the United States.            "Borrowers" shall have the meaning set forth in the Introduction.            "Borrowing" shall mean the incurrence of Loans of a single Type made from all the Banks on a single date and having, in the case of Eurodollar Loans, a single Interest Period (with any ABR Loan made pursuant to Section 2.16 being considered a part of the related Borrowing of Eurodollar Loans).            "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in the State of New York are required or permitted to close (and, for a Letter of Credit, other than a day on which the Fronting Bank issuing such Letter of Credit is closed); provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits on the London interbank market.            "Change of Control" shall mean (i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Systemax or (ii) the occupation of a majority of the seats (other than vacant seats) on the Board of Directors of Systemax by Persons who were neither (A) nominated by the Board of Directors of Systemax nor (B) appointed by directors so nominated.            "Chase" shall have the meaning set forth in the Introduction.            "Chase Note" shall have the meaning set forth in the Introductory Statement.            "Closing Date" shall mean the date on which this Agreement has been executed and the conditions precedent to the making of the initial Loans set forth in Section 4.01 have been satisfied or waived.            "Code" shall mean the Internal Revenue Code of 1986, as amended.            "Collateral" shall mean the "Collateral" as defined in the Security Agreement.            "Dollars" and "$" shall mean lawful money of the United States of America.            "Eligible Assignee" shall mean (i) a commercial bank having total assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case acceptable to the Agent, which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; and (iii) any other financial institution satisfactory to the Borrower and the Agent.            "Environmental Lien" shall mean a Lien in favor of any Governmental Authority for (i) any liability under federal or state environmental laws or regulations, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment.            "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.            "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) which is a member of a group of which any Borrower is a member and which is under common control within the meaning of Section 414(b) or (c) of the Code and the regulations promulgated and rulings issued thereunder.            "Eurocurrency Liabilities" shall have the meaning assigned thereto in Regulation D issued by the Board, as in effect from time to time.            "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans.            "Eurodollar Loan" shall mean any Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Section 2.            "Event of Default" shall have the meaning given such term in Section 7.            "Existing Obligations" shall have the meaning set forth in the Introductory Statement.            "Financial Officer" shall mean the Chief Financial Officer or Controller (or Person with equivalent authority) of Systemax.            "Fronting Bank" shall mean Chase (or any of its banking affiliates) or such other Bank (which other Bank shall be reasonably satisfactory to Systemax) as may agree with Chase to act in such capacity.            "GAAP" shall mean generally accepted accounting principles applied in accordance with Section 1.02.            "Governmental Authority" shall mean any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign.            "Indebtedness" shall mean, at any time and with respect to any Person, (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in foreign interest rates and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts; (vii) all Indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss in respect of such Indebtedness, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Indebtedness, and (viii) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.            "Insufficiency" shall mean, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA.            "Interest Payment Date" shall mean (i) as to any Eurodollar Loan, the last day of each consecutive 30 day period running from the commencement of the applicable Interest Period, and (ii) as to all ABR Loans, the last calendar day of each month and the date on which any ABR Loans are refinanced with Eurodollar Loans pursuant to Section 2.10.            "Interest Period" shall mean, as to any Borrowing of Eurodollar Loans, the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one month thereafter, as Systemax may elect in the related notice delivered pursuant to Sections 2.05(b) or 2.10; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date.            "Investments" shall have the meaning given such term in Section 6.07.            "Letter of Credit" shall mean any irrevocable letter of credit issued pursuant to Section 2.02, which letter of credit shall be (i) a standby or documentary letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of any Borrower, or for such other purposes as are reasonably acceptable to the Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Agent and the applicable Fronting Bank.            "Letter of Credit Account" shall mean the account established by the Borrowers under the sole and exclusive control of the Agent maintained at the office of the Agent at 270 Park Avenue, New York, New York 10017 designated as the "Systemax, Inc. Letter of Credit Account" that shall be used solely for the purposes set forth in Sections 2.02(b) and 2.11.            "Letter of Credit Fees" shall mean the fees payable in respect of Letters of Credit pursuant to Section 2.17.            "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate undrawn stated amount of all Letters of Credit then outstanding plus (ii) all amounts theretofore drawn under Letters of Credit and not then reimbursed.            "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof).            "Loan" shall have the meaning given such term in Section 2.01.            "Loan Documents" shall mean this Agreement, the Security Agreement, the Letters of Credit and any other instrument or agreement executed and delivered to the Agent or any Bank in connection herewith.            "Maturity Date" shall mean January 31, 2001.            "Maximum Revolving Loan Amount" shall have the meaning set forth in Section 2.01(b).            "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.            "Multiple Employer Plan" shall mean a Single Employer Plan, which (i) is maintained for employees of any Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such Plan has been or were to be terminated.            "Net Proceeds" shall mean, in respect of any sale of assets, the cash proceeds of such sale after the payment of or reservation for (x) expenses that are related to the transaction of sale, including, but not limited to, related severance costs, taxes payable, brokerage commissions, professional expenses, other similar costs that are related to the sale, (y) the amount secured by valid and perfected Liens, if any, that are senior to the Liens on such assets held by the Agent on behalf of the Banks and (z) liabilities with respect to indemnification liabilities associated with such asset sale.            "Obligations" shall mean (a) the due and punctual payment of principal of and interest on the Loans and the reimbursement of all amounts drawn under Letters of Credit, (b) the due and punctual payment of the Letter of Credit Fees, (c) the due and punctual payment of any ACH Obligations and (d) all other present and future, fixed or contingent, monetary obligations of any Borrower to the Banks and the Agent under the Loan Documents.            "Other Taxes" shall have the meaning given such term in Section 2.16(a).            "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor agency or entity performing substantially the same functions.            "Pension Plan" shall mean a defined benefit pension or retirement plan which meets and is subject to the requirements of Section 401(a) of the Code.            "Permitted Investments" shall mean:            (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof;            (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within nine months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.;            (c) investments in certificates of deposit, banker's acceptances and time deposits (including Eurodollar time deposits) maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of a Bank or the bank with whom any Borrower maintains its cash management system, provided, that if such bank is not a Bank hereunder, such bank shall have entered into an agreement with the Agent pursuant to which such bank shall have waived all rights of setoff (other than for returned items and costs and expenses) and confirmed that such bank does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.;            (d) investments in repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above;            (e) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (d) above; and            (f) investments by any Borrower in the capital stock of any direct or indirect Subsidiary.            "Permitted Liens" shall mean (i) Liens imposed by law (other than Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the Closing Date or thereafter imposed by law and created in the ordinary course of business; (iii) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (iv) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) and interest of ground lessors, which do not interfere materially with the ordinary conduct of the business of any of the Borrowers and which do not materially detract from the value of the property to which they attach or materially impair the use thereof to any of the Borrowers; (v) letters of credit or deposits in the ordinary course to secure leases; (vi) Liens existing on any property or asset prior to the acquisition thereof by any Borrower, provided that such Lien was not created or incurred in contemplation of such acquisition; (vii) judgment Liens not constituting an Event of Default pursuant to Section 7.01(i); (viii) Liens arising from precautionary UCC financing statements that are filed with respect to assets leased by any Borrower pursuant to an operating lease; and (ix) extensions, renewals or replacements of any Lien referred to in paragraphs (i) through (viii) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby.            "Person" shall mean any natural person, corporation, division of a corporation, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof.            "Plan" shall mean a Single Employer Plan or a Multiemployer Plan.            "Register" shall have the meaning set forth in Section 9.03(d).            "Security Agreement" shall mean that certain Security Agreement, dated as of October 16, 2000, among the Borrowers and the Agent, as the same may be amended or modified form time to time.            "Single Employer Plan" shall mean a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which any Borrower could have liability under Section 4069 of ERISA in the event such Plan has been or were to be terminated.            "Statutory Reserves" shall mean on any date the percentage (expressed as a decimal) established by the Board and any other banking authority which is (i) for purposes of the definition of Base CD Rate, the then stated maximum rate of all reserves (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City, for new three month negotiable nonpersonal time deposits in dollars of $100,000 or more or (ii) for purposes of the definition of Adjusted LIBOR Rate, the then stated maximum rate for all reserves (including but not limited to any emergency, supplemental or other marginal reserve requirements) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or any successor category of liabilities under Regulation D issued by the Board, as in effect from time to time). Such reserve percentages shall include, without limitation, those imposed pursuant to said Regulation. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage.            "Subsidiary" shall mean, with respect to any Person (herein referred to as the "parent"), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors is, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.            "Taxes" shall have the meaning given such term in Section 2.16(a).            "Termination Date" shall mean the earliest to occur of (i) the Maturity Date and (ii) the acceleration of the Loans in accordance with the terms hereof.            "Termination Event" shall mean (i) a "reportable event", as such term is described in Section 4043 of ERISA and the regulations issued thereunder (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC under Section 4043 of ERISA or such regulations) or an event described in Section 4068 of ERISA excluding events described in Section 4043(c)(9) of ERISA or 29 CFR §§2615.21 or 2615.23 and excluding events which would not be reasonably likely (as reasonably determined by the Agent) to have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrowers taken as a whole, or (ii) the withdrawal of any Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(c) of ERISA, or the incurrence of liability by any Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, if such amendment requires the provision of security, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC).            "Transferee" shall have the meaning given such term in Section 2.16(a).            "Type" when used in respect of any Loan or Borrowing shall refer to the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall mean the Adjusted LIBOR Rate and the Alternate Base Rate.            "Withdrawal Liability" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA.            SECTION 1.02 Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any covenant set forth in Section 6, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in the Borrower's audited financial statements referred to in Section 3.04. SECTION 2. AMOUNT AND TERMS OF CREDIT            SECTION 2.01 Restructuring of Existing Obligations; Revolving Loans; Uncommitted Facility.            (a) Confirmation of Existing Obligations. Each of the Borrowers hereby (i) confirm and agree that Systemax is truly and justly indebted to BNY and Chase in the aggregate amount of the Existing Obligations, together with all accrued and unpaid interest, fees and expenses that are due and owing in respect thereto, (ii) reaffirm and admit the validity and enforceability of this Agreement and the other Loan Documents (including the granting of liens and security interests in the Collateral) and all of their respective obligations thereunder, (iii) agree and admit that they have no defenses to, or offsets or counterclaims against, any of their respective obligations to the Agent or any Bank under the Loan Documents of any kind whatsoever.            (b) Restructuring of Existing Obligations. On the Closing Date, BNY and Chase agree (i) to restructure the Existing Obligations as revolving loans and (ii) to make revolving credit loans (each a "Loan" and collectively, the "Loans") on an uncommitted basis in an aggregate amount not to exceed $70,000,000 (the "Maximum Revolving Loan Amount"). The principal amount of the Loans to be made by each Bank shall not exceed the amounts set forth opposite its name below: Bank Principal Portion of Maximum Percentage Revolving Loan Amount Chase $35,000,000 50% BNY $35,000,000 50% Total $70,000,000 100%            The aggregate amount of the Existing Obligations shall be deemed to be the initial principal amount of the Loans outstanding hereunder.            (c) Pro Rata Borrowings. Each Borrowing shall be made by the Banks pro rata in accordance with their respective percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b).            (d) Uncommitted Facility. Notwithstanding anything contained herein to the contrary, the Loans being made by the Banks hereunder, and the issuance of Letters of Credit (i) are being made on an uncommitted basis, (ii) are being made, in each case, in the sole and absolute discretion of each of the Banks and (iii) are payable upon demand.            SECTION 2.02 Letters of Credit; Existing Letters of Credit.            (a) Upon the terms and subject to the conditions herein set forth, Systemax may request a Fronting Bank, at any time and from time to time after the date hereof and prior to the Termination Date, to issue, and, subject to the terms and conditions contained herein, such Fronting Bank shall issue, for the account of any Borrower one or more Letters of Credit, provided that no Letter of Credit shall be issued if after giving effect to such issuance the aggregate Letter of Credit Outstandings, when added to the aggregate outstanding principal amount of the Loans, would exceed the Maximum Revolving Loan Amount and, provided further that no Letter of Credit shall be issued if the Fronting Bank shall have received notice from the Agent or any Banks that the conditions to such issuance have not been met.            (b) No Letter of Credit shall expire later than one year from the date of its issuance, provided that if any Letter of Credit shall be outstanding on the Termination Date, the Borrowers shall, at or prior to the Termination Date, except as the Agent may otherwise agree in writing, (i) cause all Letters of Credit which expire after the Termination Date to be returned to the Fronting Bank undrawn and marked "canceled" or (ii) if the Borrowers are unable to do so in whole or in part, either (x) provide a "back-to-back" letter of credit to one or more Fronting Banks in a form satisfactory to such Fronting Bank and the Agent (in their sole discretion), issued by a bank satisfactory to such Fronting Bank and the Agent (in their sole discretion), and in an amount equal to 105% of the then undrawn stated amount of all outstanding Letters of Credit issued by such Fronting Banks (less the amount, if any, then on deposit in the Letter of Credit Account) and/or (y) deposit cash in the Letter of Credit Account in an amount equal to 105% of the then undrawn stated amount of all Letter of Credit Outstandings (less the amount, if any, then on deposit in the Letter of Credit Account) as collateral security for the Borrowers' reimbursement obligations in connection therewith, such cash to be remitted to the Borrowers upon the expiration, cancellation or other termination or satisfaction of such reimbursement obligations.            (c) The Borrowers shall pay to each Fronting Bank, in addition to such other fees and charges as are specifically provided for in Section 2.17 hereof, such fees and charges in connection with the issuance and processing of the Letters of Credit issued by such Fronting Bank as are customarily imposed by such Fronting Bank from time to time in connection with letter of credit transactions.            (d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers in Dollars not later than 1:00 pm on the first Business Day following notice by the Fronting Bank to Systemax of a drawing and shall bear interest from the date of draw until the first Business Day following such notice at a rate per annum equal to the Alternate Base Rate and thereafter on the reimbursed portion until reimbursed in full at a rate per annum equal to the Alternate Base Rate plus 2% (computed on the basis of the actual number of days elapsed over a year of 365 days or 366 days in a leap year). The Borrowers shall effect such reimbursement (x) if such draw occurs prior to the Termination Date, in cash or through a Borrowing without the satisfaction of the conditions precedent set forth in Section 4.02 or (y) if such draw occurs on or after the Termination Date, in cash. Each Bank agrees to make the Loans described in clause (x) of the preceding sentence notwithstanding a failure to satisfy the applicable lending conditions thereto.            (e) Immediately upon the issuance of any Letter of Credit by any Fronting Bank, such Fronting Bank shall be deemed to have sold to each Bank other than such Fronting Bank and each such other Bank shall be deemed unconditionally and irrevocably to have purchased from such Fronting Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Bank's percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b), in such Letter of Credit, each drawing thereunder and the obligations of the Borrowers under this Agreement with respect thereto. Upon any change in the percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b) attributable to each Bank pursuant to Section 9.03, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new percentage of the Maximum Revolving Loan Amount attributable to each Bank of the assigning and assignee Banks. Any action taken or omitted by a Fronting Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Fronting Bank any resulting liability to any other Bank.            (f) In the event that a Fronting Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Fronting Bank pursuant to this Section, the Fronting Bank shall promptly notify the Agent, which shall promptly notify each Bank of such failure, and each Bank shall promptly and unconditionally pay to the Agent for the account of the Fronting Bank the amount of such Bank's percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) of such unreimbursed payment in Dollars and in same day funds. If the Fronting Bank so notifies the Agent, and the Agent so notifies the Banks prior to 11:00 a.m. (New York City time) on any Business Day, such Banks shall make available to the Fronting Bank such Bank's percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) of the amount of such payment on such Business Day in same day funds. If and to the extent such Bank shall not have so made its percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) of the amount of such payment available to the Fronting Bank, such Bank agrees to pay to such Fronting Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Fronting Bank at the Federal Funds Effective Rate. The failure of any Bank to make available to the Fronting Bank its percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) of any payment under any Letter of Credit shall not relieve any other Bank of its obligation hereunder to make available to the Fronting Bank its percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b) of any payment under any Letter of Credit on the date required, as specified above, but no Bank shall be responsible for the failure of any other Bank to make available to such Fronting Bank such other Bank's percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) of any such payment. Whenever a Fronting Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Banks pursuant to this paragraph, such Fronting Bank shall pay to each Bank which has paid its percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) thereof, in Dollars and in same day funds, an amount equal to such Bank's percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) thereof.            (g) Each letter of credit issued by Chase prior to the Closing Date shall be deemed, for all purposes, to be a "Letter of Credit" issued under and pursuant to this Agreement.            SECTION 2.03 Issuance. Whenever Systemax desires a Fronting Bank to issue a Letter of Credit, it shall give to such Fronting Bank and the Agent prior written (including telegraphic, telex, facsimile or cable communication) notice reasonably in advance of the requested date of issuance specifying the date on which the proposed Letter of Credit is to be issued (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such Letter of Credit and the name and address of the beneficiary thereof.            SECTION 2.04 Nature of Letter of Credit Obligations Absolute. The obligations of the Borrowers to reimburse the Banks for drawings made under any Letter of Credit shall be joint, several, unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation (it being understood that any such payment by the Borrowers shall be without prejudice to, and shall not constitute a waiver of, any rights the Borrowers might have or might acquire as a result of the payment by the Fronting Bank of any draft or the reimbursement by the Borrowers thereof): (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary of any Letter of Credit or against any of the Banks, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by a Fronting Bank of any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vi) the fact that any Event of Default shall have occurred and be continuing, provided that the foregoing shall not be construed to excuse the Fronting Bank from liability to the Borrowers to the extent that any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by the Borrowers that are caused by the Fronting Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Fronting Bank (as finally determined by a court of competent jurisdiction), the Fronting Bank shall be deemed to have exercised care in each such determination.            SECTION 2.05 Making of Loans.            (a) Except as contemplated by Section 2.09, Loans shall be either ABR Loans or Eurodollar Loans as Systemax may request subject to and in accordance with this Section, provided that all Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Loans of the same Type. Each Bank may fulfill its portion of Maximum Revolving Loan Amount with respect to any Eurodollar Loan or ABR Loan by causing any lending office of such Bank to make such Loan; provided that any such use of a lending office shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement. Each Bank shall, subject to its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a lending office which will not result in the payment of increased costs by the Borrowers pursuant to Section 2.13. Subject to the other provisions of this Section and the provisions of Section 2.10, Borrowings of Loans of more than one Type may be incurred at the same time, provided that no more than eight (8) Borrowings of Eurodollar Loans may be outstanding at any time.            (b) Systemax shall give the Agent prior notice of each Borrowing hereunder of at least three Business Days for Eurodollar Loans and two Business Days for ABR Loans (subject, in the case of ABR Loans, to the last sentence of this Section); such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $500,000 (and integral multiples of $100,000) in the case of Eurodollar Loans and $500,000 (and integral multiples of $100,000) in the case of ABR Loans) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day in the case of Eurodollar Loans and 12:00 noon, New York City time on the second Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made except as provided in the last sentence of this Section 2.05(b). Such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Agent shall promptly notify each Bank of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing or Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each Bank may, in the exercise of its sole discretion, make its share of the Borrowing available at the office of the Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the Banks to fund any borrowing hereunder, the Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Borrower and shall use reasonable efforts to make the funds so received from the Banks available to the Borrower no later than 2:00 p.m. New York City time (other than as provided in the following sentence). With respect to ABR Loans of $10,000,000 or less, the Banks shall make such Borrowings available to Systemax by 4:00 p.m., New York City time, on the same Business Day that Systemax gives notice to the Agent of such Borrowing by 1:00 p.m., New York City time.            SECTION 2.06 Repayment of Loans; Evidence of Debt.            (a) Each Borrower hereby unconditionally promises to pay to the Agent for the account of each Bank the then unpaid principal amount of each Loan on the Termination Date. The Obligations of the Borrowers hereunder shall be joint and several.            (b) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Bank resulting from each Loan made by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder.            (c) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Banks and each Bank's share thereof.            (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.            (e) Any Bank may request that Loans made by it be evidenced by a promissory note. In such event, the Borrowers shall execute and deliver to such Bank a promissory note payable to the order of such Bank (or, if requested by such Bank, to such Bank and its registered assigns) in a form furnished by the Agent and reasonably acceptable to the Borrowers. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.03) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).            SECTION 2.07 Interest on Loans.            (a) Subject to the provisions of Section 2.08, each ABR Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days or, when the Alternate Base Rate is based on the Prime Rate, a year with 365 days or 366 days in a leap year) at a rate per annum equal to the Alternate Base Rate.            (b) Subject to the provisions of Section 2.08, each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBOR Rate for such Interest Period in effect for such Borrowing plus 1-1/2%.            (c) Accrued interest on all Loans shall be payable monthly in arrears on each Interest Payment Date applicable thereto, at maturity (whether by acceleration or otherwise), after such maturity on demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the amount prepaid).            SECTION 2.08 Default Interest. If the Borrowers shall default in the payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder (including, without limitation, the reimbursement pursuant to Section 2.02(d) of any draft drawn under a Letter of Credit), whether at stated maturity, by acceleration or otherwise, the Borrowers shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days or when the Alternate Base Rate is applicable and is based on the Prime Rate, a year with 365 days or 366 days in a leap year) equal to (x) in the case of Borrowings consisting of Eurodollar Loans, the Adjusted LIBOR Rate in effect for such Borrowing plus 3-1/2% and (y) in the case of all other amounts, the Alternate Base Rate plus 2%.            SECTION 2.09 Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Loan, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers absent manifest error) that reasonable means do not exist for ascertaining the applicable Adjusted LIBOR Rate, the Agent shall, as soon as practicable thereafter, give written or telegraphic notice of such determination to Systemax and the Banks, and any request by Systemax for a Borrowing of Eurodollar Loans (including pursuant to a refinancing with Eurodollar Loans) pursuant to Section 2.05 or 2.10 shall be deemed a request for a Borrowing of ABR Loans. After such notice shall have been given and until the circumstances giving rise to such notice no longer exist, each request for a Borrowing of Eurodollar Loans shall be deemed to be a request for a Borrowing of ABR Loans.            SECTION 2.10 Refinancing of Loans. Systemax shall have the right, at any time, on three Business Days' prior irrevocable notice to the Agent (which notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day preceding the date of any refinancing), (x) to refinance (without the satisfaction of the conditions set forth in Section 4 as a condition to such refinancing) any outstanding Borrowing or Borrowings of Loans of one Type (or a portion thereof) with a Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional Interest Period, subject to the following:            (a) as a condition to the refinancing of ABR Loans with Eurodollar Loans and to the continuation of Eurodollar Loans for an additional Interest Period, no Event of Default shall have occurred and be continuing at the time of such refinancing;            (b) if less than a full Borrowing of Loans shall be refinanced, such refinancing shall be made pro rata among the Banks in accordance with the respective principal amounts of the Loans comprising such Borrowing held by the Banks immediately prior to such refinancing;            (c) the aggregate principal amount of Loans being refinanced shall be at least $500,000, provided that no partial refinancing of a Borrowing of Eurodollar Loans shall result in the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $500,000 in aggregate principal amount;            (d) each Bank shall effect each refinancing by applying the proceeds of its new Eurodollar Loan or ABR Loan, as the case may be, to its Loan being refinanced;            (e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a refinancing or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans shall commence on the date of refinancing or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be;            (f) a Borrowing of Eurodollar Loans may be refinanced only on the last day of an Interest Period applicable thereto. In the event that Systemax shall not give notice to refinance any Borrowing of Eurodollar Loans, or to continue such Borrowing as Eurodollar Loans, or shall not be entitled to refinance or continue such Borrowing as Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be refinanced with a Borrowing of ABR Loans at the expiration of the then-current Interest Period. The Agent shall, after it receives notice from Systemax, promptly give each Bank notice of any refinancing, in whole or part, of any Loan made by such Bank.            SECTION 2.11 Cash Collateral. Upon the Termination Date, the Borrowers shall pay the Loans in full and, except as the Agent may otherwise agree in writing, if any Letter of Credit remains outstanding, deposit into the Letter of Credit Account an amount equal to 105% of the amount by which the sum of the aggregate Letter of Credit Outstandings exceeds the amount of cash held in the Letter of Credit Account, such cash to be remitted to the Borrowers upon the expiration, cancellation, satisfaction or other termination of such reimbursement obligations, or otherwise comply with Section 2.02(b).            SECTION 2.12 Optional Prepayment of Loans; Reimbursement of Banks.            (a) The Borrowers shall have the right at any time and from time to time to prepay any Loans, in whole or in part, (x) with respect to Eurodollar Loans, upon at least three Business Days' prior written, telex or facsimile notice to the Agent and (y) with respect to ABR Loans on the same Business Day if written, telex or facsimile notice is received by the Agent prior to 12:00 noon, New York City time, and thereafter upon at least one Business Day's prior written, telex or facsimile notice to the Agent; provided, however, that (i) each such partial prepayment shall be in multiples of $500,000, (ii) no prepayment of Eurodollar Loans shall be permitted pursuant to this Section 2.12(a) other than on the last day of an Interest Period applicable thereto unless such prepayment is accompanied by the payment of the amounts described in clause (i) of the first sentence of Section 2.12(b), and (iii) no partial prepayment of a Borrowing of Eurodollar Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $500,000. Each notice of prepayment shall specify the prepayment date, the principal amount of the Loans to be prepaid and in the case of Eurodollar Loans, the Borrowing or Borrowings pursuant to which made, shall be irrevocable and shall commit the Borrowers to prepay such Loan by the amount and on the date stated therein. The Agent shall, promptly after receiving notice from Systemax hereunder, notify each Bank of the principal amount of the Loans held by such Bank which are to be prepaid, the prepayment date and the manner of application of the prepayment.            (b) The Borrowers shall reimburse each Bank on demand for any loss incurred or to be incurred by it in the reemployment of the funds released (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, refinancing with ABR Loans) of any Eurodollar Loan required or permitted under this Agreement, if such Loan is prepaid other than on the last day of the Interest Period for such Loan (including, without limitation, any such prepayment in connection with the syndication of the credit facility evidenced by this Agreement) or (ii) in the event that after Systemax delivers a notice of borrowing under Section 2.05 in respect of Eurodollar Loans, such Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such Bank of its obligations hereunder. Such loss shall be the amount as reasonably determined by such Bank as the excess, if any, of (A) the amount of interest which would have accrued to such Bank on the amount so paid or not borrowed at a rate of interest equal to the Adjusted LIBOR Rate for such Loan, for the period from the date of such payment or failure to borrow to the last day (x) in the case of a payment or refinancing with ABR Loans other than on the last day of the Interest Period for such Loan, of the then current Interest Period for such Loan, or (y) in the case of such failure to borrow, of the Interest Period for such Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market. Each Bank shall deliver to Systemax from time to time one or more certificates setting forth the amount of such loss as determined by such Bank.            (c) In the event the Borrowers fail to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.12(a), the Borrowers on demand by any Bank shall pay to the Agent for the account of such Bank any amounts required to compensate such Bank for any loss incurred by such Bank as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such Bank to fulfill deposit obligations incurred in anticipation of such prepayment, but without duplication of any amounts paid under Section 2.12(b). Each Bank shall deliver to Systemax from time to time one or more certificates setting forth the amount of such loss as determined by such Bank.            (d) Any partial prepayment of the Loans by the Borrowers pursuant to Section 2.12 shall be applied as specified by Systemax or, in the absence of such specification, as determined by the Agent (upon instructions from the Banks).            SECTION 2.13 Reserve Requirements; Change in Circumstances.            (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof (whether or not having the force of law) shall change the basis of taxation of payments to any Bank of the principal of or interest on any Eurodollar Loan made by such Bank or any fees or other amounts payable hereunder (other than changes in respect of Taxes, Other Taxes and taxes imposed on, or measured by, the net income or overall gross receipts or franchise taxes of such Bank by the national jurisdiction in which such Bank has its principal office or in which the applicable lending office for such Eurodollar Loan is located or by any political subdivision or taxing authority therein, or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which such Bank would not be subject to tax but for the execution and performance of this Agreement), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such Bank (except any such reserve requirement which is reflected in the Adjusted LIBOR Rate) or shall impose on such Bank or the London interbank market any other condition affecting this Agreement or the Eurodollar Loans made by such Bank, and the result of any of the foregoing shall be to increase the cost to such Bank of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Bank hereunder (whether of principal, interest or otherwise) by an amount deemed by such Bank to be material, then the Borrowers will pay to such Bank in accordance with paragraph (c) below such additional amount or amounts as will compensate such Bank for such additional costs incurred or reduction suffered.            (b) If any Bank shall have determined that the adoption or effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any lending office of such Bank) or any Bank's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital or on the capital of such Bank's holding company, if any, as a consequence of this Agreement, the Loans made by such Bank pursuant hereto, such Bank's percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b) hereunder or the issuance of, or participation in, any Letter of Credit by such Bank to a level below that which such Bank or such Bank's holding company could have achieved but for such adoption, change or compliance (taking into account Bank's policies and the policies of such Bank's holding company with respect to capital adequacy) by an amount deemed by such Bank to be material (except to the extent that such amount is reflected in the Adjusted LIBOR Rate), then from time to time the Borrowers shall pay to such Bank such additional amount or amounts as will compensate such Bank or such Bank's holding company for any such reduction suffered.            (c) A certificate in reasonable detail of each Bank setting forth such amount or amounts as shall be necessary to compensate such Bank or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to Systemax and shall be conclusive absent manifest error. The Borrowers shall pay each Bank the amount shown as due on any such certificate delivered to it within 10 days after its receipt of the same. Any Bank receiving any such payment shall promptly make a refund thereof to the Borrowers if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable.            (d) Failure on the part of any Bank to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Bank's right to demand compensation with respect to such period or any other period, provided that the Borrowers shall not be required to compensate a Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Bank notifies Systemax of the circumstance giving rise to such increased costs or reductions and of such Bank's intention to claim compensation therefor. The protection of this Section shall be available to each Bank regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed.            SECTION 2.14 Change in Legality.            (a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if (x) any change after the date of this Agreement in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration thereof shall make it unlawful for a Bank to make or maintain a Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to a Eurodollar Loan or (y) at any time any Bank determines that the making or continuance of any of its Eurodollar Loans has become impracticable as a result of a contingency occurring after the date hereof which adversely affects the London interbank market or the position of such Bank in such market, then, by written notice to Systemax, such Bank may (i) declare that Eurodollar Loans will not thereafter be made by such Bank hereunder, whereupon any request by Systemax for a Eurodollar Borrowing shall, as to such Bank only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Bank shall exercise its rights under clause (i) or (ii) of this paragraph (a), all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Bank or the converted Eurodollar Loans of such Bank shall instead be applied to repay the ABR Loans made by such Bank in lieu of, or resulting from the conversion of, such Eurodollar Loans.            (b) For purposes of this Section 2.14, a notice to Systemax by any Bank pursuant to paragraph (a) above shall be effective, if lawful, and if any Eurodollar Loans shall then be outstanding, on the last day of the then-current Interest Period, otherwise, such notice shall be effective on the date of receipt by Systemax.            SECTION 2.15 Pro Rata Treatment, etc. All payments and repayments of principal and interest in respect of the Loans (except as provided in Sections 2.13 and 2.14) shall be made pro rata among the Banks in accordance with the then outstanding principal amount of the Loans and/or participations in Letter of Credit Outstandings and all outstanding undrawn Letters of Credit (and the unreimbursed amount of drawn Letters of Credit) hereunder and all payments of Letter of Credit Fees (other than those payable to a Fronting Bank) shall be made pro rata among the Banks in accordance with their respective percentage of the Maximum Revolving Loan Amount as set forth in Section 2.01(b). All payments by the Borrowers hereunder shall be (i) net of any tax applicable to the Borrowers and (ii) made in Dollars in immediately available funds at the office of the Agent by 12:00 noon, New York City time, on the date on which such payment shall be due. Interest in respect of any Loan hereunder shall accrue from and including the date of such Loan to but excluding the date on which such Loan is paid in full or converted to a Loan of a different Type.            SECTION 2.16 Taxes.            (a) Any and all payments by the Borrowers hereunder shall be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) taxes imposed on or measured by the net income or overall gross receipts of the Agent or any Bank (or any transferee or assignee thereof, including a participation holder (any such entity being called a "Transferee")) and franchise taxes imposed on the Agent or any Bank (or Transferee) by the United States or any jurisdiction under the laws of which the Agent or any such Bank (or Transferee) is organized or in which the applicable lending office of any such Bank (or Transferee) is located or any political subdivision thereof or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which the Agent or such Bank (or Transferee) would not be subject to tax but for the execution and performance of this Agreement and (ii) taxes, levies, imposts, deductions, charges or withholdings ("Amounts") with respect to payments hereunder to a Bank (or Transferee) in accordance with laws in effect on the later of the date of this Agreement and the date such Bank (or Transferee) becomes a Bank (or Transferee, as the case may be), but not excluding, with respect to such Bank (or Transferee), any increase in such Amounts solely as a result of any change in such laws occurring after such later date or any Amounts that would not have been imposed but for actions (other than actions contemplated by this Agreement) taken by the Borrowers after such later date (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Banks (or any Transferee) or the Agent, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Bank (or Transferee) or the Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law.            (b) In addition, the Borrowers agree to pay any current or future stamp or documentary taxes or any other excise or property taxes, charges, assessments or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").            (c) The Borrowers will indemnify each Bank (or Transferee) and the Agent for the full amount of Taxes and Other Taxes paid by such Bank (or Transferee) or the Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification shall be made within 30 days after the date any Bank (or Transferee) or the Agent, as the case may be, makes written demand therefor. If a Bank (or Transferee) or the Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrowers pursuant to this Section, it shall promptly notify Systemax of the availability of such refund and shall, within 30 days after receipt of a request by Systemax, apply for such refund at the Borrowers' expense. If any Bank (or Transferee) or the Agent receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers pursuant to this Section, it shall promptly notify Systemax of such refund and shall, within 30 days after receipt of a request by Systemax (or promptly upon receipt, if Systemax has requested application for such refund pursuant hereto), repay such refund to Systemax (to the extent of amounts that have been paid by the Borrowers under this Section with respect to such refund plus interest that is received by the Bank (or Transferee) or the Agent as part of the refund), net of all out-of-pocket expenses of such Bank (or Transferee) or the Agent and without additional interest thereon; provided that Systemax, upon the request of such Bank (or Transferee) or the Agent, agrees to return such refund (plus penalties, interest or other charges) to such Bank (or Transferee) or the Agent in the event such Bank (or Transferee) or the Agent is required to repay such refund. Nothing contained in this subsection (c) shall require any Bank (or Transferee) or the Agent to make available any of its tax returns (or any other information relating to its taxes that it deems to be confidential).            (d) Within 30 days after the date of any payment of Taxes or Other Taxes withheld by the Borrowers in respect of any payment to any Bank (or Transferee) or the Agent, the Borrowers will furnish to the Agent, at its address referred to on the signature pages hereof, the original or a certified copy of a receipt evidencing payment thereof.            (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive the payment in full of the principal of and interest on all Loans made hereunder.            (f) Each Bank (or Transferee) that is organized under the laws of a jurisdiction outside the United States shall, on or before it becomes a party to this Agreement, deliver to the Borrower such certificates, documents or other evidence, as required by the Code or Treasury Regulations issued pursuant thereto, including (A) Internal Revenue Service Form W-8 (or any subsequent versions thereof or successors, including Forms 8-BEN and 8-ECI) or W-9 and (B) Internal Revenue Service Form 1001 or Form 4224 and any other certificate or statement of exemption required by Treasury Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version thereof or successors thereto, properly completed and duly executed by such Bank (or Transferee) establishing that such payment is (i) not subject to United States Federal withholding tax under the Code because such payment is effectively connected with the conduct by such Bank (or Transferee) of a trade or business in the United States or (ii) totally exempt from United States Federal withholding tax or subject to a reduced rate of such tax under a provision of an applicable tax treaty. Unless the Borrower and the Agent have received forms or other documents satisfactory to them indicating that such payments hereunder are not subject to United States Federal withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Agent shall withhold taxes from such payments at the applicable statutory rate.            (g) The Borrower shall not be required to pay any additional amounts to any Bank (or Transferee) in respect of United States Federal withholding tax pursuant to subsection (a) above if the obligation to pay such additional amounts would not have arisen but for a failure by such Bank (or Transferee) to comply with the provisions of subsection (f) above.            (h) Any Bank (or Transferee) claiming any additional amounts payable pursuant to this Section 2.16 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole reasonable determination of such Bank (or Transferee), be otherwise materially disadvantageous to such Bank (or Transferee).            SECTION 2.17 Letter of Credit Fees. The Borrowers shall pay with respect to each Letter of Credit (i) to the Agent on behalf of the Banks a fee calculated (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of (x) two (2%) per annum on the daily average Letter of Credit Outstandings and (ii) to the Fronting Bank such Fronting Bank's customary fees for issuance, amendments and processing referred to in Section 2.02(c). In addition, the Borrowers agree to pay each Fronting Bank for its account a fronting fee of one quarter of one percent (1/4%) per annum in respect of each Letter of Credit issued by such Fronting Bank, for the period from and including the date of issuance of such Letter of Credit to and including the date of termination of such Letter of Credit, computed at a rate, and payable at times, to be determined by such Fronting Bank, Systemax and the Agent. Accrued fees described in clause (i) of the first sentence of this paragraph in respect of each Letter of Credit shall be due and payable monthly in arrears on the last calendar day of each month and on the Termination Date. Accrued fees described in clause (ii) of the first sentence of this paragraph in respect of each Letter of Credit shall be payable at times to be determined by the Fronting Bank, Systemax and the Agent.            SECTION 2.18 Nature of Letter of Credit Fees. All Letter of Credit Fees shall be paid on the dates due, in immediately available funds, to the Agent for the respective accounts of the Agent and the Banks, as provided herein. Once paid, none of the Letter of Credit Fees shall be refundable under any circumstances.            SECTION 2.19 Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default, the Agent and each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and each such Bank to or for the credit or the account of any of the Borrowers against any and all of the obligations of the Borrowers now or hereafter existing under the Loan Documents, irrespective of whether or not such Bank shall have made any demand under any Loan Document and although such obligations may not have been accelerated. Each Bank and the Agent agrees promptly to notify Systemax after any such set-off and application made by such Bank or by the Agent, as the case may be, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank and the Agent under this Section are in addition to other rights and remedies which such Bank and the Agent may have upon the occurrence and during the continuance of any Event of Default.            SECTION 2.20 Security Interest in Letter of Credit Account. The Borrowers hereby assign and pledge to the Agent, for its benefit and for the ratable benefit of the Banks, and hereby grant to the Agent, for its benefit and for the ratable benefit of the Banks, a first priority security interest, senior to all other Liens, if any, in all of the Borrowers' right, title and interest in and to the Letter of Credit Account and any direct investment of the funds contained therein. Cash held in the Letter of Credit Account shall not be available for use by the Borrowers and shall be released to the Borrowers as described in clause (ii)(y) of Section 2.02(b).            SECTION 2.21 Payment of Obligations. Upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrowers, the Banks shall be entitled to immediate payment of such Obligations. The Obligations of the Borrowers hereunder shall be joint and several. SECTION 3. REPRESENTATIONS AND WARRANTIES            In order to induce the Banks to make Loans and issue and/or participate in Letters of Credit hereunder, each of the Borrowers jointly and severally represent and warrant as follows:            SECTION 3.01 Organization and Authority. Each of the Borrowers (i) is a corporation duly organized and validly existing under the laws of the State of its incorporation and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrowers taken as a whole; (ii) has the requisite corporate power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party, and (iii) has all requisite corporate power and authority and the legal right to own, pledge, mortgage and operate its properties, and to conduct its business as now or currently proposed to be conducted.            SECTION 3.02 Due Execution. The execution, delivery and performance by each of the Borrowers of each of the Loan Documents to which it is a party (i) are within the respective corporate powers of each of the Borrowers, have been duly authorized by all necessary corporate action including the consent of shareholders where required, and do not (A) contravene the charter or by-laws of any of the Borrowers, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, without limitation, Regulations T, U or X of the Board of Governors of the Federal Reserve System), or any order or decree of any court or Governmental Authority, (C) conflict with or result in a breach of, or constitute a default, in each case in any material respect, under, any indenture, mortgage or deed of trust or any lease, agreement or other instrument binding on any of the Borrowers or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrowers other than the Liens granted pursuant to this Agreement or the other Loan Documents; and (ii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority except to the extent such consent, authorization or approval has been obtained. This Agreement has been duly executed and delivered by each of the Borrowers. This Agreement is, and each of the other Loan Documents to which each Borrower is or will be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of such Borrower, as the case may be, enforceable against such Borrower, as the case may be, in accordance with its terms.            SECTION 3.03 Statements Made. The information that has been delivered in writing by the Borrowers to the Agent in connection with any Loan Document, and any financial statement delivered pursuant hereto or thereto (other than to the extent that any such statements constitute projections), taken as a whole and in light of the circumstances in which made, contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes projections, such projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by the Borrowers to be reasonable at the time such projections were furnished.            SECTION 3.04 Financial Statements. Systemax has furnished the Banks with copies of the audited consolidated financial statement and schedules of Systemax for the fiscal year ended December 31, 1999. Such financial statements present fairly the financial condition and results of operations of Systemax on a consolidated basis as of such date and for such period; such balance sheets and the notes thereto disclose all liabilities, direct or contingent, of Systemax on a consolidated basis as of the dates thereof required to be disclosed by GAAP and such financial statements were prepared in a manner consistent with GAAP. Except as provided in Schedule 3.04, no material adverse change in the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrowers, taken as a whole, has occurred from that set forth in the Borrower's consolidated financial statements for the fiscal year ended December 31, 1999.            SECTION 3.05 Ownership. Other than as set forth on Schedule 3.05 as of the Closing Date, (i) each of the Persons listed on Schedule 3.05 is a wholly-owned, direct or indirect Subsidiary of Systemax, and (ii) Systemax owns no other Subsidiaries, whether directly or indirectly.            SECTION 3.06 Liens.There are no Liens of any nature whatsoever on any assets of the Borrowers other than: (i) Permitted Liens; (ii) Liens existing on the Closing Date and listed on Schedule 3.06; and (iii) Liens in favor of the Agent and the Banks. None of the Borrowers are parties to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of a Lien on any assets of the Borrowers or otherwise result in a violation of this Agreement other than the Liens granted to the Agent and the Banks as provided for in this Agreement or as otherwise permitted by this Section 3.06.            SECTION 3.07 Compliance with Law.            (a) Except for matters which in the aggregate would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrowers, taken as a whole, (i) the operations of the Borrowers comply in all material respects with all applicable environmental, health and safety statutes and regulations, including, without limitation, regulations promulgated under the Resource Conservation and Recovery Act (42 U.S.C. §§6901 et seq.); (ii) to the Borrowers' knowledge, none of the operations of the Borrowers is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure by the Borrowers is needed to respond to a release of any Hazardous Waste or Hazardous Substance (as such terms are defined in any applicable state or Federal environmental law or regulations) into the environment; and (iii) to the Borrowers' knowledge, the Borrowers do not have any material contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment.            (b) No Borrower is, to the best of its knowledge, in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a material adverse effect on the financial condition, operations, business, properties, assets or prospects of the Borrowers taken as a whole.            SECTION 3.08 Insurance. All policies of insurance of any kind or nature owned by or issued to the Borrowers, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Borrowers.            SECTION 3.09 Use of Proceeds. The proceeds of the Loans shall be used for working capital purposes of the Borrowers.            SECTION 3.10 Litigation. Other than as set forth on Schedule 3.10, there are no suits or proceedings pending or, to the knowledge of the Borrowers, threatened against or affecting any of the Borrowers or any of their respective properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which is reasonably likely to be determined adversely to the Borrowers and, if so determined adversely to the Borrowers, would have a material adverse effect on the financial condition, business, properties, prospects, operations or assets of the Borrowers, taken as a whole.            SECTION 4. CONDITIONS OF LENDING            SECTION 4.01 Conditions Precedent to Initial Loans and Initial Letters of Credit. The obligation of the Banks to make the initial Loans or the Fronting Bank to issue the initial Letter of Credit, whichever may occur first, is subject to the following conditions precedent:            (a) Supporting Documents. The Banks shall have received for each of the Borrowers:           (i) a copy of such entity's certificate of incorporation, as amended, certified as of a recent date by the Secretary of State of the state of its incorporation;           (ii) a certificate of such Secretary of State, dated as of a recent date, as to the good standing of and payment of taxes by that entity and as to the charter documents on file in the office of such Secretary of State; and           (iii) a certificate of the Secretary or an Assistant Secretary of that entity dated the date of the initial Loans or the initial Letter of Credit hereunder, whichever first occurs, and certifying (A) that attached thereto is a true and complete copy of the by-laws of that entity as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of that entity authorizing the Borrowings and Letter of Credit extensions hereunder, the execution, delivery and performance in accordance with their respective terms of this Agreement, the Loan Documents and any other documents required or contemplated hereunder or thereunder and the granting of the security interest in the Letter of Credit Account and other Liens contemplated hereby, (C) that the certificate of incorporation of that entity has not been amended since the date of the last amendment thereto indicated on the certificate of the Secretary of State furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer of that entity executing this Agreement and the Loan Documents or any other document delivered by it in connection herewith or therewith (such certificate to contain a certification by another officer of that entity as to the incumbency and signature of the officer signing the certificate referred to in this clause (iii)).            (b) Amendment to Security Agreement. The Borrowers shall have duly executed and delivered to the Agent an amendment to the Security Agreement.            (c) Opinion of Counsel. The Agent and the Banks shall have received the favorable written opinion of counsel to the Borrowers reasonably acceptable to the Agent, dated the date of the initial Loans or the issuance of the initial Letter of Credit, whichever first occurs, in form and substance satisfactory to the Banks.            (d) Payment of Fees. The Borrowers shall have paid to the Agent the then unpaid balance of all accrued and unpaid fees and expenses due under and pursuant to this Agreement.            (e) Corporate and Judicial Proceedings. All corporate and judicial proceedings and all instruments and agreements in connection with the transactions among the Borrowers, the Agent and the Banks contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Banks, and the Banks shall have received all information and copies of all documents and papers, including records of corporate and judicial proceedings, which the Banks may have reasonably requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate, governmental or judicial authorities.            (f) Information. The Banks shall have received such information (financial or otherwise) as may be reasonably requested by the Banks.            (g) Compliance with Laws. The Borrowers shall have granted the Banks access to and the right to inspect all reports, audits and other internal information of the Borrowers relating to environmental matters, and any third party verification of certain matters relating to compliance with environmental laws and regulations requested by the Banks, and the Banks shall be reasonably satisfied (x) that the Borrowers are in compliance in all material respects with all applicable environmental laws and regulations and (y) that the Borrowers have made adequate provision for the costs of maintaining such compliance.            (h) Closing Documents. The Banks shall have received all documents required by Section 4.01 reasonably satisfactory in form and substance to the Agent.            SECTION 4.02 Conditions Precedent to Each Loan and Each Letter of Credit. The obligation of the Banks to make each Loan and of the Fronting Bank to issue each Letter of Credit, including the initial Loan and the initial Letter of Credit, is subject to the following conditions precedent:            (a) Notice. The Agent shall have received a notice with respect to such borrowing or issuance, as the case may be, as required by Section 2.            (b) Representations and Warranties. All representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date.            (c) No Default. On the date of each Borrowing hereunder or the issuance of each Letter of Credit, no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing.           The request by Systemax for, and the acceptance by the Borrowers of, each extension of credit hereunder shall be deemed to be a representation and warranty by the Borrowers that the conditions specified in this Section have been satisfied or waived at that time. SECTION 5. AFFIRMATIVE COVENANTS            From the date hereof and for so long as any Loan shall be outstanding or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.02(b)), or any amount shall remain outstanding or unpaid under this Agreement, each Borrower agrees that, unless the Banks shall otherwise consent in writing, each Borrower will:            SECTION 5.01 Financial Statements, Reports, etc. Deliver to the Agent and each of the Banks:            (a) within 95 days after the end of each fiscal year, Systemax's consolidated balance sheet and related statement of income and cash flows, showing the financial condition of Systemax on a consolidated basis as of the close of such fiscal year and the results of Systemax's consolidated operations during such year, the consolidated statement of Systemax to be audited for Systemax by Deloitte & Touche or other independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified in any material respect other than with respect to the Cases or a going concern qualification) and to be certified by a Financial Officer of Systemax to the effect that such consolidated financial statements fairly present the financial condition and results of operations of Systemax and its Subsidiaries on a consolidated basis in accordance with GAAP;            (b) within 50 days after the end of each of the first three fiscal quarters, Systemax's consolidated balance sheets and related statements of income and cash flows, showing the financial condition of Systemax and its Subsidiaries on a consolidated basis as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, each certified by a Financial Officer as fairly presenting the financial condition and results of operations of Systemax and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments;            (c) (i) concurrently with any delivery of financial statements under (a) and (b) above, a certificate of a Financial Officer certifying such statements certifying that no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default has occurred, or, if such an Event of Default or event has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) concurrently with any delivery of financial statements under (a) above, a certificate (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations) of the accountants auditing the consolidated financial statements delivered under (a) above certifying that, in the course of the regular audit of the business of Systemax and its Subsidiaries, such accountants have obtained no knowledge that an Event of Default has occurred and is continuing, or if, in the opinion of such accountants, an Event of Default has occurred and is continuing, specifying the nature thereof and all relevant facts with respect thereto;            (d) as soon as available, but no more than 45 days after the end of each month, the unaudited monthly cash flow reports of the Borrowers on a consolidated basis and as of the close of such fiscal month and the results of their operations during such month and the then elapsed portion of the fiscal quarter;            (e) as soon as available, but no more than 30 days after the end of each month for the immediately preceding month, a monthly sales report by division, an accounts receivable and accounts payable aging schedule and a schedule of inventory with respect to the companies set forth on Schedule 5.01, each in form and substance reasonably satisfactory to the Banks;            (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said commission, or with any national securities exchange, as the case may be;            (g) as soon as available and in any event (A) within 30 days after any Borrower or any of their ERISA Affiliates knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Single Employer Plan of the Borrower or such ERISA Affiliate has occurred and (B) within 10 days after any Borrower or any of their ERISA Affiliates knows or has reason to know that any other Termination Event with respect to any such Plan has occurred, a statement of a Financial Officer of such Borrower describing such Termination Event and the action, if any, which such Borrower or such ERISA Affiliate proposes to take with respect thereto;            (h) promptly and in any event within 10 days after receipt thereof by any Borrower or any of their ERISA Affiliates from the PBGC copies of each notice received by such Borrower or any such ERISA Affiliate of the PBGC's intention to terminate any Single Employer Plan of such Borrower or such ERISA Affiliate or to have a trustee appointed to administer any such Plan;            (i) if requested by the Agent, promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan of the Borrower or any of its ERISA Affiliates;            (j) within 10 days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of any Borrower or any of their ERISA Affiliates to make timely payments to a Plan, a copy of any such notice filed and a statement of a Financial Officer of such Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which such Borrower or any of its ERISA Affiliates proposed to take with respect thereto;            (k) promptly and in any event within 10 days after receipt thereof by any Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by such Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by such Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above;            (l) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrowers, or compliance with the terms of any material loan or financing agreements as the Agent, at the request of any Bank, may reasonably request; and            SECTION 5.02 Corporate Existence. Preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except if such failure to preserve the same could not, in the aggregate, reasonably be expected to have a material adverse effect on the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrowers, taken as a whole.            SECTION 5.03 Insurance. (a) Keep its insurable properties insured at all times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses; and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by any of the Borrowers, as the case may be, in such amounts (giving effect to self-insurance) and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses and in the same geographic area; and (b) maintain such other insurance or self insurance as may be required by law.            SECTION 5.04 Obligations and Taxes. Pay all its material obligations promptly and in accordance with their terms and pay and discharge promptly all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become in default, as well as all material lawful claims for labor, materials and supplies or otherwise which, if unpaid, would become a Lien or charge upon such properties or any part thereof; provided, however, that the Borrowers shall not be required to pay and discharge or to cause to be paid and discharged any such obligation, tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings (if the Borrowers shall have set aside on their books adequate reserves therefor).            SECTION 5.05 Notice of Event of Default, etc. Promptly after obtaining knowledge thereof give to the Agent notice in writing of any Event of Default or the occurrence of any event or circumstance which with the passage of time or giving of notice or both would constitute an Event of Default.            SECTION 5.06 Access to Books and Records. Maintain or cause to be maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrowers; and provide the Banks and their representatives access to all such books and records during regular business hours, in order that the Banks may upon reasonable prior notice examine and make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrowers to the Agent or the Banks pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement; and at any reasonable time and from time to time during regular business hours, upon reasonable notice, permit the Banks and any agents or representatives (including, without limitation, appraisers) thereof to visit the properties of the Borrowers and to conduct examinations of and to monitor the Collateral held by the Agent.            SECTION 5.07 Business Plan. By no later than December 15, 2000, deliver to the Banks a business plan for the fiscal year ended December 31, 2001 (the "Business Plan"), in form and substance reasonably satisfactory to the Agent and the Banks.            SECTION 5.08 Appointment of Financial Consultant. In the event the Business Plan delivered pursuant to Section 5.08 is unacceptable to the Banks (in the exercise of their sole discretion), (A) retain (at the Borrowers' sole expense) a consultant reasonably acceptable to the Banks to review the Borrowers' Business Plan and recommend to the Borrowers and to the Banks such modifications to the Business Plan as the consultant reasonably concludes, after consultation with the Borrowers, are advisable and (B) upon reasonable notice cause such consultant to be available to the Agent and the Banks to discuss the Business Plan and the business operations, financial performance and condition of the Borrowers.            SECTION 5.09 Best Efforts Regarding Sale/Leaseback Transaction. Use its commercially reasonable best efforts to enter into sale or sale/leaseback transactions with respect to the properties listed on Schedule 5.09.            SECTION 5.10 Future Subsidiaries. Upon any Person becoming, after the closing date, a Subsidiary of Systemax, Systemax shall notify the Agent of such acquisition and, within 10 days following the consummation of such acquisition, such Person shall, if it is not a foreign Subsidiary, become a party to the Security Agreement and, if it desires, a Borrower, on terms in form and substance reasonably satisfactory to the Agent. In connection with such Security Agreement, such Person shall execute UCC-1 financing statements and other agreements reasonably requested by the Agent in order for the Agent to obtain a perfected first priority security interest in the collateral covered of such Person covered by the Security Agreement. SECTION 6. NEGATIVE COVENANTS            From the date hereof and for so long as any Loan shall be outstanding or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.02(b)) or any amount shall remain outstanding or unpaid under this Agreement, unless the Banks shall otherwise consent in writing, each Borrower will not:            SECTION 6.01 Liens. Incur, create, assume or suffer to exist any Lien on any asset of the Borrowers, now owned or hereafter acquired by any Borrower, other than (i) Permitted Liens; (ii) Liens existing on the Closing Date and listed on Schedule 3.06; (iii) Liens in favor of the Agent and the Banks; and (iv) purchase money Liens granted to secure payment of the Indebtedness permitted pursuant to Section 6.03(iv), provided that each such Lien covers only those assets acquired with the proceeds of such Indebtedness and the principal amount of such Indebtedness does not exceed the purchase price of the relevant capital asset.            SECTION 6.02 Consolidations, Mergers and Sales of Assets. Consolidate with or merge into any another Person, or sell, lease, transfer or assign to any Persons or otherwise dispose of (whether in one transaction or a series of transactions) any portion of its assets (whether now owned or hereafter acquired), except (a) the sale, lease or transfer of assets (i) in the ordinary course of business which are promptly replaced with assets of at least equal value and utility, or (ii) as permitted in Section 6.08, or (b) permit another Person to merger into it, provided, that any Subsidiary of Systemax may liquidate or dissolve voluntarily into, and may merge with and into, Systemax or any other domestic Subsidiary of Systemax and the assets, stock or other equity interest of any Subsidiary of Systemax may be purchased or otherwise acquired by Systemax or any other domestic Subsidiary of Systemax.            SECTION 6.03 Indebtedness. Contract, create, incur, assume or suffer to exist any Indebtedness, except for (i) Indebtedness under the Loan Documents; (ii) Indebtedness incurred prior to the Closing Date and listed on Schedule 6.03; (iii) intercompany indebtedness between the Borrowers; (iv) Indebtedness arising from Investments among the Borrowers that are permitted hereunder; (v) Indebtedness owed to the Banks or any of their banking Affiliates in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds; (vi) Indebtedness that is incurred to purchase an asset and is secured by the Liens referred to in Section 6.01(iv) in an aggregate principal amount not to exceed $5,000,000 at any time outstanding; (viii) Indebtedness constituting Investments permitted by Section 6.07; and (ix) Indebtedness incurred in connection with any interest rate cap agreement, interest rate collar agreement or similar arrangement with a Bank or other lender reasonably acceptable to the Agent.            SECTION 6.04 Guarantees and Other Liabilities. Purchase or repurchase (or agree, contingently or otherwise, so to do) the Indebtedness of, or assume, guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise become liable, directly or indirectly, in connection with the obligations, stock or dividends of any Person (except a Subsidiary), except (i) for any guaranty of Indebtedness permitted under Section 6.03, (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and (iii) for liabilities under leasehold interests that are assigned by any Borrower to the extent permitted by this Agreement.            SECTION 6.05 Dividends; Capital Stock. Declare or pay, directly or indirectly, any dividends or make any other distribution or payment, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock), or set apart any sum for the aforesaid purposes, provided that any Borrower may pay dividends to Systemax.            SECTION 6.06 Transactions with Affiliates. Sell or transfer any property or assets to, or otherwise engage in any other material transactions with, any of its Affiliates (other than any other Borrower), other than in the ordinary course of business at prices and on terms and conditions (taken as a whole) not less favorable to such Borrower than could be obtained on an arm's-length basis from unrelated third parties.            SECTION 6.07 Investments, Loans and Advances. Purchase, hold or acquire any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment in, any other Person (all of the foregoing, "Investments"), except for (i) without limiting clause (vi), ownership by Systemax of the capital stock of each of the Subsidiaries listed on Schedule 3.05; (ii) Permitted Investments; (iii) advances and loans among the Borrowers in the ordinary course of business; (iv) Investments among Systemax, its Subsidiaries and joint ventures in an aggregate principal amount not to exceed $5,000,000 at any time; and (v) investments by Systemax in its Subsidiaries comprising the equity ownership and approved capitalization of such Subsidiaries, provided that notwithstanding anything to the contrary contained herein, no proceeds of any Loan shall be used to make any loans or advances to, or otherwise make investments in, any domestic Subsidiary of Systemax that is not a Borrower hereunder.            SECTION 6.08 Disposition of Assets. Sell or otherwise dispose of any assets (including, without limitation, the capital stock of any Subsidiary) except for (i) sales of inventory, fixtures and equipment in the ordinary course of business, (ii) dispositions of worn out, surplus, obsolete or damaged equipment or other assets no longer used in production, (iii) sale of assets described on Schedule 5.09, (iv) transactions permitted pursuant to Section 6.02, and (v) sales or dispositions of assets other than in the ordinary course of business, provided that 100% of the Net Proceeds thereof are paid over to the Agent for application to the Loans. If no Default or Event of Default has occurred and is continuing, Systemax, during the 30 day period following receipt of any proceeds from the sale of any property or assets pursuant to clause (v) above shall notify the Agent of its good faith intention to use such proceeds for the purpose of purchasing, within 180 days, another asset or property to be used in its business. To the extent that Systemax does not send the notice referred to in the preceding sentence or does not purchase property useful in its business within such 180 day period, the relevant Net Proceeds shall be applied by the Agent as mandatory prepayment of the Loans pursuant to clause (v) above.            SECTION 6.09 Nature of Business. Modify or alter in any material manner the nature and type of its business as conducted at or prior to the Closing Date or the manner in which such business is conducted. SECTION 7. EVENTS OF DEFAULT            SECTION 7.01 Events of Default. In the case of the happening of any of the following events and the continuance thereof beyond the applicable period of grace if any (each, an "Event of Default"):            (a) any material representation or warranty made by any Borrower in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any material statement or representation made in any report, financial statement, certificate or other document furnished by any Borrower to the Banks under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or            (b) default shall be made in the payment of any (i) Letter of Credit Fees or other reimbursable costs and expenses when due, and such default shall continue unremedied for more than three (3) Business Days or (ii) principal or interest on the Loans (including, without limitation, reimbursement obligations or cash collateralization in respect of Letters of Credit), when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or            (c) default shall be made by any Borrower in the due observance or performance of any covenant, condition or agreement contained in Section 6 hereof; or            (d) default shall be made by any Borrower in the due observance or performance of any other covenant, condition or agreement to be observed or performed pursuant to the terms of this Agreement or any of the other Loan Documents and such default shall continue unremedied for more than ten (10) days; or            (e) any Borrower shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code or any other bankruptcy, insolvency, liquidation or similar law of any applicable jurisdiction, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for any Borrower or for a substantial part of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take corporate action for the purpose of effecting any of the foregoing; or            (f) an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Borrower, or of a substantial part of the property or assets of any Borrower, under the Bankruptcy Code or any other bankruptcy, insolvency, receivership or similar Law of any applicable jurisdiction, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any Borrower or for a substantial part of the property of any Borrower or (iii) the winding-up or liquidation of any Borrower; and such proceeding or petition shall continue undismissed for 60 days of an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 30 days; or            (g) a Change of Control shall occur; or            (h) any material provision of any Loan Document shall, for any reason, cease to be valid and binding on any Borrower, or any Borrower shall so assert in any pleading filed in any court; or            (i) any judgment or debt for the payment of money in excess of $2,500,000 not covered by insurance shall be rendered against any Borrower and such judgment shall remain undischarged for a period of 30 days during which a stay of enforcement of such judgment shall not be in effect; or            (j) any non-monetary judgment or order shall be rendered against any Borrower which does or would reasonably be expected to (i) cause a material adverse change in the financial condition, business, prospects, operations or assets of the Borrowers taken as a whole on a consolidated basis, (ii) have a material adverse effect on the ability of any of the Borrowers to perform their respective obligations under any Loan Document, or (iii) have a material adverse effect on the rights and remedies of the Agent or any Bank under any Loan Document, and there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or            (k) any Termination Event described in clauses (iii) or (iv) of the definition of such term shall have occurred and shall continue unremedied for more than 10 days and the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the Insufficiency of any and all other Plans with respect to which such a Termination Event (described in such clauses (iii) or (iv)) shall have occurred and then exist is equal to or greater than $5,000,000; or            (l) (i) any Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the Borrower or such ERISA Affiliate does not have reasonable grounds to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner, and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $5,000,000 allocable to post-petition obligations or requires payments exceeding $500,000 per annum in excess of the annual payments made with respect to such Multiemployer Plans by such Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or            (m) any Borrower or any ERISA Affiliate thereof 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 Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $5,000,000; or            (n) any Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA (other than the failure to make any contribution accrued and unpaid as of the Filing Date) and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $5,000,000; or            (o) it shall be determined that any Borrower is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable environmental laws or regulations the payment of which will have a material adverse effect on the financial condition, business, properties, operations, assets or prospects of the Borrowers, taken as a whole, and the enforcement thereof shall not have been stayed; then, and in every such event and at any time thereafter during the continuance of such event, the Agent may, and at the request of the Banks, shall, by notice to Systemax take one or more of the following actions, at the same or different times (i) declare the Loans then outstanding to be forthwith due and payable, whereupon the principal of the Loans together with accrued interest thereon and any unpaid accrued Letter of Credit, other fees and expenses and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding; (ii) require the Borrowers upon demand to forthwith deposit in the Letter of Credit Account cash in an amount which, together with any amounts then held in the Letter of Credit Account, is equal to the sum of 105% of the then Letter of Credit Outstandings (and to the extent the Borrowers shall fail to furnish such funds as demanded by the Agent, the Agent shall be authorized to debit the accounts of the Borrowers maintained with the Agent in such amount promptly after the giving of the notice referred to above); (iii) set-off amounts in the Letter of Credit Account or any other accounts maintained with the Agent and apply such amounts to the obligations of the Borrowers hereunder and in the other Loan Documents; and (iv) exercise any and all remedies under the Loan Documents and under applicable law available to the Agent and the Banks. SECTION 8. THE AGENT            SECTION 8.01 Administration by Agent. The general administration of the Loan Documents shall be by the Agent. Each Bank hereby irrevocably authorizes the Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto. The Agent shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents.            SECTION 8.02 Payments. Any amounts received by the Agent in connection with this Agreement (other than amounts to which the Agent is entitled pursuant to Sections 8.06, 10.05 and 10.06), the application of which is not otherwise provided for in this Agreement shall be applied, first, in accordance with each Bank's percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b) to pay accrued but unpaid Letter of Credit Fees, and second, in accordance with each Bank's percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b) to pay accrued but unpaid interest and the principal balance outstanding and all unreimbursed Letter of Credit drawings. All amounts to be paid to a Bank by the Agent shall be credited to that Bank, after collection by the Agent, in immediately available funds either by wire transfer or deposit in that Bank's correspondent account with the Agent, as such Bank and the Agent shall from time to time agree.            SECTION 8.03 Sharing of Setoffs. Each Bank agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against the Borrower, including, but not limited to, other security or interest arising from, or in lieu of, such secured claim and received by such Bank under any applicable bankruptcy, insolvency or other similar law, or otherwise, obtain payment in respect of its Loans as a result of which the unpaid portion of its Loans is proportionately less than the unpaid portion of the Loans of any other Bank (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Bank a participation in the Loans of such other Bank, so that the aggregate unpaid principal amount of each Bank's Loans and its participation in Loans of the other Banks shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to the obtaining of such payment was to the principal amount of all Loans outstanding prior to the obtaining of such payment and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that the Banks share such payment pro-rata, provided that if any such non-pro-rata payment is thereafter recovered or otherwise set aside such purchase of participations shall be rescinded (without interest). The Borrowers expressly consent to the foregoing arrangements and agree that any Bank holding (or deemed to be holding) a participation in a Loan may exercise any and all rights of banker's lien, setoff or counterclaim with respect to any and all moneys owing by the Borrowers to such Bank as fully as if such Bank held a Note and was the original obligee thereon, in the amount of such participation.            SECTION 8.04 Liability of Agent.            (a) The Agent when acting on behalf of the Banks, may execute any of its respective duties under this Agreement by or through any of its respective officers, agents, and employees, and neither the Agent nor its directors, officers, agents, employees or Affiliates shall be liable to the Banks or any of them for any action taken or omitted to be taken in good faith, or be responsible to the Banks or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. The Agent and its respective directors, officers, agents, employees and Affiliates shall in no event be liable to the Banks or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Banks or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither the Agent, nor any of its respective directors, officers, employees, agents or Affiliates shall be responsible to any Bank for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents.            (b) Neither the Agent nor any of its respective directors, officers, employees, agents or Affiliates shall have any responsibility to the Borrowers on account of the failure or delay in performance or breach by any Bank or by the Borrowers of any of their respective obligations under this Agreement or any of the Loan Documents or in connection herewith or therewith.            (c) The Agent, in its capacity as Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person.            SECTION 8.05 Reimbursement and Indemnification. Each Bank agrees (i) to reimburse (x) the Agent for such Bank's percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b), of any expenses and fees incurred for the benefit of the Banks under this Agreement and any of the Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Banks, and any other expense incurred in connection with the operations or enforcement thereof not reimbursed by the Borrowers and (y) the Agent for such Bank's percentage of the Maximum Revolving Loan Amount set forth in Section 2.01(b), of any expenses of the Agent incurred for the benefit of the Banks that the Borrowers have agreed to reimburse pursuant to Section 9.05 and has failed to so reimburse and (ii) to indemnify and hold harmless the Agent and any of its directors, officers, employees, agents or Affiliates, on demand, in the amount of its proportionate share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the Loan Documents to the extent not reimbursed by the Borrowers (except such as shall result from their respective gross negligence or willful misconduct).            SECTION 8.06 Rights of Agent. It is understood and agreed that Chase shall have the same rights and powers hereunder (including the right to give such instructions) as the other Banks and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with any Borrower, as though it were not the Agent of the Banks under this Agreement.            SECTION 8.07 Independent Banks. Each Bank acknowledges that it has decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrowers and agrees that the Agent shall bear no responsibility therefor.            SECTION 8.08 Notice of Transfer. The Agent may deem and treat a Bank party to this Agreement as the owner of such Bank's portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such Bank shall have been received by the Agent.            SECTION 8.09 Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and Systemax. Upon any such resignation, the Banks shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to Systemax. If no successor Agent shall have been so appointed by the Banks and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $100,000,000, which shall be reasonably satisfactory to Systemax. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9. MISCELLANEOUS            SECTION 9.01 Notices. Notices and other communications provided for herein shall be in writing (including telegraphic, telex, facsimile or cable communication) and shall be mailed, telegraphed, telexed, transmitted, cabled or delivered to any Borrower at Systemax Inc., 22 Harbor Park Drive, Port Washington, New York 11050, Attention: Mr. Steven M. Goldschein, with a copy to Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038, Attention: Theodore Lynn, Esq., and to a Bank or the Agent to it at its address set forth on the signature pages hereto, or such other address as such party may from time to time designate by giving written notice to the other parties hereunder. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the fifth Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail; or when delivered to the telegraph company, charges prepaid, if by telegram; or when receipt is acknowledged, if by any telegraphic communications or facsimile equipment of the sender; in each case addressed to such party as provided in this Section 9.01 or in accordance with the latest unrevoked written direction from such party; provided, however, that in the case of notices to the Agent notices pursuant to the preceding sentence with respect to change of address and pursuant to Section 2 shall be effective only when received by the Agent.            SECTION 9.02 Survival of Agreement, Representations and Warranties, etc. All warranties, representations and covenants made by any Borrower herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Banks and shall survive the making of the Loans herein contemplated regardless of any investigation made by any Bank or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid. All statements in any such certificate or other instrument shall constitute representations and warranties by each Borrower hereunder with respect to the Borrowers.            SECTION 9.03 Successors and Assigns.            (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Agent and the Banks and their respective successors and assigns. No Borrower may assign or transfer any of their rights or obligations hereunder without the prior written consent of all of the Banks. Each Bank may sell participations to any Person (a "Participant") in all or part of any Loan, or all or part of its portion of the Maximum Revolving Loan Amount, in which event, without limiting the foregoing, the provisions of Section 2.13 shall inure to the benefit of such Participant (provided that such Participant shall look solely to the seller of such participation for such benefits and the Borrowers' liability, if any, under Sections 2.13 and 2.16 shall not be increased as a result of the sale of any such participation) and the pro rata treatment of payments, as described in Section 2.15, shall be determined as if such Bank had not sold such participation. In the event any Bank shall sell any participation, such Bank shall retain the sole right and responsibility to enforce the obligations of each Borrower relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such Bank may grant its Participant the right to consent to such Bank's execution of amendments, modifications or waivers which (i) reduce any Letter of Credit fees payable hereunder to the Banks, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the rate of interest payable hereunder or (iii) extend the maturity of the Borrowers' obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the Bank selling such participation hereunder with respect to the Borrower. A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.16 than the applicable Bank would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Systemax's prior written consent.            (b) Each Bank may assign to one or more Banks or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans at the time owing to it), provided, however, that (i) other than in the case of an assignment to a Person at least 50% owned by the assignor Bank, or by a common parent of both, or to another Bank, the Agent, the Fronting Bank and Systemax must give their respective prior written consent to such assignment, which consent will not be unreasonably withheld, provided that, if an Event of Default has occurred and is continuing, the consent or approval of Systemax shall not be required in connection with any sale by a Bank under this Section 9.03(b), (ii) the aggregate amount of the Loans of the assigning Bank subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall, unless otherwise agreed to in writing by Systemax and the Agent, in no event be less than $5,000,000 or the remaining portion of such Bank's Loans, if less (or $1,000,000 in the case of an assignment between Banks) and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrowers shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be within ten Business Days after the execution thereof (unless otherwise agreed to in writing by the Agent), (A) 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 (B) the Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such Bank shall cease to be a party hereto).            (c) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) 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, such Bank assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such Bank assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance or observance by the Borrowers of any of their obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.04 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Bank assignor 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 Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Bank.            (d) The Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks and the principal amount of the Loans owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Banks shall treat each Person the name of which is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers or any Bank at any reasonable time and from time to time upon reasonable prior notice.            (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and the assignee thereunder together with the fee payable in respect thereto, the Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled and consented to by the Agent and the Fronting Bank (to the extent such consent is required hereunder), (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt written notice thereof to Systemax (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.            (f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.03, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Bank by or on behalf of the Borrowers; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 9.04.            SECTION 9.04 Confidentiality. Each Bank agrees to keep any information delivered or made available by the Borrowers to it confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Bank from disclosing such information (i) to any of its Affiliates or to any other Bank, provided such Affiliate agrees to keep such information confidential to the same extent required by the Banks hereunder, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority, (iv) which has been publicly disclosed other than as a result of a disclosure by the Agent or any Bank which is not permitted by this Agreement, (v) in connection with any litigation to which the Agent, any Bank, or their respective Affiliates may be a party to the extent reasonably required, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel and independent auditors, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 9.03(f). Each Bank shall use reasonable efforts to notify Systemax of any required disclosure under clause (ii) of this Section.            SECTION 9.05 Expenses. Whether or not the transactions hereby contemplated shall be consummated, the Borrowers agree to pay all reasonable and documented out-of-pocket expenses incurred by the Agent and the Banks (including but not limited to the reasonable fees and disbursements of Morgan, Lewis & Bockius LLP, special counsel for the Agent, any other counsel that the Agent shall retain and any internal or third-party appraisers, consultants and auditors advising the Agent) in connection with the preparation, execution, delivery and administration of this Agreement and the other Loan Documents, the making of the Loans and the issuance of the Letters of Credit, the perfection of the Liens contemplated hereby, the reasonable and customary costs, fees and expenses internally allocated charges and expenses relating to the Agent's monthly and other periodic field audits, monitoring of assets (including reasonable and customary internal collateral monitoring fees) and publicity expenses, and all reasonable out-of-pocket expenses incurred by the Banks and the Agent in the enforcement or protection of the rights of any one or more of the Banks or the Agent in connection with this Agreement or the other Loan Documents, including but not limited to the reasonable fees and disbursements of any counsel for the Banks and the Agent. Such payments shall be made on demand upon delivery of a statement setting forth in reasonable detail such costs and expenses. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and/or the payment of the Loans.            SECTION 9.06 Indemnity. Each of the Borrowers agrees to indemnify and hold harmless the Agent and the Banks and their directors, officers, employees, agents and Affiliates (each an "Indemnified Party") from and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities to the extent that they are determined by the final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and/or the payment of the Loans.            SECTION 9.07 CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND (TO THE EXTENT APPLICABLE) THE BANKRUPTCY CODE.            SECTION 9.08 No Waiver. No failure on the part of the Agent or any of the Banks to exercise, and no delay in exercising, any right, power or remedy hereunder or any of the other Loan Documents 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. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.            SECTION 9.09 Extension of Maturity. Should any payment of principal of or interest or any other amount due hereunder become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension.            SECTION 9.10 Amendments, etc. No modification, amendment or waiver of any provision of this Agreement or any of the other Loan Documents, and no consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing and signed by each of the Banks, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any of the Borrowers shall entitle the Borrowers to any other or further notice or demand in the same, similar or other circumstances. Each assignee under Section 9.03(b) shall be bound by any amendment, modification, waiver, or consent authorized as provided herein, and any consent by a Bank shall bind any Person subsequently acquiring an interest on the Loans held by such Bank. No amendment to this Agreement shall be effective against any of the Borrowers unless signed by such Borrower, as the case may be.            SECTION 9.11 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.            SECTION 9.12 Headings. Section headings used herein are for convenience only and are not to affect the construction of or be taken into consideration in interpreting this Agreement.            SECTION 9.13 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument.            SECTION 9.14 Prior Agreements. This Agreement represents the entire agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between any Borrower and any Bank or the Agent prior to the execution of this Agreement which relate to Loans to be made hereunder shall be replaced by the terms of this Agreement.            SECTION 9.15 Further Assurances. Whenever and so often as reasonably requested by the Agent or any Bank, each Borrower will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agent and the Banks all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents.            SECTION 9.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT AND EACH BANK HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. [SIGNATURE PAGES FOLLOW]            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written.   BORROWERS: SYSTEMAX INC. CONTINENTAL DYNAMICS CORP. GLOBAL COMPUTER SUPPLIES INC. MIDWEST MICRO CORP. DARTEK CORP. NEXEL INDUSTRIES INC. TIGER DIRECT INC. By: /s/ Steven M. Goldschein                                                               Title: CFO THE CHASE MANHATTAN BANK,   Individually and as Agent By: /s/ Robert Addea                                                                          Title: 395 North Service Road Suite 302 Melville, New York 11747 Attn: Mr. Robert Addea,           Vice President THE BANK OF NEW YORK By: /s/ Anita Schmidt                                                                           Title: 1401 Franklin Avenue Garden City, New York 11530 Attn: Ms. Anita Schmidt,           Vice President Exhibit A to the Revolving Credit and Guaranty Agreement ASSIGNMENT AND ACCEPTANCE Dated:                  ,                  Reference is made to the Revolving Credit Agreement, dated as of November 30, 2000 (as restated, amended, modified, supplemented and in effect from time to time, the “Credit Agreement”), among SYSTEMAX INC. (“Systemax”) and the subsidiaries of Systemax named therein (collectively, the “Borrowers”), the Banks named therein and THE CHASE MANHATTAN BANK, as agent for the Banks (the “Agent”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. This Assignment and Acceptance between the Assignor (as set forth on Schedule I hereto and made a part hereof) and the Assignee (as set forth on Schedule I hereto and made a part hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and made a part hereof).   1.       The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date, an undivided interest (the “Assigned Interest”) it) and to all the Assignor’s rights and obligations under the Credit Agreement in a principal amount as set forth on Schedule 1.   2.      The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other of the Loan Documents or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes Do representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, or the performance or observance by the Borrower of any of its obligations under the Credit Agreement, any of The other Loan Documents or any other instrument or document furnished pursuant thereto; and (iii) requests that the Agent evidence the Assigned Interest by recording the information contained on Schedule I in the Register which reflects the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date).   3.      The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance and that it is an Eligible Assignee; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Bank and based on such documents andinformation as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are. required to be performed by it as a Bank; (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee’s exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement; and (vii) has supplied the information requested on the administrative questionnaire heretofore supplied by the Agent.   4.      Following the execution of this Assignment and Acceptance, it will be delivered to the Agent, together with a processing and recordation fee of $3,500, for acceptance by it and recording by the Agent pursuant to Section 9.03 of the Credit Agreement, effective as of the Effective Date (which Effective Date shall, unless otherwise agreed to by the Agent, be within ten Business Days after the execution of this Assignment and Acceptance).   5.      Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date by the Agent or with respect to the making of this assignment directly between themselves.   6.      From and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement provided that Assignor hereby represents and warrants that the restrictions set forth in Section 10.03 of the Credit Agreement pertaining to the minimum amount of assignments have been satisfied.   7.      This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York,            IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on Schedule I hereto. Schedule I to Assignment and Acceptance Respecting the Revolving Credit Agreement, dated as of November 30, 2000, among Systemax Inc. and the Subsidiaries of Systemax named therein, the Banks named therein’, and The Chase Manhattan Bank, as Agent   Legal Name of Assignor: Legal Name of Assignee: Effective Date of Assignment: Principal Amount Assigned $______________ Percentage Assigned (to at least 8 decimals). shown as a percentage of aggregate principal amount of all Banks ___________________% CONSENTED TO AND ACCEPTED: THE CHASE MANHATTAN BANK, as Agent By                                   Name: Title:                                      , as Fronting Bank By                                   Name: Title: SYSTEMAX INC. By                                   Name: Title:                                   , as Assignor By                                   Name: Title:                                       , as Assignee By                                   Name: Title: Schedule 3.04 to Revolving Credit and Guaranty Agreement           Since December 31, 1999 there has been a material adverse change in the financial condition of the Borrowers, Reference is made to Systemax’s quarterly report on Form 1OQ for the quarterly ended September 30, 2000 and Systemax’s amended quarterly reports on Form 10-Q/A for the quarterly periods ended March 31, 2000 and June 30, 2000 as filed with the Securities and Exchange Commission. Schedule 3.05 to Revolving Credit And Guaranty Agreement Subsidiaries to Systemax Inc. (Delaware) Domestic Global Computer Supplies Inc. (NY) Continental Dynamics Corp (NY) Dartek Corp. (DEL) Nexel Industries Inc (NY) Papier Catalogues Inc (NY) Catalog Data Systems Inc (NY) BTSA INC (NY) Millennium Falcon Corp (DEL) Tiger Direct Inc (DEL) Tek Serv Corp (DEL) Midwest Micro Corp (DEL) ZAC Corp (DEL) Systemax Retail Sales Inc. (DEL) International Misco, Germany Inc. (NY) Misco Italy Computer Supplies SPA (ITALY) HCS Global SA (FRANCE) Systemax Europe Ltd. (UK) SN Option PC Sarl (France) Misco Computer Supplies LTD (UK) Global Directmail BV (Netherlands) Simply Computers Ltd. (UK) Dabus Dataprodukter AB (SWEDEN) Schedule 3.06 To Revolving Credit And Guaranty Agreement Liens Existing on the Closing Date Secured Party Ingram Micro, Inc. Hewlett-Packard Company Grava & Associates d/b/a Direct Source Lucent Technologies Pitney Bowes Credit Corporation Star Bank Tech Data Corporation Pitney Bowes Credit Corp. Debtor Tiger Direct Inc. Tiger Direct Inc. Tiger Direct Inc. Tiger Direct Inc. Tiger Direct Inc. Midwest Micro Corp. Tiger Direct Inc. Misco America Collateral Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Specific Inventory and Proceeds Schedule 3. 10 to Revolving Credit And Guaranty Agreement Material Litigation None Schedule 5.01 to Revolving Credit and Guaranty Agreement SYSTEMAX INC. CONTINENTAL DYNAMICS CORP. GLOBAL COMPUTER SUPPLIES INC. MIDWEST MICRO CORP. TIGER DIRECT INC. Schedule 5.10 to Revolving Credit and Guaranty Agreement            Office and warehouse facility located in Suwanee, Georgia owned by Continental Dynamics Corp. Schedule 6.03 to the Revolving Credit and Guaranty Agreement Indebtedness 1. Systemax Inc. guaranty of indebtedness of Systemax Europe Limited to Barclays Bank PLC under fifteen million pounds Sterling loan facility 2. IBM Inventory Financing Facility 3. Oracle Software Finance Agreement 4. Deutsche Financial Agreement for Wholesale Financing, together with the related letter of credit
>   > >   > > -------------------------------------------------------------------------------- > >   > >   > > -------------------------------------------------------------------------------- > >   > > ASSET SALE AGREEMENT > > by and among > > HARRIS CORPORATION, as Seller > > > > and > > > > TELTRONICS, INC., as Buyer > >   > > -------------------------------------------------------------------------------- > > > > > > > > Dated as of June 30, 2000 > > > > > > > > -------------------------------------------------------------------------------- > > Relating to the sale of certain of the assets of Harris Corporation > used in its "Enhanced Services Business Unit" > > > > > > > >   > >   > >   > >   > > > >   > > Asset Sale Agreement > > > > Table of Contents > > > >   > > (This Table of Contents is for convenience of reference only and is not > intended to define, limit or describe the scope or intent of any provision of > this Agreement.) > > > >   > > > Page         > > > > > > ARTICLE I > DEFINITIONS; RULES OF CONSTRUCTION > > > > Section 1.1 > > Definitions > > ..................................................................................................... >  1 Section 1.2 > > Location of Additional Defined Terms > > .........................................................  6 Section 1.3 > > Rules of Construction > > .................................................................................... >  7 > > > > ARTICLE II > TERMS OF THE TRANSACTION > > Section 2.1 Transfer of > Assets......................................................................................... >  8 Section 2.2 Excluded > Assets............................................................................................ >  9 Section 2.3 Assumption of > Liabilities.............................................................................. > 10 Section 2.4 > License.......................................................................................................... > 10 > > > > ARTICLE III > THE PURCHASE PRICE; CLOSING > > > > Section 3.1 Purchase Price > ............................................................................................. > 11 Section 3.2 The Closing > .................................................................................................. > 11 Section 3.3 Instrument of Conveyance and Transfer; Possession; Assumption > ........... 11 Section 3.4 Further Assurances > ...................................................................................... > 11 Section 3.5 Tax Allocation > ............................................................................................. > 12 > > > > ARTICLE IV > REPRESENTATIONS AND WARRANTIES OF THE SELLER > > > > Section 4.1 Organization; Authority > .............................................................................. > 12 Section 4.2 Authorization of Transaction; Non-Contravention > ..................................... 12 Section 4.3 Consents and Approvals > .............................................................................. > 13 Section 4.4 Title to Property > ........................................................................................... > 13 Section 4.5 Compliance with Law; Permits > .................................................................... 13 > Section 4.6 Legal Proceedings > ........................................................................................ > 13 Section 4.7 > > Intellectual Property > > .................................................................................... > 14 > >   > > i > >   > >   > > Section 4.8 Assigned Contracts and Commitments > ....................................................... 14 Section 4.9 > Inventory > .................................................................................................. > 14 Section 4.10 Taxes > ....................................................................................................... > 14 Section 4.11 Finders or Brokers > ..................................................................................... > 14 Section 4.12 Express Disclaimer > ...................................................................................... > 14 Section 4.13 RESERVED > ............................................................................................... > 14 Section 4.14 ERISA and Benefits > .................................................................................... > 14 > > > > ARTICLE V > REPRESENTATIONS AND WARRANTIES OF THE BUYER > > Section 5.1 Organization; > Authority.............................................................................. > 15 Section 5.2 Authorization of Transaction; > Non-Contravention....................................... 15 Section 5.3 > Consents and > Approvals............................................................................. > 16 Section 5.4 Legal > Proceedings.................................................................................... > 16 Section 5.5 Finders or > Brokers...................................................................................... > 16 Section 5.6 Buyer's > Examination................................................................................... > 16 Section 5.7 > Disclaimer................................................................................................... > 16 Section 5.8 Non-Interference with > Suppliers.................................................................. 17 > > > > ARTICLE VI > COVENANTS PENDING THE CLOSING > > > > Section 6.1 Approvals; Consents > ................................................................................. > 17 Section 6.2 Commercially Reasonable Efforts > ............................................................... 17 > > > > ARTICLE VII > RESERVED > > > >   > > ARTICLE VIII > RESERVED > > > >   > > ARTICLE IX > ADDITIONAL COVENANTS OF THE PARTIES > > > > Section 9.1 Publicity > ....................................................................................................... > 17 Section 9.2 Cooperation > ................................................................................................ > 18 Section 9.3 Access to Information > ................................................................................... > 18 Section 9.4 Cooperation in Litigation > ............................................................................. > 18 Section 9.5 Performance of Assigned Contracts > ............................................................ 18 Section 9.6 > Employees and Employee Benefit Plans > ..................................................... 18 Section 9.7 Personnel > Records > ....................................................................................... > 20 Section 9.8 Substitution of Surety Bonds and Letters of Credit > ..................................... 20 Section 9.9 Non-Compete > ............................................................................................. > 20 > > > > > > ii > > > > Section 9.10 Accounts Receivables Collection > ................................................................ 20 > > Section 9.11 > > Nonassignable Leases > .................................................................................. > 20 Section 9.12 No Set-Off > .................................................................................................. > 21 Section 9.13 Real Property Subleases > ............................................................................... > 21 Section 9.14 Source Code/OCR Generator > ....................................................................... 21 > Section 9.15 Prepaid Deposits > .......................................................................................... > 21 Section 9.16 Performance Bond > ....................................................................................... > 21 Section 9.17 Digital Telephone Systems, Inc. > .................................................................. 21 > > ARTICLE X > RESERVED > > > > > >   > > ARTICLE XI > INDEMNIFICATION > > > > > > Section 11.1 Indemnification by the Seller > ....................................................................... 22 > Section 11.2 Indemnification by the Buyer > ....................................................................... 22 > Section 11.3 Matters Involving Third Parties, Etc. > ........................................................... 22 Section 11.4 > Limits; Sole Remedy, Etc. > ........................................................................... 24 > Section 11.5 Mitigation > .................................................................................................... > 24 > > > > ARTICLE XII > RESERVED > >   > > ARTICLE XIII > MISCELLANEOUS PROVISIONS > > Section 13.1 Costs and Expenses > ................................................................................. > 25 Section 13.2 Survival of Representations and Warranties; and Covenants > ................. 25 Section 13.3 Governing Law > ........................................................................................ > 25 Section 13.4 Notices > ................................................................................................ > 25 Section 13.5 Severability > ......................................................................................... > 25 Section 13.6 Dispute Resolution > .................................................................................. > 26 Section 13.7 No Third Party Beneficiary > ....................................................................... 26 > Section 13.8 Sales and Transfer Taxes > .......................................................................... 27 > Section 13.9 Waiver > ..................................................................................................... > 27 Section 13.10 Assignment; Amendment > .......................................................................... 27 > Section 13.11 Entire Agreement > ....................................................................................... > 27 Section 13.12 Counterparts > ............................................................................................. > 27 Section 13.13 No Set-Off > ............................................................................................. > 27 Section 13.14 Limitation of Liability > ................................................................................ > 27 Section 13.15 Independent Contractor; Reliance on Counsel > ...................................... 27 > > > > > iii > > > > Section 13.16 No Partnership or Joint Venture, etc. > ......................................................... 28 Section 13.17 > Specific Performance > .................................................................................. > 28 Section 13.18 Audit Fees > ........................................................................................ > 28       Signatures > ........................................................................................ > 29 > > > > > > > > iv > > > >   > > EXHIBITS > > > > Exhibit A > > - > > Form of Assumption Agreement > > Exhibit B > > - > > Form of Bill of Sale > > Exhibit C > > - > > Form of Contract Assignment > > Exhibit D > > - > > Forms of Intellectual Property Assignments > > Exhibit E > > - > > RESERVED > > Exhibit F > > - > > Form of License Agreement > > Exhibit G > > - > > Form of Lease Assignment > > Exhibit H > > - > > Form of Transition Services Agreement > > Exhibit I > > - > > RESERVED > > Exhibit J > > - > > Form of Supply Agreement > > Exhibit K > > - > > Form of Subcontract Agreement > > Exhibit L > > - > > Form of Secured Promissory Note > > Exhibit M > > - > > Form of Security Agreement > > > >   > > SCHEDULES > > > > Schedule 2.1(a)(i) > > -- > > Equipment > > Schedule 2.1(a)(ii) > > -- > > Inventory > > Schedule 2.1(a)(iii) > > -- > > Intellectual Property List > > Schedule 2.1(a)(iv) > > -- > > Computer Software > > Schedule 2.1(a)(vii) > > -- > > Assigned Contracts > > Schedule 2.1(c) > > -- > > Customer Furnished Property > > Schedule 2.2(f) > > -- > > Third Party Software > > Schedule 2.3 > > -- > > Additional Assumed Liabilities > > > > v > > > > > > > > > > ASSET SALE AGREEMENT > > > >   > >           THIS ASSET SALE AGREEMENT > > is made and entered into as of June 30, 2000 (this "Agreement"), by and > between HARRIS CORPORATION, a Delaware corporation acting through its Network > Support Division (the "Harris") or ("Seller") and on the one hand, and > TELTRONICS, INC., a Delaware corporation ("Teltronics") ("Buyer") on the other > hand. > > > > > >   > > W  I  T  N  E  S   E  T  H : > > > >           WHEREAS, Seller through its Network Support Division, is engaged, in > part, in the design, manufacture and distribution of 20-20 Switch Technology > and ClearView Call Center Technology the business which is otherwise known as > its Enhanced Services Business Unit; and > > > >           WHEREAS, subject to the terms and conditions set forth in this > Agreement, the Seller desires to sell to the Buyer for the consideration set > forth below, and the Buyer desires to purchase from Seller, certain of the > assets, business, rights and goodwill of the Seller used in the Enhanced > Services Business Unit (defined below), all as more fully described in Section > 2.1, and the Seller desires to cause the Buyer to assume, and the Buyer has > agreed to assume from the Seller, certain specified liabilities and > obligations of the Seller arising in connection with the Enhanced Services > Business Unit all as more fully described in Section 2.3. > > > >           NOW, THEREFORE, in reliance upon the representations, warranties and > agreements made herein and in consideration of the premises and covenants > herein contained and for other good and valuable consideration, the receipt > and sufficiency of which is hereby acknowledged, the parties hereto, intending > to be legally bound, hereby agree as follows: > > > >   > > ARTICLE I > DEFINITIONS; RULES OF CONSTRUCTION > > > >           Section 1.1     Definitions. Except as otherwise specified or as the > context may otherwise require, in addition to the capitalized terms defined > elsewhere herein, the following terms shall have the respective meanings set > forth below whenever used in this Agreement: > > > >           "Affiliate" means, with respect to any designated Person, any other > Person directly or indirectly, through one or more intermediaries, > controlling, or controlled by, or under direct or indirect common control > with, such designated Person. For purposes of this definition, "control" > (including, with correlative meanings, 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 stock, other equity interest or by contract or otherwise. > > > >           "Assumption Agreement" means the Assumption Agreement, to be dated > the Closing Date, executed by the Seller and the Buyer, substantially in the > form of Exhibit A hereto. > >   > > 1 > >   > > > >           "Bill of Sale" > > means the Bill of Sale, to be dated the Closing Date, executed by the Seller > and accepted by the Buyer, substantially in the form of Exhibit B hereto. > > > > > >           "Business Day" means any day which is not a Saturday, Sunday or a > day on which banking institutions in the State of Florida are authorized by > law to close. > > > >           "ClearView Call Center Technology" means the software application > designed to run on or in conjunction with specific hardware and operating > platforms to 1) provide automated processing, routing, queuing, queue > treatments, tracking, interactive response, recording and reporting on a > variety of customer communications such as inbound and outbound telephone > calls, e-mail, voice messaging fax, text chat and web-based callback; 2) > organize incoming customer communications requests into skills-based queues; > call distribution based on agent skill profile, availability, station > capability, and skill priority; and 3) use business data such as account > status, customer profile and last agent contact to enable more efficient > routing of customer communications. > > > >           "Code" means the Internal Revenue Code of 1986, as amended, and the > rules and regulations promulgated thereunder. > > > >           "Contemplated Transaction" means the transactions contemplated by > this Agreement and the other Transaction Documents, including (a) the sale of > the Transferred Assets, (b) the execution, delivery and performance of this > Agreement and other Transaction Documents, (c) the Buyer's acquisition of the > Transferred Assets, and (d) the Buyer's assumption of the Assumed Liabilities. > > > >           "Contract Assignment" means the Assignment of Contracts, to be dated > the Closing Date, executed by the Buyer and the Seller, substantially in the > form of Exhibit C hereto. > > > >           "Damages" means any and all damages, losses, liabilities, > obligations, penalties, fines, claims, litigation, demands, defenses, > judgments, suits, proceedings, costs, disbursements or expenses (including, > without limitation, reasonable attorneys' and experts' fees and disbursements) > of any kind or of any nature whatsoever (whether based in common law, statute > or contract; fixed or contingent; known or unknown) suffered or incurred by a > party hereto, its employees, Affiliates, successors and assigns. > > > >           "Disclosure Statement" means the disclosure statement dated the date > of this Agreement made by Buyer and Seller to each other. > > > >           "Employee Benefit Plans" means any employee benefit plan as defined > in Section 3(3) of the Employee Retirement Security Act of 1974, as amended. > > > >           "Enhanced Services Business Unit" means the business of designing, > manufacturing and distribution of the 20-20 Switch Technology and ClearView > Call Center Technology as it exists as of the Closing Date. > >   > > 2 > >   > > > >           "ERISA" means the Employee Retirement Income Security Act of 1974, > as amended. > > > >           "ERISA Affiliate" means any (a) corporation which at any time on or > before the Closing Date is or was a member of the same controlled group of > corporations (within the meaning of section 414(b) of the Code) as the Seller, > (b) partnership or other trade or business (whether or not incorporated) which > at any time on or before the Closing Date is or was under common control > (within the meaning of section 414 (c) of the Code) with the Seller, and (c) > any entity which at any time on or before the Closing Date is or was a member > of the same affiliated service group (within the meaning of section 414(b) of > the Code) as the Seller, any corporation described in clause (a) above or any > partnership or trade or business described in clause (b) above. > > > >           "GAAP" means United States generally accepted accounting principles, > consistently applied. > > > >           "Governmental Body" means any Federal, state, municipal, local or > other governmental body, department, commission, board, bureau, agency or > instrumentality, political subdivision or taxing authority, domestic or > foreign. > > > >           "Intellectual Property Assignment" means the patent and trademark > assignments, to be dated the Closing Date executed by Buyer and Seller, > substantially in the form as those in Exhibit D. > > > >           "Intellectual Property Rights" means Patents, Trademarks, Know-how > trade secrets, copyrights, and other intellectual property used exclusively in > the Enhanced Services Business Unit, subject to any non-exclusive licenses > [granted back] existing at Closing (i) in connection with the sale, use, or > enhancement of products by Seller's customers or joint ventures of the > Enhanced Services Business Unit; or (ii) in connection with corporate wide > patent cross-licenses between Harris, or its subsidiaries, and other > companies. > > > >           "Knowledge" an individual will have "Knowledge" of a particular fact > or other matter if such individual is actually aware of such fact or other > matter without independent investigation and a Person (other than an > individual) will have "Knowledge" of a particular fact or other matter if an > individual who is serving as a director, officer or manager of such person has > actual awareness of such fact or other matter without independent > investigation. For purposes of this Agreement, references to the Knowledge of > the Seller or Seller's Knowledge shall refer to the actual knowledge of the > individuals listed in the Disclosure Statement. > > > >           "Lease Assignment" means the lease assignment, to be dated the > Closing Date, executed by the Buyer and Seller, substantially in the form of > Exhibit G hereto. > > > >           "License Agreement" means the License Agreement, to be dated the > Closing Date, executed by Buyer and Seller, substantially in the form of > Exhibit F. > > > >           "Lien or Other Encumbrance" means any mortgage, lien (statutory or > other), pledge, assignment, deed of trust, hypothecation, adverse claim, > charge, security interest, or other encumbrance of any kind or nature, or any > interest or title of any vendor, lessor, lender or other > >   > > 3 > >   > > secured party under any conditional sale, capital lease, trust receipt or > other title retention agreement. > >           "Materially Adverse"; Material Adverse Change"; "Material Adverse > Effect" means any change or effect that is materially adverse to the business, > assets, results of operations or financial condition of the business > operations of the Enhanced Services Business Unit taken as a whole. Any > adverse change, event or effect that is proximately caused by conditions > affecting the United States or international economy generally shall not be > taken into account in determining whether there has been or would be a > Material Adverse Change or Material Adverse Effect. Any adverse change, event, > or effect that is proximately caused by any industry which competes with the > parties herein, shall not be taken into account in determining whether there > has been or would be a Material Adverse Change or Material Adverse Effect > (unless such conditions adversely affect in a materially disproportionate > manner). Any adverse change, event, or effect that is proximately caused by > the announcement or pendency of the transaction contemplated herein shall not > be taken into account in determining whether there has been or would be a > Material Adverse Change or Material Adverse Effect. > > > >           "Order" means any order, writ, injunction, decree, judgment, award, > determination, directive or demand of a court, arbitrator, tribunal or other > Governmental Body. > > > >           "Patents" means the patents and patent applications listed in > Schedule 2.1(a)(iii) and all continuations, continuations-in-part, divisions, > reissues and re-exams based thereon. > > > >           "Pension Plan" means any pension plan, as defined in section 3(2) of > ERISA, applied without regard to the exceptions from coverage contained in > section 4(b)(4) or 4(b)(5) ERISA. > > > >           "Permitted Liens" shall mean Liens or Other Encumbrances in respect > of (i) liabilities that constitute Assumed Liabilities, (ii) Taxes not yet due > and payable, (iii) other claims or Liens or Other Encumbrances that do not > restrict the use of the subject asset. > > > >           "Permits" means all permits, licenses, orders, approvals, > franchises, registrations and any other authorizations of any Governmental > Body. > > > >           "Person" means any individual, corporation, partnership, limited > liability company, joint venture, association, trust, unincorporated > organization, entity or any Governmental Body or political subdivision thereof > or any other entity or organization. > > > >           "Plan" means any Pension Plan or any Welfare Plan. > > > >           "Requirement of Law" means any statute, law, ordinance, rule, > regulation, order, decree, judicial or administrative decision or [published > or written] directive. > > > >           "Salt Lake City Lease" means the commercial lease agreement > (including any renewals, modifications or extensions thereof) dated April 27, > 1999, between Mechan Parkview Associates, L.L.C., Fong Parkview Associates, > L.L.C., dba Parkview Plaza Office Building as lessor and Harris > >   > > 4 > >   > > Corporation, as lessee for the rental of approximately 5,800 square feet of > space located at 2180 South 1300 East, Salt Lake City, Utah 84106. > >           "Secured Promissory Note" means the secured, non-negotiable and > interest bearing promissory note to be dated the Closing Date executed and > delivered by the Buyer in favor of Seller substantially in the form of Exhibit > L. > > > >           "Security Agreement" means the Security Agreement between Buyer as > Debtor and Seller as Secured Party securing the Secured Promissory Note in > substantially in the form of Exhibit M. > > > >           "Subcontract Agreement" means the Subcontract Agreement to be dated > the Closing Date executed by the Seller and Buyer, substantially in the form > of Exhibit K, hereto. > > > >           "Supply Agreement" means the Supply Agreement, to be dated the > Closing Date, executed by the Seller and Buyer, substantially in the form of > Exhibit J , hereto. > > > >           "Tangible Personal Property" means, collectively, the Equipment, the > Inventory and the Records (all as defined in Section 2.1(a)). > > > >           "Tax Returns" means all returns, reports, estimates, declarations, > information returns and statements of any nature regarding Taxes for any > period, including any schedule or attachment thereto, and including any > amendment thereto. > > > >           "Taxes" means all taxes of any kind, including, without limitation, > those on, or measured by or referred to as income, gross receipts, license, > payroll, employment, excise, severance, stamp, occupation, premium, > environmental, customs duties, capital stock, franchise, profits, withholding, > social security, unemployment, disability, real property, personal property, > ad valorem, import or export duties, sales, use, transfer, registration, value > added, alternative, estimated or any other tax of any kind whatsoever, > including any interest, penalty, fine or addition thereto, whether disputed or > not of any Federal, state, local or foreign Governmental Body or other taxing > authority. > > > >           "Trademarks" means registered and unregistered trademarks and trade > names listed on Schedule 2.1(a)(iii). > > > >           "Transaction Documents" means this Agreement, the Assumption > Agreement, the Bill of Sale, the Contract Assignment, the Intellectual > Property Assignment, License Agreement, Lease Assignment, Transition Services > Agreement, Distribution Agreement, Supply Agreement, Subcontract Agreement and > Accounts Receivable Assignment. > > > >           "Transition Services Agreement" means the Transition Services > Agreement, to be dated the Closing Date, executed by Seller and Buyer, > substantially in the form of Exhibit H. > > > >           "Welfare Plan" means any welfare plan, as defined in section 3(1) of > ERISA, applied without regard to the exceptions from coverage contained in > section 4(b)(4) or 4(b)(5) of ERISA. > >   > > 5 > >   > > > >           "Whitestone Lease" means the commercial lease agreement (including > any renewals, modifications or extensions thereof) dated December 13, 1993, > and amended September 1995 and March 23, 1999, between Pistilli Landmark > Plaza, L.L.C. as lessor and Harris Corporation, as lessee > > for the rental of approximately 6,200 square feet of space located at 19-02 > Whitestone Expressway, Whitestone, New York 11357. > > > >           "20-20 Switch Technology" means the hardware and software based, > non-blocking digital switching functionality that supports network and > standalone private voice and data communications. Standard features include > call forward, call waiting, callback, conference, privacy and transfer. > Enhanced services include advanced conference capabilities, announcement > services, and computer-telephone integration links that allow the development > of computer supported telephony applications. > > > >           Section 1.2     Location of Additional Defined Terms. In addition to > the terms defined in Section 1.1, set forth below is a list of terms defined > elsewhere in this Agreement. > > > >   > >             Term >      Section >   "AAA" Section 13.6   "Accounts Receivable" Section 2.1(a)(vi)   "Antitrust > Division" Section 10.1   "Assigned Contracts" Section 2.1(a)(vii)   "Assumed > Liabilities" Section 2.3   "Buyer' Damages" Section 11.1(b)   "Buyer's Savings > Plan" Section 9.6(i)   "Closing" Section 3.2   "Closing Date" Section 3.2   > "Computer Software" Section 2.1(a)(v)   "Equipment" Section 2.1(a)(I)   > "Excluded Assets" Section 2.2   "FTC" Section 10.1   "Indemnified Party" > Section 11.3   "Indemnitor" Section 11.3   "Inventory" Section 2.1(a)(ii)   > "Inventory Count" Section 3.2(b)   "Hart-Scott Rodino Act" Section 10.1 > > > > > > 6 > >             Term >      Section >   "Know-how" Section 2.1(a)(xi)   "List of Assets" Section 4.13   "Market" > Section 9.9   "Material Assigned Contracts" Section 12.1   "Materially > Adverse" Section 4.1   "Materially Adverse Change" Section 4.1   "Materially > Adverse Effect" Section 4.1   "Outstanding Accounts Receivables" Section 9.10 >   "Prepaid Expenses" Section 2.1(a)(v)   "Purchase Price" Section 3.1   > "Records" Section 2.1(a)(vii)   "Seller" Preamble   "Seller's Damages" Section > 11.2(b)   "Seller's Savings Plan" Section 9.6(i)   "Transferred Assets" > Section 2.1(a)   "Transferring Employees" Section 9.6(a) > > > >   > >           Section 1.3     Rules of Construction > > . The following provisions shall be applied wherever appropriate herein: (a) > "herein", "hereby", "hereunder", "hereof" and other equivalent words shall > refer to this Agreement as an entirety and not solely to the particular > portion of this Agreement in which any such word is used; (b) all definitions > set forth herein shall be deemed applicable whether the words defined are used > herein in the singular or the plural; (c) wherever used herein, any pronoun or > pronouns shall be deemed to include both the singular and plural and to cover > all genders; (d) all accounting terms not specifically defined herein shall be > construed in accordance with GAAP; (e) this Agreement and the other > Transaction Documents shall be deemed to have been drafted by both the Seller > and the Buyer and neither this Agreement nor any other Transaction Document > shall be construed against any party as the principal draftsperson hereof or > thereof; (f) any references herein to a particular Section, Article, Exhibit > or Schedule means a Section or Article of, or an Exhibit or Schedule to, this > Agreement unless another agreement is specified; and (g) the Exhibits and > Schedules attached hereto are incorporated herein by reference and shall be > considered part of this Agreement. > > > > > >   > > 7 > >   > >   > > ARTICLE II > TERMS OF THE TRANSACTION > > > >           Section 2.1     Transfer of Assets. > > (a) On and subject to the terms and conditions of this Agreement, at the > Closing, the Seller shall sell, grant, convey, transfer, assign and deliver > (except as > > > > identified below) to the Buyer, and the Buyer shall purchase, acquire and > accept from the Seller, all of the Seller's right, title and interest in, the > following assets, properties and rights of the Seller, as those identified > same shall exist on the Closing Date (collectively, the "Transferred Assets") > free and clear of any Liens or Other Encumbrances (other than Liens or Other > Encumbrances arising from any act or omission of the Buyer): > > > >                     (i) the tangible assets and properties and fixed assets, > machinery, equipment, tools, dies, office furniture, computers, and computer > peripherals listed on Schedule 2.1(a)(i) hereto (the "Equipment"); > > > >                     (ii) the inventory of raw materials, work-in-process, > finished goods, and similar items of inventory used and intended to be used in > the Enhanced Services Business Unit listed on Schedule 2.1(a)(ii) (the > "Inventory"); and > > > >                     (iii) all Intellectual Property Rights listed on Schedule > 2.1(a)(iii) (the "Intellectual Property ") and any subsequently discovered > Intellectual Property Rights; > > > >                     (iv) the computer software, including source code, binary > executable code, object code, compilers, assemblers and algorithms which have > been developed by the Seller and incorporated exclusively into the Enhanced > Services Business Unit listed on Schedule 2.1(a)(iv) (the "Computer Software") > and any subsequently discovered Computer Software; > > > >                     (v)   RESERVED > > > >                     (vi) rights in and to the contracts and agreements entered > into by the Seller in connection with the Enhanced Services Business Unit > listed on Schedule 2.1(a)(vii) hereto (each an "Assigned Contract" and > collectively, the "Assigned Contracts"); > > > >                     (vii) all originals, or to the extent originals are not > available, copies of papers, sales and business files and records, property > records, contract records, manufacturing, test and design records, product > specifications, drawings, engineering, maintenance, operating and production > records, supplier and customer lists and other accounting, financial and > business records and documents used primarily in connection with the Enhanced > Services Business Unit, whether maintained in electronic or physical form (the > "Records") provided, that the Seller shall be entitled to retain copies (or, > in the case of invoices, originals) of all such Records; > > > >                     (viii) to the extent transfer is permitted under > applicable law or regulation, all Permits, if any, held by the Seller which > are exclusively used in the Enhanced Services Business Unit or relate > exclusively to the use of any of the Transferred Assets; > > > >   > > 8 > >   > >                     (ix) the technologies, designs, improvements, formulae, > manufacturing methods, engineering concepts, practices, processes, technical > data, product development data, research data, specifications, or methods and > know-how, whether or not patentable, whether or not a secret and whether or > not reduced to writing that are owned by Seller and used exclusively in the > Enhanced Services Business Unit (the "Know-how"); > > > >                     (x) all rights, title, and interest of Seller under the > Salt Lake City Lease of Seller; > > > >                     (xi) goodwill of the Enhanced Services Business Unit. > > > >           (b)     Notwithstanding Section 2.1(a), to the extent the sale, > grant, conveyance, transfer, assignment or delivery of any of the Transferred > Assets or the assignment of any Assigned Contracts may be prohibited, > restricted or delayed pursuant to any Requirement of Law or the terms of any > such Assigned Contract or, in the case of any Assigned Contract, may give rise > to any right on the part of any other party thereto not to perform, or may > release any such party from any of its obligations thereunder, this Agreement > shall constitute an agreement to sell, grant, convey, transfer, assign or > deliver such Transferred Assets and such agreements and contracts as soon as > practicable following the compliance by the Seller and the Buyer with such > Requirement of Law or the obtaining of any necessary consent or otherwise. > > > >           (c)     Buyer acknowledges and agrees that title to the Equipment > and Inventory identified on Schedule 2.1(c) (the "Customer Furnished > Property") shall transfer at Closing but not physical delivery until Buyer > directs delivery thereof. Seller shall use such Customer Furnished Property to > perform the Transition Services Agreement. Upon completion of the Transition > Services Agreement, Seller shall deliver to Buyer, at Buyer's expense any > remaining Customer Furnished Property. > > > >           Section 2.2     Excluded Assets. The Transferred Assets shall only > include the Transferred Assets specifically listed in Section 2.1(a)(i) > through Section 2.1(a)(xi) and shall not include any assets or rights not > listed in Section 2.1(a)(i) through Section 2.1(a)(xi). In addition the > Transferred Assets shall not include, and the Seller shall not, and shall not > cause any Affiliate to, transfer to Buyer and Buyer shall not accept, > including but not limited to, any of the following (collectively, the > "Excluded Assets"): > > > >           (a)     Books of original financial entry and internal accounting > documents and records not primarily relating to the Enhanced Services Business > Unit and any other books and records not primarily relating to the Enhanced > Services Business Unit that Seller is required to retain pursuant to statute, > rule or regulation, provided, that Seller shall provide Buyer with copies of > any books and records relating but not primarily relating to the Enhanced > Services Business Unit as Buyer may reasonably request from time to time > within eight years after the Closing Date. > > > >           (b)     Any assets or reserves of Employee Benefit Plans; > > > >           (c)     All rights to refunds of all Taxes; > >   > > 9 > >   > > > >           (d)     The trademark and trade name "Harris," both typed and > stylized versions, the "H" logo and any name, mark or logo confusingly similar > thereto; > > > >           (e)     Insurance policies; > > > >           (f)     Corporate-wide or Division-wide systems of Seller not > exclusively used in the Enhanced Services Business Unit, including but not > limited to, management information systems > > and software and computer and communications systems and software, including > but not limited to the third party software listed in Schedule 2.2(f) (the > "Third Party Software"); > > > >           (g)     IP address spaces (i.e. 137.237.X.X ranges, etc); > > > >           (h)     Protocall 2000 and its related intellectual property rights; > > > >           (i)     "Harris Prepaid (HPP)" and its related intellectual property > rights and technology; > > > >           (j)     Voicemail and messaging systems, such as "Calleague," and > their related intellectual property rights and technology; > > > >           (k)     "WireFree" and its related intellectual property rights and > technology; and > > > >           (l)     Any and all Accounts Receivables that exist as of the > Closing Date. > > > >           Section 2.3     Assumption of Liabilities. > > At the Closing, the Seller shall assign and the Buyer shall assume, undertake > to pay, perform or discharge the following obligations and liabilities of the > Seller (all of which are hereinafter referred to collectively as the "Assumed > Liabilities"), all of which the Buyer will assume and pay, discharge or > perform, as appropriate, from and after the Closing Date: (i) all obligations > of the Seller under the Assigned Contracts accrued on or after Closing, (ii) > all obligations arising on or after Closing Date in connection with the > Transferred Assets, (iii) any and all liabilities for product support or > warranties existing as of the Closing Date for spares, replacements, repairs, > customer support and warranty related to product/services sold in the Enhanced > Services Business Unit as identified in Assigned Contracts; (iv) the > Technology and Asset Purchase Agreement with Cumulus Information Services, > L.C., as amended by the First Amendment dated June 29, 2000, and the > Development, Support and Maintenance Agreement, as amended, First Amendment > dated June 29, 2000; and (v) all obligations and liabilities set forth on > Schedule 2.3. > > > > > >   > > 10 > >   > >            Section 2.4     License. Any Intellectual Property Rights included > in the Transferred Assets whereby complete ownership is transferred to Buyer, > will be licensed by Buyer to Seller including any future derivatives pursuant > to the License Agreement substantially in the form of Exhibit F. > > > >   > > ARTICLE III > THE PURCHASE PRICE; CLOSING > > > >           Section 3.1     Purchase Price > > . The Transferred Assets shall be sold, assigned, granted, transferred, > conveyed and delivered as herein stated by the Seller and shall be purchased, > acquired and accepted by the Buyer for a purchase price of SIX MILLION EIGHT > HUNDRED EIGHTY-FOUR THOUSAND THREE HUNDRED FIFTY-FIVE DOLLARS AND TWENTY-NINE > CENTS U.S. ($6,884,355.29) (the "Purchase Price"). The Purchase Price shall be > paid by the Buyer to the Seller on the Closing Date, by execution and delivery > of the Secured Promissory Note and General Security Agreement. > > > > > >           Section 3.2     The Closing > > . (a) Subject to the terms and conditions set forth herein, the closing of the > sale and purchase of the Transferred Assets and the other transactions > contemplated hereby (the "Closing") shall be held at the offices of the > Seller, 1025 West NASA Boulevard, Melbourne, Florida 32919, at 11:00 A.M., > Florida time, on June 30, 2000. The time and date of Closing is herein called > the "Closing Date." All transactions contemplated hereunder to occur on the > Closing Date shall be deemed to have occurred simultaneously at 12:01 a.m. on > the Closing Date. > > > > > >           Section 3.3     Instruments of Conveyance and Transfer; Possession; > Assumption. > > In order to effectuate and evidence the sale, grant, conveyance, transfer, > assignment and delivery of the Transferred Assets as contemplated by Section > 2.1, the Seller shall, at the Closing: (a) execute and deliver to the Buyer > the Bill of Sale, the Contract Assignment, Intellectual Property Assignments, > License Agreement, Lease Assignment, Transition Services Agreement, Supply > Agreement, and Subcontract Agreement, and (b) execute and deliver to the Buyer > such other bills of sale, assignments, endorsements, and other good and > sufficient instruments and documents of transfer and assignment, all dated as > of the Closing Date, and in a form reasonably satisfactory to the Buyer as > shall be necessary and effective to transfer and assign to, and further vest > in, the Buyer, all of the Transferred Assets. Simultaneously with such > deliveries, the Seller shall, in cooperation with the Buyer, at Buyer's cost > and expense, take all steps required to put the Buyer in actual possession and > operating control of the Transferred Assets. Concurrently with the delivery of > such instruments, the Buyer shall execute and deliver to the Seller the > Secured Promissory Note, General Security Agreement, Assumption Agreement, > License Agreement, Transition Services Agreement, Supply Agreement and the > Subcontract Agreement and shall accept each of the Bill of Sale, the Contract > Assignment, the Intellectual Property Assignments, and Lease Assignment. The > parties shall also execute, deliver to the other party (i) the other > Transaction Documents to which they are respectively a party and (ii) such > other certified charters, incumbency certificates, good standing certificates > and other instruments reasonably requested by the other party. > > > > > >           Section 3.4     Further Assurances > > . From time to time, pursuant to the request of a party delivered to the other > party after the Closing Date, such party shall execute, deliver and > acknowledge such other instruments and documents of conveyance and transfer or > assumption and shall take such other actions and shall execute and deliver > such other documents, certifications and further assurances as the other party > reasonably may request in order to vest and confirm more effectively in the > Buyer title to or to put the Buyer more fully in legal possession of, or to > enable the Buyer to use, any of the Transferred Assets, or to enable the Buyer > to complete, perform or > > > >   > > 11 > >   > > discharge any of the Assumed Liabilities or otherwise enable the parties to > carry out the purposes and intent of this Agreement. > >           Section 3.5     Tax Allocation > > . An allocation of the Purchase Price shall be arrived at by arm's length > negotiation between the Buyer and the Seller and shall be consistent with the > requirements of Section 1060 of the Code and the regulations thereunder. The > Buyer and the Seller agree that such allocation shall be in writing no later > than sixty (60) Business Days after the Closing. The Buyer and the Seller > agree to report this transaction for tax purposes, including the timely filing > of Internal Revenue Service Form 8594 and any other required forms, in > accordance with such allocation and to defend such allocation before, and not > take any positions that are inconsistent with > > > > such allocation before any Governmental Body charged with the collection of > Taxes, or in any judicial proceeding. > > > >   > > ARTICLE IV > REPRESENTATIONS AND WARRANTIES OF THE SELLER > > > >           Harris represents and warrants to the Buyer, that: > > > >           Section 4.1     Organization; Authority > > . Harris is a corporation validly existing and in good standing under the laws > of the State of Delaware. Harris has all necessary corporate power and > authority, and possesses all Permits necessary to own or to lease, and to > operate all the Transferred Assets except where the failure would not have a > Material Adverse Effect. Harris has all necessary corporate power and > authority to sell, convey, transfer, assign and deliver the Transferred Assets > to the Buyer as contemplated by this Agreement, and to execute, deliver and > perform its obligations hereunder and under the other Transaction Documents to > which it is a party. > > > > > >           Section 4.2     Authorization of Transaction; Non-Contravention > > . (a) Harris has duly authorized and approved the Contemplated Transactions, > and the Seller has taken all action required by law, its articles of > incorporation, its bylaws or otherwise to authorize and to approve the > execution, delivery and performance of this Agreement, the other Transaction > Documents to which it is to be a party and the documents, agreements and > certificates executed and delivered by it or to be executed and delivered by > it in connection herewith and therewith. This Agreement is, and each other > Transaction Document to which the Seller is to be a party, when executed and > delivered by the Seller at the Closing will be duly executed and delivered by > the Seller, and shall constitute a valid and legally binding obligation of the > Seller, enforceable against the Seller, in accordance with its terms, except > as such enforceability may be limited by (i) applicable bankruptcy, > insolvency, reorganization, moratorium or similar laws from time to time in > effect affecting the enforcement of creditors' rights generally and (ii) > general equitable principles with respect to the availability of specific > performance or other equitable remedies. All persons who have executed this > Agreement on behalf of the Seller or who will execute on behalf of the Seller > any other Transaction Document or other documents, agreements and certificates > in connection herewith or therewith, have been duly authorized to do so by all > necessary corporate action. > > > > > >           (b)     Neither the execution and delivery of this Agreement or the > other Transaction Documents, nor the consummation of the Contemplated > Transactions on the terms and subject to > >   > > 12 > >   > > the conditions hereof and thereof, will (i) conflict with or result in any > violation of or constitute a breach of or give rise to a right of termination > or cancellation of any of the terms or provisions of, or result in the > acceleration of any obligation under, or constitute a default under any > provision of the articles of incorporation or bylaws of the Seller; (ii) > result in the creation of any Lien or Other Encumbrance upon any of the > Transferred Assets; (iii) violate any material Order against or binding upon, > the Seller, any of the Transferred Assets; or (iv) constitute a material > violation by the Seller of any Requirement of Law. > >           Section 4.3     Consents and Approvals. Except only for consents to > assignment of the Assigned Contracts or as set forth in the Disclosure > Statement hereto, no approval, consent, waiver > > or authorization from any Governmental Body or other Person is required (a) > for or in connection with the valid execution and delivery by the Seller of > this Agreement or the other Transaction Documents to which it is a party or > the consummation by the Seller of the Contemplated Transactions, (b) for or in > connection with the sale, transfer, assignment, conveyance, or delivery of the > Transferred Assets to the Buyer, or (c) as a condition to the legality, > validity or enforceability as against the Seller of this Agreement or the > other Transaction Documents to which it is a party. > > > >           Section 4.4     Title to Property > > . The Seller has valid title to all Equipment and Inventory owned by it free > and clear of any and all Liens or Other Encumbrances. Seller has valid title > to all Transferred Assets (except equipment as described in the respective > Schedule. All items of Equipment included in the Transferred Assets with a > value over $100,000 are described in the Schedules delivered pursuant to > Section 2.1(a). Other than this Agreement, there are no existing options, > commitments or rights with, of or to any Person to acquire any of the > Transferred Assets. > > > > > >           Section 4.5     Compliance With Law; Permits > > . The Seller is not now in violation or default under any Requirement of Law > of any Governmental Body or any Order applicable to its operation of the > Enhanced Services Business Unit where such violation or default would not have > a Material Adverse Effect upon Transferred Assets or the Enhanced Services > Business Unit. Prior to the date hereof, the Seller has not received, and to > the Seller's Knowledge, there does not exist, any notice of any action, suit, > hearing, charge or investigation to the effect that the Transferred Assets > are, was or may be in violation of any Requirement of Law or any Order. The > Seller is duly licensed under all Requirements of Law and possesses all > material licenses, clearances and Permits necessary or required in connection > with the Enhanced Services Business Unit. > > > > > >           Section 4.6     Legal Proceedings > > . Except as set forth in the Disclosure Statement hereto on the date hereof, > there is no (a) action, suit, claim, proceeding or investigation pending or, > to the Knowledge of the Seller threatened against or directly affecting the > Transferred Assets at law or in equity, or before or by any Governmental Body, > or (b) arbitration proceeding relating to the Enhanced Services Business Unit. > None of the actions, suits, claims, proceedings or inquiries listed on such > Schedule, either individually or in the aggregate, is likely to have an > adverse effect on (i) the Buyer's ability to use or operate the Transferred > Assets in a manner consistent with the Seller's operations, (ii) the Buyer's > use of the Transferred Assets for the purposes which they have been used by > the Seller or (iii) the Seller's ability to consummate the Contemplated > Transactions. The Seller is not in default with respect to any Order known to > or served upon the Seller relating directly to the Enhanced Services Business > Unit. > > > > > >   > > 13 > >   > >           Section 4.7     Intellectual Property. Except as set forth on the > Disclosure Statement the Seller has good and marketable title or the right to > use all Intellectual Property Rights incorporated into the Enhanced Services > Business Unit. Except as set forth in Disclosure Statement, to the Seller's > Knowledge, on the date hereof, there are no claims asserted against the Seller > by a third party alleging misappropriation or infringement of the third > party's intellectual property rights as a result of the processes used in or > the manufacture, use, or sale of products of the Enhanced Services Business > Unit. > > > >           Section 4.8     Assigned Contracts and Commitments. The Seller has > delivered or made available to the Buyer true and complete copies of the > Assigned Contracts all of which are listed on Schedule 2.1(a)(vii). Except as > set forth on Disclosure Statement, to the Knowledge of the Seller, no default, > alleged default or anticipatory breach exists on the part of the Seller under > any Assigned Contract. There are no material agreements or arrangements, > whether written or oral, of the parties relating to any Assigned Contract that > have not been set forth on Disclosure Statement. To the Knowledge of the > Seller, each such Assigned Contract is legal, valid, binding and enforceable > against the parties thereto in accordance with its terms, except as such > enforceability may be limited by (i) applicable bankruptcy, insolvency, > reorganization, moratorium or similar laws from time to time in effect > affecting the enforcement of creditors' rights generally and (ii) general > equitable principles with respect to the availability of specific performance > or other equitable remedies. > > > >           Section 4.9     Inventory. To the best of Seller's knowledge, the > Inventory is saleable and usable in the ordinary course of the business of the > Enhanced Business Services Unit. > > > >           Section 4.10     Taxes. As of the Closing Date, the Seller will not > be in default in the filing of any Tax Return relating or pertaining to Taxes > incurred in connection with the Transferred Assets. To the Seller's Knowledge, > the Transferred Assets are not subject to any tax liens or tax assessments. > > > >           Section 4.11     Finders or Brokers > > . The Seller has not utilized the services of any investment banker, broker, > finder or intermediary in connection with the transactions contemplated hereby > who might be entitled to a fee or commission in connection with this Agreement > or upon consummation of the Contemplated Transactions. > > > > > >           Section 4.12     Express Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN > THIS ARTICLE IV, THE SELLER DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE > TRANSFERRED ASSETS, WHETHER EXPRESSED OR IMPLIED, WRITTEN OR ORAL (INCLUDING, > WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A > PARTICULAR PURPOSE). AT THE CLOSING, THE SELLER SHALL SELL THE TRANSFERRED > ASSETS AND BUYER SHALL PURCHASE THE TRANSFERRED ASSETS ON AN "AS IS" AND > "WHERE IS" BASIS. > > > >           Section 4.13     RESERVED > > > >           Section 4.14     ERISA and Benefits  (a) Each Plan maintained in > connection with the Enhanced Services Business Unit or in which at least one > of the Transferring Employees participates has made available to Buyer as well > as any summary plan description, the most recent > >   > > 14 > >   > > IRS Form 5500, and, with respect to each Pension Plan, the most recent IRS > determination letter and any related trust instrument. > >           (b)     To the Knowledge of Seller, with respect to each Plan > applicable to Transferred Employees each such Plan has been maintained and > operated in substantial compliance with the applicable requirements of the > Code and ERISA and the regulations issued thereunder. > > > >   > > ARTICLE V > REPRESENTATIONS AND WARRANTIES OF THE BUYER > >           Teltronics represents and warrants to the Seller, that: > > > >           Section 5.1     Organization; Authority > > . Teltronics is a corporation duly organized, validly existing and in good > standing under the laws of the state of its incorporation. Teltronics has all > necessary corporate power and authority, and possesses all Permits necessary > to own or to lease, and to operate all of its assets and properties and the > Transferred Assets, and to carry on its business as it is now being conducted > and as proposed to be conducted. Teltronics has all necessary power and > authority to purchase and accept the Transferred Assets (including the > Assigned Contracts), as contemplated by this Agreement, and to execute, > deliver and perform its obligations hereunder and under the other Transaction > Documents to which it is a party. > > > > > >           Section 5.2     Authorization of Transaction; Non-Contravention > > . (a) Teltronics has duly authorized and approved the Contemplated > Transactions, and the Buyer has taken all action required by law, its articles > of incorporation, its bylaws or otherwise to authorize and to approve the > execution, delivery and performance of this Agreement, the other Transaction > Documents to which it is to be a party and the documents, agreements and > certificates executed and delivered by it or to be executed and delivered by > it in connection herewith and therewith. This Agreement is, and each other > Transaction Document to which the Buyer is to be a party, when executed and > delivered by the Buyer at the Closing will be duly executed and delivered by > the Buyer, and shall constitute a valid and legally binding obligation of the > Buyer, enforceable against the Buyer, in accordance with its terms, except as > such enforceability may be limited by (i) applicable bankruptcy, insolvency, > reorganization, moratorium or similar laws from time to time in effect > affecting the enforcement of creditors' rights generally, and (ii) general > equitable principles with respect to the availability of specific performance > or other equitable remedies. All persons who have executed this Agreement on > behalf of Teltronics or who will execute on behalf of Teltronics any other > Transaction Document or other documents, agreements and certificates in > connection herewith or therewith, have been duly authorized to do so by all > necessary corporate action. > > > > > >           (b)     Neither the execution and delivery of this Agreement or the > other Transaction Documents, nor the consummation of the Contemplated > Transactions on the terms and subject to the conditions hereof and thereof, > will (i) conflict with or result in any violation of or constitute a breach of > or give rise to a right of termination or cancellation of any of the terms or > provisions of, or result in the acceleration of any obligation under, or > constitute a default under any provision of the articles of incorporation or > bylaws of Teltronics or any contract to which Teltronics is a party; (ii) > violate any Order against or binding upon, the Buyer or any of its assets; or > (iii) constitute a > >   > > 15 > >   > > violation by Teltronics of any Requirement of Law of any jurisdiction as such > Requirement of Law relates to Teltronics, its business or any of the > Transferred Assets or Assumed Liabilities. > >           Section 5.3     Consents and Approvals. No approval, consent, waiver > or authorization to any Governmental Body, bank, financial or lending > institution or other Person is required (a) for or in connection with the > valid execution and delivery by Teltronics of this Agreement or the other > Transaction Documents to which it is a party or the consummation by Teltronics > of the Contemplated Transactions, including without limitation, the assignment > of all Assigned Contracts to the Buyer, (b) for or in connection with the > sale, transfer, assignment, conveyance, or delivery of > > the Transferred Assets to the Buyer, or (c) as a condition to the legality, > validity or enforceability as against Teltronics of this Agreement or the > other Transaction Documents to which it is a party. > > > >           Section 5.4     Legal Proceedings > > . There is no action, suit, claim, proceeding or investigation pending or, to > the knowledge of Teltronics threatened against or directly affecting it, which > either individually or in the aggregate, is likely to have an adverse effect > on (i) Teltronics' ability to use or operate any of the Transferred Assets in > a manner consistent with the Seller's operations, (ii) the Buyer's use of any > of the Transferred Assets for the purposes which they have been used by the > Seller, or (iii) the Buyer's ability to consummate the Contemplated > Transactions. The Buyer is not in default with respect to any Order known to > or served upon the Buyer. > > > > > >           Section 5.5     Finders or Brokers > > . The Buyer has not utilized the services of any investment banker, broker, > finder or intermediary in connection with the Contemplated Transactions who > might be entitled to a fee or commission in connection with this Agreement or > upon consummation of the Contemplated Transactions. > > > > > >           Section 5.6     Buyer's Examination. The Seller has provided the > Buyer with such access to the records, books, documents, facilities and > personnel of the Seller as the Buyer has deemed necessary and appropriate in > order for the Buyer to investigate and examine to its satisfaction the > business, affairs and properties of the Seller sufficient to make an informed > decision to purchase the Transferred Assets, to enter into this Agreement and > to consummate the Contemplated Transactions. The Buyer is capable of > evaluating the merits and risks of the purchase of the Transferred Assets and > to enter into the Contemplated Transactions. > > > >           Section 5.7     Disclaimer. THE BUYER ACKNOWLEDGES AND AGREES THAT > THE TRANSFERRED ASSETS BEING TRANSFERRED HEREUNDER ARE BEING TRANSFERRED ON AN > "AS IS, WHERE IS" BASIS "WITH ALL FAULTS," AND THAT EXCEPT AS EXPRESSLY SET > FORTH IN ARTICLE IV, THE SELLER IS MAKING NO REPRESENTATION OR WARRANTY OF ANY > KIND, EXPRESSED OR IMPLIED, RESPECTING THE TRANSFERRED ASSETS, AS TO > MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER MATTER. The > Buyer acknowledges that the Buyer is fully familiar with the Transferred > Assets and the Enhanced Services Product Line and acknowledge that any > projections or pro forma statements are for illustration purposes and do not > form the basis of any liability or a representation or warranty. The Buyer > also acknowledges that the potential liability of the Seller for any potential > breach of such representations and warranties set forth in Article IV is > limited by the terms of Article XI and Section 13.2. > > > >   > > 16 > >   > >           Section 5.8     Non-Interference with Suppliers. Buyer shall not > tortiously interfere nor take any actions to tortiously interfere with any > business relationships between any of the joint ventures in which Seller has > or had an equity interest (the "Joint Ventures"). > > > >   > > ARTICLE VI > COVENANTS AFTER THE CLOSING > > > >           The Seller and the Buyer hereby covenant and agree that after the > date hereof and except as otherwise agreed to in writing by the other party: > > > >           Section 6.1     Approvals; Consents. The Seller shall give any > notices to third parties required to be given by it in connection herewith and > the Seller and Buyer shall use commercially reasonable efforts to obtain or > cause to be obtained all material consents, approvals, authorizations and > waivers required by any applicable Requirement of Law or by any Assigned > Contracts, to be obtained by the Seller or Buyer in connection with the > consummation of the sale and transfer by the Seller of the Transferred Assets > and the other Contemplated Transactions. Without limiting the generality of > the foregoing, the Seller with cooperation of Buyer shall each use its > commercially reasonable efforts to obtain the written consents and approvals > relating to the assignment and release of Seller of the Assigned Contracts. > > > >           Section 6.2     Commercially Reasonable Efforts. The Seller and the > Buyer shall each use commercially reasonable efforts to cause all of the > conditions to the obligations of the other to consummate the Contemplated > Transactions which are within its control to be met as soon as reasonably > practicable after the date of this Agreement. > > > >   > > ARTICLE VII > RESERVED > > > >   > > ARTICLE VIII > RESERVED > > > >   > > ARTICLE IX > ADDITIONAL COVENANTS OF THE PARTIES > > > >           Section 9.1     Publicity. No party shall issue any press release or > announcement or make any reference to the Contemplated Transactions to any > third party (except in connection with obtaining requisite consents) without > the prior written consent of the other party, which consent shall not be > unreasonably withheld; provided, however, that the parties may make such > disclosure as may be required by law, rule or regulation (including relevant > securities laws or any listing > >   > > 17 > >   > > agreement covering publicity traded securities) in which case the party making > the release or announcement shall, before making such release or announcement, > afford the other party a reasonable opportunity to review and comment upon > such release or announcement. > >           Section 9.2     Cooperation. The parties hereto shall cooperate with > each other and will use their commercially reasonable good faith efforts to > promptly prepare, execute and file all necessary documentation, to effect all > applications, notices, petitions, and filings, and to obtain as promptly as > practicable all permits, consents and approvals and authorizations of all > third Persons and Governmental Bodies which are necessary or advisable to > consummate the Contemplated Transactions. > > > >           Section 9.3     Access to Information. The Seller shall have the > right following the Closing Date to have reasonable access to such books, > records and accounts, including financial and tax information, correspondence, > production records, employment records and other similar information as are > transferred to the Buyer pursuant to the terms of this Agreement for the > purposes of concluding its involvement in the Enhanced Services Business Unit > and for complying with its obligations under applicable securities, tax, > employment or other laws and regulations, which right of access shall continue > for such period of time following the Closing as is necessary to enable the > Seller to comply with such obligations. At any time after the Closing Date > that the Buyer proposes to destroy any such materials or information, the > Buyer shall first notify the Seller and the Seller shall be entitled to > receive such materials or information proposed to be destroyed. > > > >           Section 9.4     Cooperation in Litigation. Each party hereto will > fully cooperate with the other in the defense or prosecution of any litigation > or proceeding which may be instituted hereafter against or by such party > relating to or arising out of the conduct of the Enhanced Services Business > Unit prior to or after the Closing Date (other than litigation arising out the > transactions contemplated by this Agreement). The party requesting such > cooperation shall pay the reasonable out-of-pocket expenses (including > reasonable legal fees and disbursements) of the party providing such > cooperation and of its officers, directors, employees and agents reasonably > incurred in connection with providing such cooperation, but shall not be > responsible to reimburse the party providing such cooperation. > > > >           Section 9.5     Performance of Assigned Contracts. Following the > Closing, the Buyer shall diligently perform, and shall cause its Affiliates > diligently to perform, their respective obligations under the Assigned > Contracts. To the extent that an Assigned Contract is not novated in > connection with the Closing, the Buyer shall use commercially reasonable > efforts to enter into novation agreements or to otherwise have the Seller > released from all obligations under such Assigned Contracts. If for whatever > reason the parties are unable to assign any of the contracts identified in > Schedule 2.1(a)(vii), the Assigned Contracts to Buyer, then Seller and Buyer > agree to execute either a mutually acceptable Subcontract Agreement, or > mutually acceptable Supply Agreement all of which shall be in substantial > forms to Exhibit K or J, respectively, to enable Seller to perform and fulfill > their unassignable contracts. The selection of a subcontract or supply > agreement shall be at the mutual agreement of Seller and Buyer. > > > >           Section 9.6     Employees and Employee Benefit Plans. (a) Effective > as of the Closing Date, the employment of each employee of the Enhanced > Services Business Unit listed on > >   > > 18 > >   > > Disclosure Statement ("Transferring Employees") shall cease and the > Transferring Employees shall immediately become employees of Buyer. Nothing in > this Agreement shall create any obligation on the part of Buyer to continue > the employment of any Transferring Employee for any period of time. > >           (b)     Except as otherwise required by applicable law, as of the > Closing Date all Transferring Employees shall cease participation in all > Welfare Plans sponsored or maintained by Seller or any of their affiliates and > shall cease active participation and the accrual of benefits under, any > Pension Plan sponsored or maintained by Seller or any of its affiliates. > > > >           (c)     Commencing on the Closing Date, Transferring Employees shall > be eligible for those Plans and other employee benefits in effect for > similarly situated existing employees of Buyer. Buyer shall credit > Transferring Employees for their length of service with Seller and any of > their affiliates for all employment and benefit purposes, including for > purposes of eligibility, vesting, and any pre-existing condition limitations > under Buyer's Plans. Buyer shall credit Transferring Employees with any > amounts paid under Seller's Plans prior to the Closing Date toward > satisfaction of applicable deductibles or out-of-pocket maximums under the > corresponding Welfare Plans of Buyer for Calendar Year 2000. Buyer shall be > responsible for providing each Transferring Employee (and each such employee's > qualified beneficiaries within the meaning of section 4980B(f) of the Code) > who has a "qualifying event" (within the meaning of section 4980B(f) of the > Code) on or after the Closing Date with the continuation of group health > coverage required by section 4980B(f) of the Code. > > > >           (d)     After the Closing Date, Buyer shall have the liability and > obligation for, and neither Seller nor any of its affiliates shall have any > liability or obligation for any short-term or long term disability, sick pay > or salary continuation benefits for Transferring Employees maintained by Buyer > for its employees. > > > >           (e)     Seller shall be responsible for all liabilities or > obligations under the Worker Adjustment and Retraining Notification Act and > similar state and local rules, statutes and ordinances resulting from the > Closing. Buyer shall be responsible for all liabilities or obligations under > the Worker Adjustment and Retraining Notification Act and similar state and > local rules, statutes and ordinances resulting from Buyer's actions following > the Closing. Upon request, Seller shall advise Buyer of the number of > employees at each Business facility of the Seller or its affiliates during the > sixty-day period ending on the Closing Date. > > > >           (f)     The Buyer shall have the obligation and liability for any > workers' compensation or similar workers' protection claims of the > Transferring Employees incurred on or after the Closing Date. > > > >           (g)     The parties shall effectuate a trust-to-trust transfer of > account balances of Transferring Employees under the Harris Corporation > Retirement Plan ("Seller's Savings Plan") to a tax-qualified defined > contribution plan maintained by Buyer ("Buyer's Savings Plan") as follows. As > soon as practical after the Closing Date, Seller shall cause the account of > each Transferring Employee who participates in Seller's Savings Plan to be > valued. As of the date such accounts are valued assets equal to such value > will be transferred to the trust maintained under > >   > > 19 > >   > > Buyer's Savings Plan. Such transferred assets shall be in cash(except to the > extent such assets include promissory notes evidencing outstanding loan > balances of the Transferring Employees) and shall be in accordance with > section 414(l) of the Code. Prior to, and as a condition of, any transfer of > assets from the Seller's Savings Plan to Buyer's Savings Plan, each party > shall provide the other with satisfactory evidence that its plan is > tax-qualified within the meaning of section 401(a) of the Code. As of the > transfer date, Buyer will be liable for the payment of benefits accrued by and > transferred in respect of the Transferring Employees under the Seller's > Savings Plan. > > > >            > > (h)     No Transferring Employee or other current or former employee of the > Seller or its affiliates including any beneficiary or dependent thereof, or > any other person not a party to this Agreement, shall be entitled to assert > any claim hereunder. > > > > > >           Section 9.7     Personnel Records. Buyer and Seller acknowledge that > Buyer is entitled to inspect the personnel and related employment files on the > premises of Seller of any of the current employees of the business who are > offered employment by the Buyer and who thereafter accept employment with the > Buyer. Buyer acknowledges that some of this information may be considered to > be confidential under State and/or Federal law. Buyer agrees it will keep all > information obtained from Seller strictly confidential and it will be > maintained (and disclosed, if at all) in strict compliance with all applicable > State and Federal laws. > > > >           Section 9.8     Substitution of Surety Bonds and Letters of Credit. > Buyer shall use commercially reasonable efforts to, at or prior to Closing, > substitute its own fidelity, surety or similar bonds, bank guarantees and > letters of credit for those posted by Seller on behalf of the Enhanced > Services Business Unit listed in the Disclosure Statement (the "Surety > Bonds"), such that Seller's bonds, guarantees, and/or letters of credit may be > cancelled or released upon the Closing. Buyer hereby indemnifies and shall > hold the Seller harmless from any liability or expense arising from its > failure to observe and fulfill the requirements of this Section 9.9. > > > >           Section 9.9     Non-Compete. Seller agrees, for a period of three > (3) years that it will not compete directly or indirectly with Buyer in the > Market (as defined below). For purposes of this Section 9.9, the term Market > shall be the 20-20 Switch Technology or ClearView Call Center Technology as it > exists on Closing Date. Market shall not include air traffic control > applications, department of defense contracts or internal use by Seller. > > > >           Section 9.10     Accounts Receivable Collection. Buyer and Seller > acknowledge and agree that the outstanding accounts receivables relating to > the Assigned Contracts (the "Outstanding Accounts Receivables") that exist as > of the Closing Date and which are listed in the Disclosure Statement are > considered Excluded Assets. However, Buyer and Seller agree that any monies > received as payment under the Assigned Contracts shall be immediately paid to > Seller until such time as Seller has been reimbursed the total dollar value of > the Outstanding Accounts Receivables. Buyer shall be solely responsible for > any and all disputes regarding which invoices a customer to the Assigned > Contracts may claim the payments have been submitted for. > > > >           Section 9.11     Nonassignable Leases. If, for whatever reason, the > Salt Lake City Lease is not fully assignable to Buyer, Buyer shall not amend, > modify, or change such nonassignable lease without the written consent of > Seller. > > > >   > > 20 > >   > >           Section 9.12     No Set-Off. The Buyer acknowledges and agrees that > whether or not it has claims hereunder or under any other Transaction Document > it shall not withhold or off-set any amount due under the Secured Promissory > Note or the Transition Services Agreement and that all > > payments under the Secured Promissory Note shall be made without set-off or > counterclaim under any circumstances and in such amounts as may be necessary > in order that all such payments shall not be less than the amounts otherwise > specified to be paid thereunder. > > > >           Section 9.13     Real Property Subleases. Seller and Buyer agree > that effective as of the date of this Agreement, Seller, as sublessor shall > sublease to Buyer and Buyer shall sublease from Seller, as sublessor the > following: > > > >           (a)     Whitestone Lease in accordance with each and every one of > its terms through December 31, 2000; > > > >           (b) Seller's lease in Atlanta, Georgia in accordance with each and > every one of its terms through July 30, 2000, for [$1]. > > > >           (c) Seller's lease in Novato, California, previously used for the > Seller's ESBU, in accordance with each and every one of its terms through > ninety (90) days for $1. > > > >           Section 9.14     Source Code/OCR Generation. Seller shall use its > good faith efforts to identify and retrieve any and all source code held by a > third party. Seller shall use its best efforts to locate and retrieve the OCR > Generator which Seller believes may be located in Russia. > > > >           Section 9.15     Prepaid Deposits. Buyer hereby agrees, covenants, > warrants that Buyer shall pay, reimburse or otherwise fully indemnify Seller, > for, from and against any of the amounts described as prepaid deposits related > to the customers listed in the Disclosure Schedule in the event Buyer fails or > refuses to perform its obligations under the Assigned Contracts for any such > customer for which a prepaid deposit was previously received by Seller. > > > >           Section 9.16     Performance Bond. Buyer hereby agrees, warrants, > and covenants that it shall indemnify; hold harmless and otherwise fully pay > the costs incurred by Seller as a result of the customer redeeming performance > bonds identified in Schedule 9.9. > > > >           Section 9.17     Digital Telephone Systems, Inc. Seller shall change > the name of Seller's subsidiary known as of the Closing Date as Digital > Telephone Systems, Inc. > > > >   > > ARTICLE X > RESERVED > > > >   > > 21 > >   > > > >   > > ARTICLE XI > INDEMNIFICATION > > > >           Section 11.1     Indemnification by the Seller. (a) Following the > Closing, the Seller shall be liable for, shall indemnify the Buyer, its > officers, directors, Affiliates and employees for, shall hold > > harmless, protect and defend the Buyer, its officers, directors, Affiliates or > employees from and against, and shall reimburse the Buyer, its officers, > directors, Affiliates and employees for, any and all Buyer's Damages (as > defined in Section 11.1(b)); provided, however, that the maximum obligation in > respect of indemnification for Buyer's Damages payable by the Seller hereunder > shall not exceed an amount equal to fifty percent (50%) of the amount of > Purchase Price paid to the Seller except for Buyer's Damages in respect of: > (i) Seller's representations in Sections 4.1, 4.2, 4.4 and 4.7 of this > Agreement and (ii) willful breach of a covenant contained herein in which each > case indemnification for Buyer's Damages will not be so limited and further, > provided, that such indemnification is also limited as set forth in Section > 11.4, Section 13.2 and Section 13.14. > > > >           (b)     The term "Buyer's Damages" means all Damages sustained, > incurred or suffered by the Buyer, its officers, directors, Affiliates or > employees after the Closing resulting from or arising in connection with: (i) > any misrepresentation by the Seller contained in or made pursuant to this > Agreement in any certificate, instrument or agreement delivered to the Buyer > as part of the Closing under this Agreement; or (ii) any breach of warranty or > any default in the performance of any covenant or obligation of the Seller > under this Agreement. > > > >           Section 11.2     Indemnification by the Buyer. (a) Following the > Closing, the Buyer shall be liable for, shall indemnify the Seller and its > officers, directors, Affiliates and employees for, shall hold harmless, > protect and defend the Seller and its officers, directors, Affiliates and > employees, from and against, and shall reimburse the Seller for, any and all > Seller's Damages (as defined in Section 11.2(b)). > > > >           (b)     The term "Seller's Damages" means all Damages sustained, > incurred or suffered by the Seller and its officers, directors, Affiliates and > employees, resulting from or arising in connection with: (i) any > misrepresentation by the Buyer contained in or made pursuant to this Agreement > or in any certificate, instrument or agreement delivered to the Seller as part > of the Closing under this Agreement; (ii) any breach of warranty or any > default in the performance of any covenant or obligation of the Buyer under or > in connection with this Agreement; (iii) any Assumed Liability; or (iv) > Buyer's default under either Salt Lake City Lease or Whitestone Lease or > Sublease should either lease not be novated to Buyer and subleased by Seller > to Buyer; or (v) Seller's inability to collect any Outstanding Accounts > Receivables relating to an Assigned Contracts where such inability to collect > arises out of Buyer's performance or failure to perform such Assigned > Contract; or (vi) any claim or liabilities by or to a party under an Assigned > Contract, including but not limited to any claims relating to the breach > thereof arising after the Closing. > > > >           Section 11.3     Matters Involving Third Parties, Etc. (a) Following > the Closing, if any legal proceeding shall be instituted, or any claim or > demand made, against an indemnified party or a party which proposes to assert > that the provisions of this Article XI apply (the Indemnified Party") such > Indemnified Party shall give prompt written notice of the claim to the party > obliged or alleged to be so obliged so to indemnify such Indemnified Party > (the "Indemnitor "). The omission > >   > > 22 > >   > > so to notify such Indemnitor, however, shall not relieve such Indemnitor from > any duty to indemnify which otherwise might exist with regard to such claim > unless (and only to the extent that) the omission to notify materially > prejudices the ability of the Indemnitor to assume the defense of such claim. > After any Indemnitor has received notice from an Indemnified Party that a > claim has been asserted against such Indemnified Party, the Indemnitor shall > promptly pay to the Indemnified Party the amount of such Damages in accordance > with and subject to the provisions of this Section; provided, however, that no > such payment shall be due during any period in which the Indemnitor is > contesting in good faith either its obligation to make such indemnification or > the amount of Damages payable, or both. After any Indemnitor has received > notice from an Indemnified Party that a claim has been asserted against it by > a third party, the Indemnitor shall have the right, upon giving written notice > to the Indemnified Party, to participate in the defense of such claim and to > elect to assume the defense against the claim, at its own expense, through the > Indemnified Party's attorney or an attorney selected by the Indemnitor and > approved by the Indemnified Party, which approval shall not be unreasonably > withheld; provided, however, that it shall be a condition to such election to > assume such defense that (i) the Indemnitor shall provide the Indemnifying > Party with reasonable evidence that the Indemnitor will have the financial > resources to defend against the claim and to fulfill its indemnification > obligations hereunder, and (ii) the claim involves only money damages and does > not seek an injunction or other equitable relief. If the Indemnitor fails to > give prompt notice of such election, then the Indemnitor shall be deemed to > have elected not to assume the defense of such claim and the Indemnified Party > may defend against the claim with its own attorney. > > > >           (b)     If the Indemnitor so elects to participate in the defense of > such claim or to assume the defense against a claim and the conditions of the > proviso of Section 11.3(a) are satisfied, then the Indemnified Party will > cooperate and make available to the Indemnitor (and its representatives) all > employees, information, books and records in its possession or under its > control which are reasonably necessary or useful in connection with such > defense; and if the Indemnitor shall have elected to assume the defense of a > claim, then the Indemnitor shall have the right to compromise and settle in > good faith any such claim provided that the conditions of Section 11.3(a) are > satisfied and further provided such release or settlement contains an > unconditional release of the Indemnified Party. If such conditions are not > satisfied and such unconditional release not obtained, then the Indemnitor > will not compromise or settle such action, suit, proceeding, or claim without > the prior written consent of the Indemnified Party, which consent shall not be > unreasonably withheld or delayed. If the Indemnitor is conducting the defense > of a claim, the Indemnified Party may retain separate co-counsel at its cost > and expense and participate in such defense. > > > >           (c)     If the Indemnitor does not elect to assume or is deemed to > have elected not to assume the defense of a claim or in the event any of the > conditions in the proviso to Section 11.3(a) above becomes unsatisfied then: > (i) the Indemnified Party shall have the right to conduct such defense; (ii) > the Indemnified Party shall have the right to compromise and to settle, in > good faith, the claim without the prior consent of the Indemnitor; (iii) the > Indemnitor will periodically reimburse the Indemnified Party for costs > (including reasonable legal fees); and (iv) if it is ultimately determined > that the claim of loss which shall form the basis of such judgment or > settlement is one that is validly an obligation of the Indemnitor that elected > not to assume the defense, then such Indemnitor shall be bound by any ultimate > judgment or settlement as to the existence and the amount of the claim and the > amount of said judgment or settlement (including the > >   > > 23 > >   > > costs and expenses of defending such claims) shall be conclusively deemed for > all purposes of this Agreement to be a liability on account of which the > Indemnified Party is entitled to be indemnified hereunder, subject to any > limits on the right to be so indemnified hereunder. Upon the determination of > liability under and subject to Section 11.1 or 11.2 hereof, the appropriate > party shall within thirty (30) days of such determination, pay the amount of > such claim. > >           Section 11.4     Limits; Sole Remedy, Etc. > > (a) There shall be no payment of Buyer's Damages under this Article XI until > the aggregate amount of all such obligations shall exceed $100,000, at which > time, subject to any limits on the right to be so indemnified, all such > obligations in excess of $100,000 will become due and payable. There shall be > no payment of Seller's Damages under this Article XI until the aggregate > amount of all such obligations shall exceed $100,000, at which time all such > obligations in excess of $100,000 will become due and payable. > > > > > >           (b)     No party shall be liable to the other for any breach of > representation or warranty to the extent (i) such breach of representation or > warranty is disclosed in any Transaction Document or any exhibit or schedule > thereto, (ii) a party has actual specific knowledge in fact that the other > party is in breach of such representation or warranty on the Closing Date, or > (iii) a claim for any such breach of representation or warranty is asserted > after the applicable period of survival of such representation or warranty set > forth in Section 13.2. > > > >           (c)     Following the Closing, the sole and exclusive remedy with > respect to a breach of representation or warranty contained in this Agreement > shall be to seek indemnification under this Agreement in accordance with the > terms hereof. > > > >           Section 11.5     Mitigation. The Parties shall cooperate with each > other with respect to resolving any claim or liability with respect to which > one Party is obligated to indemnify the other Party hereunder, including by > making commercially reasonable efforts to mitigate or resolve any such claim > or liability. In the event that any Party shall fail to make such commercially > reasonable efforts to mitigate or resolve any claim or liability, then > notwithstanding anything else to the contrary contained herein, the other > Party shall not be required to indemnify any Person for any Damages that could > reasonably be expected to have been avoided if such party, as the case may be, > had made such efforts. > > > >   > > ARTICLE XII > RESERVED > > > >   > > 24 > >   > > > > > >   > > ARTICLE XIII > MISCELLANEOUS PROVISIONS > > > >           Section 13.1     Costs and Expenses. Except as otherwise provided > herein, each party shall pay its own expenses in connection with the > preparation and performance of the terms of this Agreement. The provisions of > this Section shall survive the termination of this Agreement. > > > >           Section 13.2     Survival of Representations and Warranties; and > Covenants. The representations and warranties contained herein or in any > certificate, statement, document or instrument furnished hereunder or under > the other Transaction Documents except for representations and warranties set > forth in Sections 4.1, 4.2, 4.7 and 4.10 shall survive the Closing for a > period of nine (9) months following the Closing Date, after which all > liability with respect to such > > representations and warranties shall terminate, except as to any alleged > inaccuracy or breach thereof of which any party prior to the expiration of > such period, shall have advised the other party in writing, specifying in > reasonable detail the representation or warranty that is alleged to be > inaccurate or breached. The right of a party to seek indemnification hereunder > with respect to any representation or warranty of the other party shall remain > in effect for the period specified in this Section with respect to such > representation or warranty. The covenants of the Buyer and the Seller shall > continue in full force and effect in accordance with their respective terms. > > > >           Section 13.3     Governing Law. This Agreement shall be governed by, > and construed and enforced in accordance with, the laws of the State of > Florida without giving effect to the conflicts of laws provisions thereof. > > > >           Section 13.4     Notices. All notices, consents, requests, > instructions, approvals and other communications which may be or are required > to be given, served or sent by either party pursuant to this Agreement, shall > be in writing and shall be delivered personally, or sent by nationally > recognized overnight courier service, or by registered or certified mail, > return receipt requested, postage prepaid, addressed as follows: (a) if to the > Buyer: to Teltronics, Inc., Attention: President and CEO; Teltronics, Inc., > 2150 Whitefield Industrial Way, Sarasota, FL 34243; or (b) if to the Seller: > to Harris Corporation, 1025 West NASA Boulevard, Melbourne, Florida, > Attention: Corporate Secretary, with a copy to Harris Corporation - Network > Support Division, 1025 West NASA Boulevard, Melbourne, Florida 32919 > Attention: President. Each party may designate by notice in writing as > aforesaid a new address to which any notice, demand, request or communication > may thereafter be so given, served or sent. Each notice, demand, request or > communication which shall be mailed, sent, or delivered in the manner > described above, shall be deemed sufficiently given, served, sent or received > for all purposes at such time as it is delivered to the addressee (with the > return receipt, or the delivery receipt being deemed conclusive confirmation > of such delivery) or at such time as actual delivery is refused by the > addressee upon presentation. > > > >           Section 13.5     Severability. If any term, provision, covenant or > restriction of this Agreement is held by a court of competent jurisdiction to > be illegal, invalid, void or unenforceable, then the remainder of the terms, > provisions, covenants and restrictions of this Agreement shall remain in full > force and effect. > > > >   > > 25 > >   > >           Section 13.6     Dispute Resolution. (a) If a dispute arises out of > or relates to this Agreement, or the breach thereof, the parties agree to use > their commercially reasonable good faith efforts to have their respective > management resolve such dispute within a reasonable time through negotiations > and efforts by the affected parties. If such dispute cannot be resolved by > negotiation, the parties agree to subject the dispute to a sole mediator > selected by the parties, or, if the parties are unable to agree to the sole > mediator, the parties agree to submit the dispute to Enhanced Services > Business Unit under the rules of the American Arbitration Association ("AAA"). > If not thus resolved, the dispute will be referred to a sole arbitrator > selected by the parties within ninety (90) days after the conclusion of > Enhanced Services Business Unit, or in the absence of agreement on such > selection, to AAA arbitration which shall be governed by the United States > Arbitration Act. > > > >           (b)     Any resolution reached through Enhanced Services Business > Unit or award arising out of arbitration (i) shall be limited to a holding for > or against a party, and affording such monetary > > remedy as is deemed equitable, just and within the scope of this Agreement or > the other Transaction Documents; (ii) may not include special, consequential > or punitive damages; (iii) may in appropriate circumstances include injunctive > relief; and (iv) may be entered in court in accordance with the United States > Arbitration Act. The arbitrator may not limit, expand or otherwise modify the > terms of this Agreement or the other Transaction Documents. > > > >           (c)     The laws of the State of Florida shall apply to any Enhanced > Services Business Unit, arbitration, or litigation (for specific performance > or interim measures as set forth in paragraph (e) arising under this > Agreement. All disputes and matters arising under, in connection with, or > incident to this Agreement which are to be litigated, if at all, shall be > litigated in and before the Federal District Court for the Middle District of > Florida. > > > >           (d)     In the event of a dispute hereunder, which is submitted to > Enhanced Services Business Unit, arbitration or which is litigated, the > prevailing party in such dispute shall be entitled to recover from the other > party all of its costs and expenses incurred in connection therewith, > including reasonable attorneys' and experts' fees. The determination of the > prevailing party and the reasonable fees may be made by the mediator, > arbitrator(s) or court, as applicable. > > > >            (e)     A request by a party to a court for interim measures or > specific performance necessary to preserve a party's rights and remedies for > resolution pursuant to this Section shall not be deemed a waiver of the > obligation to mediate or agreement to arbitrate. > > > >           (f)     The parties, their representatives, other participants and > the mediator or arbitrator shall hold the existence, content and result of > Enhanced Services Business Unit or arbitration in confidence. > > > >           Section 13.7     No Third Party Beneficiary > > . This Agreement is entered into solely for the benefit of the parties hereto, > and in the case of Article XI hereof, the other Indemnified Parties and the > provisions of this Agreement shall be for the sole and exclusive benefit of > such parties and their respective successors and permitted assigns. No Person > not a party hereto or their successors and permitted assigns (including > employees or creditors of the Seller) shall be entitled to enforce any > provisions hereof or exercise any right hereunder. > > > > > >   > > 26 > >   > >           Section 13.8     Sales and Transfer Taxes. All sales and transfer > Taxes (including Taxes, if any, imposed upon the transfer of personal > property) and other Taxes, filing, recording and registration fees and similar > fees payable in connection with the transactions contemplated hereby shall be > paid by the Buyer when due on or following the Closing Date. The provisions of > this Section shall survive the termination of this Agreement. > > > >           Section 13.9     Waiver. Neither the waiver by either of the parties > hereto of a breach of or a default under any one or more of the provisions of > this Agreement, nor the failure of either of the parties, on one or more > occasions, to enforce any of the provisions of this Agreement or to exercise > any right or privilege hereunder shall thereafter be construed as a waiver of > any subsequent breach or default of a similar nature, or as a waiver of any > such provisions, rights or privileges hereunder. > > > >           Section 13.10     Assignment; Amendment. Neither the Buyer nor the > Seller shall assign any of their rights or obligations under this Agreement > whether by written agreement or by operation of law (including by merger or > sale of all or substantially all assets), without the prior written consent of > the other. This Agreement shall be binding upon and shall inure to the benefit > of the parties and their respective successors and permitted assigns. No > provision of this Agreement may be amended, modified, waived, discharged or > terminated except by written agreement duly executed by each of the parties. > > > >           Section 13.11     Entire Agreement. This Agreement and the > Transaction Document embody and constitute the entire agreement and > understanding between the parties with respect to the subject matter hereof > and supersede and cancel any prior oral or written agreement, letter of intent > (including the Letter dated May 10, 2000), proposal executed or delivered by > or on behalf of any of the parties or understanding related to the subject > matter hereof. > > > >           Section 13.12     Counterparts. This Agreement may be executed in > one or more counterparts, and it shall not be necessary that the signature of, > or on behalf of, each party, or that the signatures of all persons required to > bind any party, appear on each counterpart, but it shall be sufficient that > the signature of, or on behalf of, each party, or that the signatures of the > persons required to bind any party, appear on one or more such counterparts. > All counterparts shall constitute one and the same instrument. It shall not be > necessary in making proof of this Agreement or any counterpart hereof to > produce or account for any of the other counterparts. > > > >           Section 13.13     No Set-Off. Neither party hereto shall have any > right to set-off any amounts due under this Agreement against any claims or > amounts due to the other party under any other arrangement between or among > the parties. > > > >           Section 13.14     Limitation of Liability. UNDER NO CIRCUMSTANCES > SHALL THE SELLER OR BUYER BE LIABLE UNDER ARTICLE XI OR OTHERWISE, FOR ANY > INDIRECT, SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSSES, INCLUDING > WITHOUT LIMITATION LOST PROFITS OR LOST SALES OR REVENUES. > > > >           Section 13.15     Independent Contractor; Reliance on Counsel. Each > party hereto is an independent contractor, and nothing contained in this > Agreement shall be construed to be inconsistent with this relationship or > status. Neither party owes a fiduciary duty to the other. > >   > > 27 > >   > > Nothing in this Agreement shall be in any way construed to constitute either > party as the agent employee, or representative of the other. As an independent > contractor, each party has relied on its own expertise or the expertise of its > legal, financial, technical, or other advisors. No party has relied upon any > oral representation of any other party in entering into this Agreement. All > discussions, estimates, pro forma financial statements or projections > developed by a party during the course of negotiating the terms and conditions > of this Agreement or the other Transaction Documents are by way of > illustration only, are not binding or enforceable against the other party in > law or equity and do not form the basis of any liability or a representation > or warranty. > >           Section 13.16     No Partnership or Joint Venture, etc. The parties > expressly do not intend to form a partnership or joint venture under any > applicable laws. Nothing in this > > Agreement shall be in any way construed to constitute either party as an > agent, employee or representative of the other. > > > >           Section 13.17     Specific Performance. The Seller and Buyer > acknowledge and agree that irreparable damage would occur in the event that > any of the provisions of this Agreement were not performed in accordance with > their specific terms or were otherwise breached. Accordingly, the parties > shall be entitled to an injunction or injunctions to prevent or to cure > breaches of such provisions and to enforce specifically, such terms and > provisions , this being in addition to any other remedy to which they may be > entitled at law or in equity. > > > >           Section 13.18 Audit Fees. Buyer shall be responsible for the payment > of any and all Ernst & Young audit fees incurred for SEC compliance purposes. > Any such fees in excess of THREE HUNDRED THOUSAND DOLLARS ($300,000) shall be > the responsibility of Seller. In addition, each Party shall be responsible for > their own costs and expenses and disbursements. > > > >   > > 28 > >   > >   > >           IN WITNESS WHEREOF, this Asset Sale Agreement has been duly executed > by the parties hereto on the day and year first above written. > > > >   > >   BUYER: > TELTRONICS, INC. > >   By:         /s/ Ewen R. Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President > >   > > SELLER: > HARRIS CORPORATION > >   By:         /s/Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > > >   > >   > >   > >   > > 29 > >   > > EXHIBIT A > > FORM OF ASSUMPTION AGREEMENT > > > >   > >   > >           THIS ASSUMPTION AGREEMENT, is dated as of June 30, 2000 (this > "Agreement"), between Harris Corporation a Delaware corporation (the > "Seller"), on the one hand, and Teltronics, Inc., a Delaware corporation (the > "Buyer"), on the other hand. > > > > W I T N E S E T H: > > > >           WHEREAS, Seller is transferring certain of its assets of its > Enhanced Services Business Unit (as defined in the Asset Sale Agreement) to > the Buyer pursuant to the terms of the Asset Sale Agreement, dated as of June > 30, 2000 by and among the Buyer, on the one hand, and Seller, on the other > hand (the "Asset Sale Agreement"); and > > > >           WHEREAS, in partial consideration therefore, the Asset Sale > Agreement requires that the Buyer assume the Assumed Liabilities (as defined > in the Asset Sale Agreement). > > > >           NOW THEREFORE, in consideration of the transfer of the assets to the > Buyer and for other good and valuable consideration, the receipt and > sufficiency of which are hereby acknowledged, the parties hereto, intending to > be legally bound, hereby agree as follows (capitalized terms used herein > without definition shall have the meanings attributed thereto in the Asset > Sale Agreement): > > > >           1.          Assumption. The Buyer hereby expressly assumes and > undertakes to perform, pay and discharge all of the Assumed Liabilities > including but not limited to the Assigned Contracts under and in accordance > with the Asset Sale Agreement. Notwithstanding the above, nothing in this > Agreement shall require the Buyer to pay, perform or discharge any Assumed > Liabilities that it is in good faith contesting or causing to be contested. > Except for the Assumed Liabilities, Buyer assumes no other debt, liability or > obligation of Seller. > > > >           2.          Further Assurances. The Buyer shall, at any time and > from time to time after the Closing Date, upon the reasonable request of > Seller promptly and duly execute and deliver any and all such further > agreements and instruments as Seller may reasonably request to obtain the full > benefits of this Agreement and of the rights and powers herein granted > relating to the assumption of the Assumed Liabilities. > > > >           3.          No Third Party Beneficiaries. Nothing herein expressed > or implied is intended or shall be construed to confer upon or give to any > person, other than the parties hereto, any rights or remedies under or by > reason of this Agreement. > > > >           4.          Governing Law. This Agreement shall be governed by, > construed and enforced in accordance with the internal laws of the State of > Florida, without regard to the conflict of laws provisions thereof. > > > > > > > > 1 > > > > > > > > > >           5.          Amendments. Neither this Agreement nor any of the terms > hereof may be terminated, amended or waived orally, but only by an instrument > in writing executed by each of the parties hereto. > > > >           6.          Severability. If any term or provision of this Agreement > is held by a court of competent jurisdiction or other authority to be invalid, > void or unenforceable, the remainder of the terms and provisions of this > Agreement shall be in no way affected, impaired or invalidated. > > > >           7.          Successors and Assigns. The provisions hereof shall > inure to the benefit and be binding upon the parties hereto and their > respective successors and assigns. The assignment of this Agreement shall not > relieve the assigning party of its obligations without the written consent of > the other party. > > > >           8.          Counterparts. This Agreement may be executed in two or > more counterparts, each of which shall be deemed an original, but all of which > together shall constitute one and the same instrument. > > > >           IN WITNESS WHEREOF, Harris Corporation and Teltronics, Inc. each has > caused this Assumption Agreement to be executed by its duly authorized officer > as of the date first written above. > > > > > > > > > >   HARRIS CORPORATION > >   By:         /s/Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division   > > > TELTRONICS, INC. > >   By:         /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President > > > > > > > > > 2 > > > > > > > > > EXHIBIT B > > FORM OF BILL OF SALE > > > >   > >   > >           KNOW ALL MEN BY THESE PRESENTS, that HARRIS CORPORATION, a Delaware > corporation ("Seller"), for good and valuable consideration, receipt and > sufficiency of which is hereby acknowledged, pursuant to the Asset Sale > Agreement, dated as of June 30, 2000, (the "Agreement") by and among Seller > and TELTRONICS, INC., a Delaware corporation ("Buyer"), does hereby grant, > sell, convey, assign, transfer and deliver unto Buyer, to have and to hold > forever (capitalized terms used herein but not otherwise defined shall have > the respective meaning ascribed to such terms in the Agreement)the following: > > > >           All of the right, title and interest of the Seller as of the date > hereof, in and to the Transferred Assets (as term is defined in Article 2 of > the Agreement). > > > >           Seller covenants that it will from time to time, at its expense, > make, execute and deliver such instruments, acts, consents and assurances as > Buyer may reasonably request to more effectively sell, convey, transfer to and > invest in Buyer all of Seller's right, title and interest in and to the > Transferred Assets. > > > >           Seller further covenants and agrees that the covenants herein > contained shall be binding upon their successors and assigns. > > > >           IN WITNESS WHEREOF, this Bill of Sale has been duly executed and > delivered by a duly authorized officer of Seller as of this 30th day of June, > 2000. > > > > > >   > >   HARRIS CORPORATION > >   By:         /s/Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President - Network Support Division > > > > > > EXHIBIT C > > FORM OF CONTRACT ASSIGNMENT > > > >   > >           THIS CONTRACT ASSIGNMENT ("Assignment") is made and entered into as > of this 30th day of June, 2000 by and between TELTRONICS, INC., a Delaware > corporation ("Buyer "), and HARRIS CORPORATION, a Delaware corporation > ("Seller"), and > > > > W I T N E S S E T H: > > > >           WHEREAS, pursuant to that certain Asset Sale Agreement dated as of > June 30, 2000, (the "Agreement") by and between Buyer and Seller, Buyer has > agreed to purchase the Transferred Assets (as defined in the Agreement); and > > > >           WHEREAS, pursuant to the terms of the Agreement, Seller has agreed > to assign the Transferred Assets to Buyer. > > > >           NOW, THEREFORE, for good and valuable consideration, the receipt and > sufficiency of which are hereby acknowledged, the parties hereto promise and > agree as follows: > > > >           1.          Seller hereby assigns and transfers to Buyer all > Seller's right, title and interest in and to the Transferred Assets . > > > >           2.          Buyer hereby accepts the assignment from Seller of each > of the Transferred Assets. > > > >           3.          This Assignment shall be binding on and inure to the > benefit of the parties hereto and their respective successors and assigns. > > > >           4.          Notice shall be deemed given to either of the parties if > notice is given in the manner set forth in the Agreement. > > > >           5.          This Agreement shall be governed by and construed in > accordance with the internal laws of Florida. > >   > >           IN WITNESS WHEREOF, the undersigned have executed this Assignment as > of the date set forth above. > >   > > > >   SELLER: > HARRIS CORPORATION > >   By:         /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division   > > > BUYER: > TELTRONICS, INC. > >   By:         /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President and CEO > > > > > > >   > > EXHIBIT D > > > > FORM OF PATENT ASSIGNMENT > > > >   > >           WHEREAS, HARRIS CORPORATION, a Delaware corporation, acting through > its Network Support Division, ("Assignors"), is the owner of the patents > described in the attached Schedule A ("Assigned Patents"); and > >           WHEREAS, TELTRONICS, INC., a Delaware corporation, ("Assignee"), > having an office at 2150 Whitfield Industrial Way in Sarasota, Florida, is > desirous of acquiring the Assigned Patents; > >           NOW THEREFORE, for good and valuable consideration to the Assignors > paid, the receipt and sufficiency of which is hereby acknowledged, the > Assignor assigns to the Assignee, its successors and assigns, all right, title > and interest in and to the Assigned Patents, subject to any licenses > previously granted by Assignor, together with the rights of recovery for past > infringement thereof, including the right to sue for and collect damages for > its own use, the same to be held and enjoyed by Assignee for its own use and > benefit and the use and benefit of its successors and assigns, fully and > entirely as the same would have been held and enjoyed by Assignors had this > sale and assignment not been made. > > > >           EXECUTED this 30th day of June 2000, at Melbourne, Florida, USA. > > > > > > >   HARRIS CORPORATION > Network Support Division >   > > By:         /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > >   > > > > STATE OF FLORIDA > COUNTY OF BREVARD > > > >           The foregoing instrument was acknowledged before me this 30th day of > June, 2000, by Daniel R. Pearson, President of the Network Support Division of > Harris Corporation, a Delaware corporation, on behalf of the corporation. He > is personally known to me. > > > >   > ___________________________________ > > > > > > > EXHIBIT E > > RESERVED > > > > > > > EXHIBIT F > > > > FORM OF LICENSE AGREEMENT > > > > >   > >           This License Agreement is made as of June 30, 2000, (the "License > Agreement") by and between TELTRONICS, INC., a Delaware corporation > ("Licensor"), and HARRIS CORPORATION, a Delaware corporation, acting through > its Communications Products Division ("Licensee"). > > > > WITNESSETH: > >           WHEREAS, Licensor and Licensee have entered into an Asset Sale > Agreement, dated as of June 30, 2000, for the sale and other transfer of > certain tangible and intangible assets from Licensee to Licensor ("Asset Sale > Agreement"); and > > > >           WHEREAS, pursuant to the Asset Sale Agreement, Licensee will > transfer to Licensor certain of the Intellectual Property Rights used in the > Enhanced Services Business Unit (as defined in the Asset Sale Agreement); and > > > >           WHEREAS, the Licensor wishes to grant back to Licensee a > non-exclusive license to certain of the Intellectual Property Rights > transferred to Licensor pursuant to terms and conditions of the Asset Sale > Agreement. > > > >           NOW, THEREFORE, in consideration of the premises, representations, > warranties, mutual covenants and agreements hereinafter set forth, and for > good and valuable consideration the receipt and sufficiency of which are > hereby acknowledged, the Licensee and Licensor hereby covenant and agree as > follows. > > > >   > > TERMS OF AGREEMENT > > > > 1. > > Licenses Back to Licensee > Licensor agrees to grant, and hereby grants, to Licensee a non-exclusive, > world-wide, royalty-free, irrevocable, non-transferable (except as permitted > herein) license to practice under the Intellectual Property Rights, excluding > the Trademarks, transferred to Licensor under the Asset Sale Agreement to > make, have made, use, sell, lease and otherwise dispose of products and to > distribute, make copies of and make derivative works of, all software and > related documentation, provided such is not prohibited under, or contrary to > the terms of Section 9.9 Non-Compete of the Asset Sale Agreement. > > Licensor acknowledges and agrees that Licensee's products and services for air > traffic control applications and those of the type presently being provided by > Licensee under contract with the U.S. Dept. of Defense and follow-on contracts > and future generations thereof, and use of the related software, documentation > and applications, including but not limited to those listed on Annex A hereto, > are deemed to be permissible under the Non-Competition Agreement. > > > 2. > > > Improvements > The parties agree to develop a mutually acceptable plan to meet periodically > for the purpose of exchanging information relating to their respective > Improvements which have been reduced to practice and which would reasonably > have application in the other party's products as described in this Agreement > and in the Asset Sale Agreement. Neither party shall be obligated to disclose > information to the other party if prohibited by law or if contrary to existing > contract or customer approval. > > Any information submitted pursuant hereto shall be subject to a mutually > acceptable non- disclosure agreement, unless otherwise indicated in writing by > the submitting party. "Improvements" shall mean enhancements, upgrades and > other changes, such as those made under engineering change orders which result > in substantially the same functions as in the original products, excluding > major redesigns or replacement products. > > To the extent it is permitted to do so, and to do so without an obligation to > pay fees or royalties to a third party, each party agrees, under mutually > acceptable terms and conditions to grant to the other party a non-exclusive, > royalty free, non transferable, worldwide license to practice under the > granting party's intellectual property rights to make, have made, use, sell, > lease and otherwise dispose of its Improvements as a part of the other party's > products, as described in this Agreement and in the Asset Sale Agreement. > > Th respective obligations of the parties to grant licenses hereunder such > apply only for a period of three (3) years following the Closing Date, unless > extended under mutual agreement between the parties. > > > 3. > > > Limited Warranty and Disclaimer of Liability > NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, > CONSEQUENTIAL, INDIRECT, OR OTHER SIMILAR DAMAGES ARISING FROM BREACH OF > CONTRACT, NEGLIGENCE, OR ANY OTHER LEGAL THEORY EVEN IF OTHER PARTY OR ITS > AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. > > > 4. > > > Governing Law, Severability > This Agreement shall be construed in accordance with and governed for all > purposes by the laws and public policies of the State of Florida applicable to > contracts executed and to be wholly performed within such State. In case any > one or more of the provisions contained in the Agreement shall, for any > reason, be held to be invalid, illegal, or unenforceable shall not affect any > other provision of this Agreement, but this Agreement shall be construed as if > such invalid, illegal, or unenforceable provision had never been contained > herein. > > > 5. > > > Assignment > Neither party shall assign or otherwise transfer their respective rights or > obligations under this License Agreement without the other, except for a > transfer to a subsidiary or affiliate or as such transfer or assignment is > made as a part of the sale or other transfer of substantially all of the > business assets to which the respective licenses granted herein apply. Any > attempted assignment not assented in the manner provided for herein shall be > null and void. > > > 6. > > > Notices > All notices under this License Agreement shall be in writing, and shall be > effective when delivered to the party at the address first shown above by > prepaid certified, air mail, return receipt requested, or by Fax. If to > Licensee, shall be sent to Corporate Secretary, Harris Corporation, 1025 West > NASA Boulevard, Melbourne, Florida, 32919, Attention: Scott Mikuen, if to > Licensor, to President and CEO, Teltronics, Inc., 2150 Whitfield Way, > Sarasota, Florida 34243; the recipient's answerback reply at both the > beginning and end of a fax message shall establish delivery. > > > 7. > > > Integration > The foregoing is the entire Agreement of the parties with respect to the > subject matter hereof and may not be modified, amended, supplemented, > canceled, or discharged except by written instrument executed by the party > affected thereby. > > > > > > > AGREED TO BY: > LICENSEE > > HARRIS CORPORATION > LICENSOR > > TELTRONICS, INC. > > By:          /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > Date:      June 30, 2000 > > By:          /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President and CEO > > Date:      June 30, 2000 > > > > > > EXHIBIT G > > > > LEASE ASSIGNMENT > > > >   > >           KNOW ALL MEN BY THESE PRESENTS, that Harris Corporation, a Delaware > corporation ("Assignor"), for and in consideration of the sum of $10.00 and > other good and valuable consideration in hand paid by Teltronics, Inc, a > Delaware corporation ("Assignee"), the receipt and sufficiency of which is > hereby acknowledged, hereby assigns, transfers and conveys unto Assignee, > effective July 1,2000, all of the Assignor's right, title and interest in that > certain written Commercial Lease Agreement (including any renewals, > modifications, or extensions thereof) ("Lease"), dated April 27, 1999 between > Mecham Parkview Associates, L.L.C., Fong Parkview Associates, L.L.C, dba > Parkview Plaza Office Building as Lessor, and Assignor, as Lessee for the > rental of approximately 5800 square feet of space located at 2180 South 1300 > East, Salt Lake City, Utah 84106 ("Leased Premises"), together with all and > singular the premises therein mentioned and described, to have and to hold the > same for and during the remainder of the term of the Lease. Assignor covenants > that Assignor's interest in the Lease is free from all other gifts, grants, > bargains, sales, leases, and encumbrances, made or created by the Assignor. > Assignee covenants to assume all obligations and responsibilities arising > under the Lease with respect to any matter occurring or accruing from and > after the date of this Agreement. > > > >           NOTWITHSTANDING the foregoing, Lessor and Assignee agree that upon > execution of this Agreement that the Assignor shall be fully relieved of any > and all responsibilities, obligations and liabilities of any nature, arising > under the Lease with respect to any matters occurring or accruing from and > after the date of this Agreement. Upon execution of this Agreement, the > Assignee shall hereafter, at all times be fully responsible and liable to > Lessor for all of the obligations of Lessee occurring or accruing from and > after the date of this Agreement under the terms, provisions and covenants of > the Lease. This Agreement shall be construed to constitute a novation of the > Lease and a full release of Assignor from the further performance of its > obligations as the Lessee under the Lease occurring or accruing from and after > the date of this Agreement. > > > > 1 > >   > >           Assignee does hereby covenant and agree for itself and for its > successors and assigns to perform all of the covenants and obligations > occurring or accruing from and after the date of this Agreement required to be > performed by the Lessee under the Lease the same as if Assignee had been named > as Lessee therein. > > > >   > >           Signed at ______________________, this 30th day of June, 2000. > > > > >   ASSIGNOR: > HARRIS CORPORATION, a Delaware corporation > > By:          /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:        Daniel R. Pearson > Title:          President     ASSIGNEE: > TELTRONICS, INC., > > By:          /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:       Ewen Cameron > Title:          President and CEO > > > > > > > >           The undersigned hereby consents to the terms and conditions of the > Assignment of Lease set forth above. > > > >   LESSOR: > MECHAM PARKVIEW ASSOCIATES, L.L.C. > FONG PARKVIEW ASSOCIATES, L.L.C. >           dba > PARKVIEW PLAZA OFFICE BUILDING > > By:             > > -------------------------------------------------------------------------------- > > Name:        > Title:           > Date:        > > > > > > > > > > > 2 > > > > > > > EXHIBIT H > > > > FORM OF TRANSITION SERVICES AGREEMENT > >   > >           THIS TRANSITION SERVICES AGREEMENT ("Agreement") is made as of June > 30, 2000 by and between HARRIS CORPORATION, a Delaware corporation having > offices at 1025 West NASA Boulevard, Melbourne, FL 32919 ("Harris") and > TELTRONICS, INC, a Delaware corporation, having an office at Sarasota, FL > ("Buyer"). > >   > > R E C I T A L S > > > >           WHEREAS, > > Buyer and Harris entered into an Asset Sale Agreement dated as of June 30, > 2000, wherein Buyer has purchased and Harris has sold certain assets relating > to Harris' Enhanced Services Business Unit, ("Asset Sale Agreement"); and > > > > > >           WHEREAS, > > Buyer desires to purchase from Harris certain manufacturing, procurement, > sales order support, training and sustaining engineering services previously > used in connection with Harris' operation of the Enhanced Services Business > Unit (ESBU) following the Closing of the Asset Sale Agreement, for a > transition period; and > > > > > >           WHEREAS > > , Harris will provide all transition services at its Florida facilities or in > Novato, California, in both cases, using Florida based employees; and > > > > > >           WHEREAS, > > the manufacturing test equipment purchased by Buyer under the Asset Sale > Agreement is located at Seller's, Florida facilities, and it is the parties > intent to physically transfer this equipment to Buyer's facility upon > completion of Seller's transition services activities identified herein; and > > > > > >           NOW, THEREFORE, in consideration of the foregoing and the mutual > covenants hereinafter set forth, the Parties agree as follows: > > > >   > > ARTICLE > > 1 > > > > INTERPRETATION > > > > 1.1 > >           Definitions. For the purposes of this Agreement the following terms > have the meanings set forth in this Section 1.1: > > > > > > "Agreement" means this transition services agreement, the attached Schedule A > and any agreement or schedule supplementing or amending this agreement. The > words "hereto", "herein," "hereof," "hereby" and "hereunder" and similar > expressions refer to this Agreement and not to any particular section or > portion of it. References herein to an Article, Section or Schedule refer to > the applicable Article, Section or Schedule of this Agreement. > > > > > > > > 1 > > > > > > "Asset Sale Agreement" means the Asset Sale Agreement between Harris > Corporation and Buyer dated June 30, 2000 whereby Buyer acquired from Harris > certain of its assets of the Enhanced Services Business Unit. > > > > "Buyer" means Teltronics, Inc., a Delaware corporation. > > > > "Closing Date" means June 30, 2000. > > > > "Harris" means Harris Corporation, a Delaware corporation. > > > > "Invoiced Amount" has the meaning attributed to it in Section 6.1. > > > > "Parties" means Harris and Buyer and "Party" means either one of them. > > > > "Place of Business" means the offices of Harris located at Palm Bay, Melbourne > and Malabar Florida and Camarillo, California. > > > > "Operations" means the business conducted by Buyer following the Closing Date > using the assets purchased by Buyer under the Asset Sale Agreement using the > assets purchased by Buyer. > > > > "Prices of Transition Services" means the price charged by Harris for > providing such service or Service(s) and or Materials, as described in > Schedule A. > > > > "Services" means the services set out in Schedule A which outline the nature > of the services to be made available by Harris to assist Buyer in operating > the Operations during the Transition Period. > > > > "Transition Period" means the periods, described as follows, from the Closing > Date which the Parties have agreed to for the provision of Services, provided > that, some Services will only be provided as requested and at the rates > identified in Schedule A as Price of Transition Services. > > > >   > > ARTICLE > > 2 > SCHEDULES > > > > > > 2.1          Schedules > > . The following schedule forms part of this Agreement. > Schedule A Description of Services/Price of Services. > > > > > >   > > ARTICLE > > 3 > ACCESS TO SERVICES > > > > > > 3.1          Access to Services > > . During the Transition Period and subject to the terms herein contained, each > Party will use reasonable efforts to request from or make available to the > other Party, as applicable, the Services on an as and when needed basis during > normal business hours or such hours as may otherwise be agreed upon by the > Parties. > > > > > > > > > > 2 > > > > > > 3.2          Acknowledgement by Parties > > . Buyer acknowledges that the Services are provided by Harris at the request > of Buyer to assist Buyer in administrating and operating as soon as possible > the Operations on a stand alone basis free of any dependence on the personnel > and resources needed by Harris to operate the remainder of its operations. > > > > > > 3.3          No Liability > > . Harris is providing the Services on the understanding that it assumes no > liability or responsibility to Buyer or any person claiming through Buyer, > arising from or in connection with the Services except for any liability > suffered by Buyer by reason of the gross negligence, willful misconduct of > Harris, or failure of Harris to exercise professional care in the provision of > the Services. Furthermore, Harris assumes no liability or responsibility > whatsoever, with respect to the Buyer's equipment while located at Harris > facilities nor shall Harris be responsible for any of the results of the > services performed. > > > > > > Buyer agrees that none of Harris or its affiliates and their respective > directors, officers, agents, and employees (each, a "Harris Indemnified > Person") shall have any liability, whether direct or indirect, in contract or > tort or otherwise, to Buyer for or in connection with the Services rendered or > to be rendered by any Harris Indemnified Person pursuant to this Agreement, or > any Harris Indemnified Person's actions or inaction's in connection with any > such Services, with respect to the Buyer's use or operation of Buyer's > equipment or the results of the services conducted by Harris and the > transactions contemplated hereby, except for damages which have resulted from > such Harris Indemnified Person's gross negligence, willful misconduct or > failure to exercise professional care in connection with any such Services, > actions, or inactions. The sole remedy of Buyer for any claim relating to the > performance or nonperformance of the Services or damage (whether personal > injury or property ) resulting from Harris' use of Buyer's equipment shall be > a refund by Harris to Buyer of any charges or fees paid for the applicable > Service. In addition, in no event shall either party be liable to the other > for special, punitive, incidental, or consequential damages arising out of > this Agreement. HARRIS MAKES no REPRESENTATIONS OR WARRANTIES, EXPRESS OR > IMPLIED, AND HARRIS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES WITH RESPECT > TO THE agreement SERVICES TO BE PROVIDED HEREUNDER OR USE OF THE BUYER'S > EQUIPMENT. > > > > Buyer agrees to indemnify and hold harmless each Harris Indemnified Person > from and against any damages in connection with the provision of Services or > resulting from Harris' use of the Buyer's equipment; provided that Buyer will > not be responsible for any damages incurred by any Harris Indemnified Person > that have resulted from such Harris Indemnified Person's gross negligence, > willful misconduct or failure to exercise professional care in connection with > any of the Services, actions, or inactions referred to above. > > > > 3.4          Use of Services > > . In using the Services, Buyer will use its best efforts not to disrupt or > adversely affect Harris' ability to administer and operate its businesses. The > Parties will cooperate with each other in achieving this objective. > > > > > > 3.5          No Representation > > . Harris does not make any representation or give any warranty as to whether > the provision of the Services is adequate to service Buyer's needs to > administer and operate the Operations during the Transition Period. With > respect to materials and workmanship, Harris will not ship any materials or > finished goods to a customer until said > > > > > > > > > > > 3 > > > > > > materials or finished goods have successfully passed Quality Control > inspections or tests compliant with ISO 9000. > > > > 3.6          Good Faith Obligations > > . The Parties acknowledge and agree that the provision of the Services during > the Transition Period will require the good faith of each Party in achieving > their mutual objectives without disrupting the other Party's ability to > administer and operate its own business. > > > > > > 3.7          Services to be Provided > > . All Services to be provided during the Transition Period will take place at > the Place of Business or at the Novato ESBU site, unless otherwise agreed in > writing by the Parties. > > > > > > 3.8          Conduct of Businesses > > . Except as otherwise expressly provided herein, Harris will administer and > operate the remainder of its operations separate and apart from the Operations > and Buyer will administer and operate the Operations separate and apart from > the remainder of Harris' operations. > > > > > > 3.9          Liability. > > Buyer shall be solely responsible for the cost of removal and transportation > of the Buyer's equipment from Harris' facilities. In addition, Buyer shall be > solely responsible for any and all damages resulting from Harris use or > operation of the Buyer's equipment. > > > > > >   > > ARTICLE > > 4 > TERMINATION OF AGREEMENT > > > > > > 4.1          Termination of Agreement > > . Except for the obligations of each Party to pay the other Party for the > Invoiced Amount, this Agreement will terminate and be of no further effect > upon the termination of the Transition Period. > > > > > >   > > ARTICLE > > 5 > KEEPING OF RECORDS > > > > > > 5.1          Keeping of Records > > . Harris will keep records in accordance with its then normal accounting > procedures documenting the Price of Transition Services incurred hereunder for > a period of one year following the end of the Transition Period. Upon > reasonable notice by the Buyer, Harris will make copies of such records > available for inspection by the Buyer at Buyer's expense during regular > business hours and at the office where such records are normally kept. > > > > > >   > > ARTICLE 6 > REIMBURSEMENT FOR SERVICES > > > > 6.1 > >           Reimbursement for Services. Buyer will reimburse Harris for the > Price of Transition Services incurred in providing the Services during the > Transition Period. At the end of every Harris FY period (July 28, Aug. 25, > Sept. 29, etc.) Harris will deliver to the Buyer an invoice setting forth the > Price of Transition Services (the "Invoiced Amount"). In the event that Buyer > > > > > > > > 4 > > > > > > elects to selectively terminate any of the Services described in Schedule "A" > prior to the expiration of the Transition Period because such Service is no > longer required by Buyer, Buyer will pay the applicable Price of Transition > Services for the Transition Services to the extent that Buyer has utilized > them. > > > > 6.2          Payment > > . Buyer will pay to Harris the Invoiced Amount within 30 days of receipt of > the invoice thereof. > > > > > > 6.3          Invoice Binding > > . The Price of Transition Services calculation set forth in the invoice > referred to in Section 6.1 will be prima facie evidence of the amount owing by > Buyer to Harris hereunder absent manifest error. Any challenge by Buyer as to > the accuracy to the Invoiced Amount will not release Buyer from its obligation > to pay the Invoiced Amount within the period provided under Section 6.2 > pending resolution of the matter in dispute in accordance with Article 7. > > > > > > 6.4          Maximum Service > > . In no event shall Buyer be authorized to request Transition Services which > exceed the total price of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) a month > for labor. > > > > > >   > > ARTICLE 7 > DISPUTE RESOLUTION > > > > 7.1 > >           Dispute Resolution. In the event of any dispute arising under this > Agreement, the Parties will undertake to use reasonable commercial efforts, > with due regard to the concerns of each Party regarding the time of settlement > of the dispute, to refer discussion of the matters constituting the dispute to > working parties formed by the Parties, who will have 14 days to resolve the > issue. If the working parties fail to resolve the dispute within such two week > period, then the dispute will be referred to the senior executives of the > Parties, who will have one week to resolve the issue, failing which the > Parties will be free to pursue such remedies at law or equity as they may be > entitled to. > > > > > >   > > ARTICLE > > 8 > CONFIDENTIAL INFORMATION > > > > > > 8.1.          Confidential Information. > > Buyer and Harris acknowledge that, in connection with the provision of the > Services, they each have access to, have received or will receive from each > other tangible and intangible property which is confidential and or > proprietary to Harris or Buyer. Both Parties agree that, as a material > provision of this Agreement, they will exercise all reasonable care to > safeguard such property and prevent disclosure or misuse of same. At any time > requested by Buyer, Harris shall promptly return all tangible property of > Buyer and shall continue to treat as confidential for a period of three (3) > years after termination of this Agreement all intangibles received from Buyer. > At any time requested by Harris, Buyer shall promptly return all tangible > property of Harris and shall continue to treat as confidential for a period of > three (3) years after termination of this Agreement all intangibles received > from Harris. No Party shall knowingly publish or disseminate to any third > party any of any other Party's > > > > > > > > 5 > > > > > > confidential information. Each document in printed or electronic form or other > media which contains confidential information shall be stamped with a > confidential legend. > > > > Notwithstanding the other provisions of this Section of this Agreement, > nothing received by any of the Parties hereunder shall be construed as > confidential information which: > > > >           8.1.1 > >           is published or otherwise made available to the public other than by > breach of this Agreement by a Party hereto; or > > > > > >           8.1.2 > >           is rightfully received by one Party hereunder from a third Party not > obligated under this Agreement, and without confidential limitation; or > > > > > >           8.1.3 > >           is approved for release by the Party designating the information as > confidential information; or > > > > > >           8.1.4 > >           is known to the Party receiving the confidential information prior > to its first receipt of the same from the other Party; or > > > > > >           8.1.5 > >           is independently developed by the Party receiving the confidential > information; or > > > > > >           8.1.6 > >           the receiving party reasonably believes that it is required to be > disclosed to comply with applicable law, rule or regulation or court order or > other compulsory process of a court or other governmental body. > > > > > >           In the event that Section 8.1.6 is applicable, the receiving Party > shall make commercially reasonable efforts to notify the disclosing party, in > writing, of its intention to disclose allowing a reasonable period prior to > such intended disclosure, where the receiving Party reasonably believes that > such notice can be provided without violating applicable law, rule or > regulation or court order or other compulsory process of a court or other > governmental body, so that the disclosing Party may take such action as it > deems appropriate to protect its confidential information. > >   > > ARTICLE 9 > MISCELLANEOUS > > > > 9.1          Notices > > . Any notices hereunder will be sufficiently given if delivered personally or > sent by facsimile transmission or overnight or expedited courier, addressed as > follows, or to such other address of which the addressee party may have given > notice: > > > > > >                          To Buyer: >                           Attention: >                           Facsimile Number: > > > with copies to: > >                          Attention: >                           Facsimile Number: > > > > > > 6 > > > > > > > > To Harris:          Harris Corporation >                           1025 West NASA Boulevard >                           Melbourne, Florida 32919 >                            Attention:   Corporate Secretary > > > > with copies to:    Harris Corporation >                           1025 West NASA Boulevard >                           Melbourne, Florida 32919 >                            Attention:   Scott T. Mikuen, Esq. >                           Facsimile Number: (321) 727-9234/9636 > > > > Unless otherwise specified in this Agreement, such notices or other > communications will be deemed received on the first Business Day following > delivery or receipt by facsimile transmission. > > > > 9.2          Assignment > > . No Party may assign any right, benefit or obligation arising under this > Agreement without the prior written consent of the other Party, such consent > not to be unreasonably withheld. > > > > > > 9.3          Entire Agreement, Amendments, Schedules > > . This Agreement and all agreements and instruments to be delivered by the > Parties pursuant hereto, represent the entire understanding and agreement > between the Parties with respect to the subject matter hereof and supersede > all prior oral and written and all contemporaneous oral negotiations, > representations, warranties, commitments and understandings between the > Parties. The Parties may amend or modify this Agreement, in such manner as may > be agreed upon, only by a written instrument executed by the Parties. > > > > > > 9.4          Expenses > > . Except as otherwise expressly provided in this Agreement, the Parties will > each pay their own expenses in connection with this Agreement and the > transactions contemplated hereby. > > > > > > 9.5          Independent Contractor > > . Each Party is an independent contractor and nothing contained in this > Agreement will be construed to be inconsistent with this relationship or > status. Neither Party owes a fiduciary duty to the other. Nothing in this > Agreement will be in any way construed to constitute either Party as the > agent, employee or representative of the other. As an independent contractor, > each Party has relied on its own expertise or the expertise of its legal, > financial, technical or other advisors. > > > > > > 9.6           Force Majeure and Work Stoppages. > > No Party shall be liable in any manner for failure or delay upon fulfillment > of all or part of this Agreement, directly or indirectly owing to any cause > beyond its control, including, but not limited to, acts of God, governmental > orders or restriction, war, threat of war, warlike conditions, fire, > hostilities, sanctions, revolution, riot, looting, strike, lockout, accident, > interruption of transportation or inability to obtain necessary labor, > materials, or facilities. > > > > > > > > > > 7 > > > > > > 9.7          No License. Nothing contained in this Agreement shall be > construed as granting, by implication, estoppel or otherwise, any licenses or > rights under any patents, copyrights, works or other legally protectable > proprietary rights (present or future) of either Party hereto to the other > Party. > > > > 9.8          Governing Law > > . This Agreement will be governed by and construed and enforced in accordance > with the laws of Florida without giving effect to its conflicts of laws > provisions thereof. > > > > > > 9.9          Section Heading > > . The Section headings are for the convenience of the Parties and in no way > alter, modify, amend, limit, or restrict the contractual obligations of the > Parties. > > > > > > 9.10          Waiver > > . No consent or waiver, expressed or implied, by a Party to or of any breach > or default by the other Party in the performance by the other Party of its > obligations hereunder will be deemed or construed to be a consent or waiver to > or of any other breach or default in performance of such other Party > hereunder. > > > > > > 9.11          Further Assurance > > . The Parties will with reasonable diligence do all things and provide all > reasonable assurances as may be required to consummate the transactions > contemplated by this Agreement as may be reasonably necessary or desirable to > effect the purpose of this Agreement and to carry out its provisions. > > > > > >   > >           IN WITNESS WHEREOF, this Agreement has been duly executed by the > Parties as of and on the date first above written. > > > > > >   TELTRONICS, INC., > > By:        /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:         President and CEO     >   HARRIS CORPORATION > > By:        /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > > > > > > 8 > > > > > > > > > > > EXHIBIT I > > RESERVED > > > > > > > > EXHIBIT J > > > > FORM OF > > SUPPLY AGREEMENT > >   > >   > > This Supply Agreement ("Agreement") is entered into as of June 30, 2000, by > and between Teltronics, Inc., a Delaware corporation ("Supplier") and Harris > Corporation, a Delaware corporation, acting through its Network Support > Division ("Harris"). > > > > In consideration of the mutual agreements and covenants herein contained, the > parties, intending to be legally bound, agree as follows: > > > > 1. SALE AND PURCHASE > > > During the term of this Agreement, Supplier agrees to provide Harris any of > Supplier's products at Supplier's lowest prices that Supplier provide the same > product to any other customer. > > Harris shall order products by issuing written purchase orders to Supplier. > Such purchase orders will be subject to written acceptance by Supplier and, > upon acceptance, will constitute a binding agreement between Supplier and > Harris on the terms and conditions included herein. The terms and conditions > of this Agreement will prevail over any inconsistent wording on purchase order > forms. Supplier shall make best efforts to meet the quantities and shipping > dates specified by Harris in each purchase order; however, Supplier shall > notify Harris as soon as practicable when quantities or shipping dates differ > from those specified by Harris. > > > > 2. PRICES/TAXES > > > > All prices are exclusive of shipping and insurance charges which shall be > billed separately. > > > > All prices are exclusive of all sales, use, excise, and other taxes, duties or > charges. > > > > 3. PAYMENT/FINANCING > > > > Payment terms shall be determined on a per order basis. All payments shall be > made to Harris not later than within the agreed to number of days from date of > invoice. Late payments shall result in the assessment of a late charge equal > to one and one half (1 1/2%) percent per month on any outstanding balance, or > the maximum amount of interest chargeable by law, whichever is less. > > > > > > > 1 > > > > > > 4. EQUIPMENT WARRANTY > > > > Supplier shall extend its standard commercial warranty to Harris for each > respective product ordered by Harris. > > > 5. TITLE AND RISK OF LOSS > > > > Risk of loss for all Equipment sold under this Agreement shall pass to Harris > at time of delivery as defined herein. > > > 6. RESERVED > > > 7. CHANGE, CANCELLATION, AND TERMINATION > > > > In the event Harris desires to modify a purchase order, it shall submit a > written change order to Supplier. Each change order is effective upon written > acceptance by Supplier. > > > > If Harris cancels a purchase order within 30 days prior to scheduled shipment > date, Harris shall pay to Supplier a restocking fee of five (5%) percent of > the total purchase price of the canceled purchase order. > > > 8. ASSIGNMENT > > > > Neither party may assign this Agreement in whole or in part without the prior > written consent signed by an officer of the other party. Such consent shall > not be unreasonably withheld. > > > 9. GOVERNING LAW, VENUE, AND JURISDICTION > > > > This Agreement will be governed by and construed in accordance with the laws > of the State of Florida. The parties agree that any action to enforce any > provision of this Agreement or arising out of or based upon this Agreement or > the business relationship between Supplier and Harris will be brought in a > local or Federal court of competent jurisdiction in the State of Florida. > > > 10. ENFORCEABILITY > > > > If any provision of this Agreement shall be held to be invalid, illegal or > unenforceable, the validity, legality, or enforceability of the remaining > provisions shall in no way be affected or impaired. > > > > > > > > 2 > > > > > > 11. NOTICES > > > > All notices shall be in writing and shall be delivered or sent by registered, > certified or express mail, return receipt requested, to the addresses > indicated in this Agreement or to such other addresses as the parties shall > specify by giving notice pursuant hereto. A copy of all notices shall be sent > to Harris Corporation, Attention: __________, __________. A copy of all > notices shall be sent to Teltronics, Inc., Attention: __________, __________. > > > 12. LIMITATION OF LIABILITY > > > > NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CONTRACT, UNDER NO CIRCUMSTANCES > SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INCIDENTAL, > INDIRECT OR CONSEQUENTIAL DAMAGES, AS A RESULT OF A BREACH OF ANY PROVISION OF > THIS CONTRACT. > > > 13. TERM > > > > This Agreement shall become effective on the date first stated above and shall > remain in effect for a period of five (5) years thereafter. Upon expiration of > this five (5) year period, this Agreement shall terminate unless otherwise > extended by the written Agreement of both parties. Furthermore, either party > may terminate this Agreement immediately in the event that the other party has > breached a provision of this Agreement and has failed to cure the breach > pursuant to Article II or in the event that the other party shall become > liquidated, dissolved, bankrupt or insolvent, or shall taken any action to be > so declared. > > > 14. AUDIT RIGHTS > > > > Harris shall have the right to review Supplier's books and records in the > event Harris has a reasonable basis to question whether the prices charged to > Harris are the lowest prices offered to other customers of Supplier. In the > event Harris is charged in excess of the lowest price, Supplier agrees to > immediately refund Harris such excess. > > > 15. ENTIRE AGREEMENT > > > > This Agreement supersedes all previous communications, transactions, and > understandings, whether oral, or written, and constitutes the sole and entire > agreement between the parties pertaining to the subject matter hereof. No > modification or deletion of, or addition to these terms shall be binding on > either party unless made in writing and signed by a duly authorized > representative of both parties. > > > > > > > 3 > > > > > > > >   > > In Witness Whereof > > , duly authorized representatives of the Parties hereto have executed this > Agreement as of the day and year first above written. > > > > > > TELTRONICS, INC.HARRIS CORPORATION > > By:          /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President and CEO > > Date:      June 30, 2000 > > By:          /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > Date:      June 30, 2000 > > > > > > > 4 > > > > > > > >   > >   > > EXHIBIT K > > > > FORM OF SUBCONTRACT AGREEMENT > > > >   > >           This Subcontract Agreement ("Subcontract") is made as of June 30, > 2000, by and between Harris Corporation, a Delaware corporation ("Harris") and > Teltronics, Inc. a Delaware corporation ("Teltronics"). > > > >           WHEREAS, Harris and Teltronics have entered into an Asset Sale > Agreement dated June 30, 2000 whereby Harris agrees to transfer certain assets > to Teltronics and Teltronics agrees to assume certain liabilities which > include the assignment of certain contracts. > > > >           WHEREAS, the parties acknowledge that the assignment, transfer, > conveyance, sublet or otherwise disposition of the contract (hereinafter > referred to as the Requirements Agreement) between the Board of Education of > the City School District of the City of New York dated January 1, 1999, > (hereinafter referred to as the Board) and Harris requires the written > approval of the Chancellor of the Board or his designee. > > > >           WHEREAS, pending approval of the assignment of the Requirements > Agreement to Teltronics, Harris is issuing this subcontract to Teltronics as > an interim measure. It is the intent of the Parties that this Subcontract will > be superseded by a Novation Agreement entered into between the Board, Harris > and Teltronics. > > NOW, THERETOFORE, the parties further agree as follows: > > > > I. WORK DEFINED > > > All work to be performed under this Subcontract shall be subject to each and > every term and condition of the Requirements Agreement, which is hereby > incorporated by reference, and the additional provisions set forth below. > > > > II. TASK ORDERS > > > > The work to be performed by Teltronics shall be issued in the form of one or > more task orders ("Task Orders"), to be mutually agreed between the parties > from time to time. Each Task Order issued hereunder shall define payment and > delivery and other terms; which, upon execution, shall be attached to and > become a part of this Subcontract. > > > > III. DIRECTION/MODIFICATION > > > > Teltronics is not authorized to perform any work until such time as a Task > Order is issued. Changes to the Task Order shall be made by written > modifications executed by > > > > > > > 1 > > > > > >   > > both parties. Any additional work performed by Teltronics not performed > pursuant to a written modification shall be performed at Teltronics' sole cost > and expense. > > > > IV. > > The Parties agree to use their best efforts to obtain the Board's approval of > a Novation Agreement, at such time as the Parties mutually agree. > > > > V. > > Harris reserves the right to terminate this Subcontract should Harris receive > notice from the Board that Teltronics has failed to perform the work described > in the Task Orders or has failed to cure any deficiency (the "Default"). In > the event of such termination, Teltronics shall be responsible for any and all > costs, expenses, damages incurred by Harris arising out of such Default. > > > > VI. > > At the time this Subcontract is novated, the Parties acknowledge that any and > all outstanding accounts receivables that exist as of the date of the novation > are the assets of Harris (the "Outstanding Accounts Receivable"). Following > the novation, any monies received by Teltronics from the Board, shall be > immediately paid to Harris, until such time as Harris has been reimbursed the > total value of the Outstanding Accounts Receivables. Teltronics shall be > responsible for any and all disputes regarding which invoices the Board may > claim the payments have been submitted for. > > > Any dispute between Teltronics and the board concerning payment of invoices > shall in no way affect Teltronics' obligation to fully reimburse Harris for > the value of the outstanding accounts receivable. > > > > VII.ADDITIONAL PROVISIONS > > > >  A. > > Definitions - It is understood that all references, in the attached > Requirements Agreement, to the Board of Education, Customer, etc. are deemed > to mean Harris and all references to Contractor, proposer, etc. are deemed to > mean Teltronics. > > > >   B. > > Applicable Law and Venue - Notwithstanding anything to the contrary in the > attached Requirements Agreement, both parties agree that, irrespective of the > place of performance of this order, this order will be construed and > interpreted according to the laws of the state of Florida exclusive of its > conflict of laws provision. Unless otherwise agreed to in writing by the > parties, venue and jurisdiction for all legal proceedings of any kind or > nature brought to enforce any provisions of this order shall lie within the > State of Florida. > > > >   C. > > Invoicing and Payment - Invoicing and payment shall be described and in > accordance with each Task Order. > > > >   D. > > Disputes - Notwithstanding anything to the contrary in the attached > Requirements Agreement, > > >     1) > > If a dispute arises out of or relates to this Subcontract, and cannot be > resolved through good faith negotiations by the parties, the parties agree to > > > > > > > 2 > > > > > >       > > submit the dispute to a sole mediator selected by the parties or, if the > parties are unable to agree to the sole mediator, the parties agree to submit > the dispute to mediation under the Rules of the Supreme Court of the State of > Florida or the Commercial Mediation rules of the American Arbitration > Association ("AAA"). If not thus resolved and if both parties agree to binding > arbitration, the dispute will be referred to arbitration. > > > >     2) Any resolution reached through mediation or award arising out of > arbitration: > >     a) Shall be limited to a holding for or against a party, and affording > such monetary remedy as is deemed equitable, just and within the scope of this > Subcontract; >     b) May not include special, consequential or punitive damages; >     c) May in appropriate circumstances include injunctive relief; and >     d) May be entered in court in accordance with the Florida Arbitration Act. > >     3) > > Arbitration shall not be deemed a waiver of any right of termination under > this Subcontract and the arbitrator is not empowered to act or make any award > other than based solely on the rights and obligations of the parties prior to > and including such termination. > > > >     4) > > The arbitrator may not limit, expand or otherwise modify the terms of this > Subcontract. > > > >     5) > > Each party shall bear its own expenses incurred in any mediation, arbitration > or litigation, but any expenses related to the compensation and the costs of > any mediator or arbitrator shall be borne equally by the parties. > > > >   E. > > Entire Agreement, Amendments, Schedules > > This Agreement represents the entire understandings and agreement between > Teltronics and Harris with respect to this Subcontract. The Parties may amend > or modify this Subcontract only by written instrument executed by both > Parties. > > > >   F. > > Independent Contractor > > Each Party is an independent contractor and nothing contained in this > Subcontract will be inconsistent with this relationship or status. Neither > Party owes a fiduciary duty to the other. Nothing in this Subcontract will be > in any way construed to constitute either Party as the agent, employee or > representative of the > > > > > > > 3 > > > > > >     > > other. As an independent contractor, each Party has relied upon its own > expertise or the expertise of its legal, financial, technical or other > advisors. > > > > > > > > > IN WITNESS WHEREOF, the parties hereto have executed this Subcontract > Agreement as of the day and year last below written. > > > >   > > HARRIS CORPORATIONTELTRONICS, INC. > > By:          /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > By:          /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President and CEO > > > > > > > 4 > > > > > > > > EXHIBIT L > > > > SECURED PROMISSORY NOTE > > > >   > > $7,560,149.00 June 30, 2000 > > >   > >           FOR VALUE RECEIVED, the undersigned TELTRONICS, INC., a Delaware > corporation ("Maker") hereby promises to pay to HARRIS CORPORATION or order > ("Payee "), at 1025 West NASA Boulevard, Melbourne, Florida 32919, or at such > other address as Payee may from time to time designate to Maker in writing, > the principal sum of SEVEN MILLION FIVE HUNDRED SIXTY THOUSAND ONE HUNDRED > FORTY-NINE DOLLARS ($7,560,149.00), in lawful money of the United States of > America which, at the time of payment, shall be legal tender for the payment > of all debts, public and private together with interest at the rate of ten and > one-half percent (10.5%) per annum computed on the basis of a 360-day year. > > > >   > >           1.     Payment of Principal and Interest. (a) THREE MILLION SEVEN > HUNDRED EIGHTY THOUSAND AND SEVENTY-FOUR DOLLARS AND FIFTY CENTS > ($3,780,074.50) of the principal amount of this Note together with interest on > such $3,780,074.50 shall be due and payable on August 14, 2000. > > > >                (b) The entire unpaid principal balance on this Note, together > with all accrued and unpaid interest or other sums due hereunder, shall be due > and payable on September 29, 2000, if not sooner paid or declared to be due. > > > >                (c) If any day for payment of principal of, or interest on, > this Note shall be a day other than a business day, such payment shall be made > on the next succeeding business day. > > > >                (d) All payments hereunder shall be applied first to all fees, > expenses and other amounts (exclusive of principal and interest) then due > hereunder, next to interest, then due and the balance to the principal then > due. > > > >                (e) The Maker shall not be obligated to pay and Payee shall not > collect interest at a rate in excess of the maximum permitted by law or the > maximum that will not subject the Payee to any civil or criminal penalties. If > because of the acceleration of maturity, the payment of interest in advance or > any other reason, the Maker is required, under the provisions of this Note, to > pay interest at a rate in excess of such maximum rate, the rate of interest > under such provisions shall immediately and automatically be reduced to such > maximum rate, and any payment made in excess of such maximum rate together > with interest thereon at the rate provided herein from the date of such > payment, shall be immediately and automatically applied to the payment of > expenses owing to the Payee and then to the reduction of the unpaid principal > > > > 1 > > > > balance of this Note as of the date on which such excess payment was made. If > the amount to be so applied to reduction of the unpaid principal balance > exceeds the unpaid principal balance, the amount of such excess shall be > refunded by the payee to the Maker. > > > >           2.     Prepayment of Principal. (a) Maker may prepay principal of > this Note in whole or in part at any time without penalty or premium together > with accrued interest on the amount prepaid from the date hereof to the date > of the prepayment and the payment of all other fees, expenses and sums due and > owing hereunder. > > > >                (b) The Payee shall have the right to require that this Note be > prepaid in full (i) upon the sale, transfer or other disposition by Maker of > all or substantially all of its property, assets or business or (ii) upon any > merger, reorganization or consolidation in which Maker is not the resulting or > surviving entity or (iii) upon any merger, reorganization, sale of stock or > other similar event pursuant to which the current owners of the stock of Maker > cease to own less than fifty (50%) percent of the voting stock of Maker > > > >           3.     Late Charges; Default Interest. After maturity (whether by > acceleration or otherwise) of this Note or after the occurrence of an Event of > Default with respect to any payment of principal or interest due on this Note, > this Note shall bear interest, payable on demand, at a rate of twelve and > one-half (12.5%) percent per annum, but not in excess of the maximum rate > allowed by law. > > > >           4.     Security. This Note is secured by and entitled to the benefit > of a Security Agreement of Maker to Payee (the "Security Agreement "). > > > >           5.     Affirmative Covenants. So long as this Note shall remain > unpaid, Maker shall, unless waived by the advance written consent of the > Payee: > > > >                (a) Legal Existence. Maintain its existence in good standing in > the jurisdiction of Delaware, and operate its business in the ordinary course. > > > >                (b) Taxes. Pay and discharge when due all taxes, upon or with > respect to Maker and upon the income, profits and property of Maker. > > > >                (c) Insurance. Maintain insurance with financially sound > insurance carriers on such of its property, against such risks, and in such > amounts as is customarily maintained by similar businesses of similar size. > > > >                (d) Condition of Property. At all times, maintain, protect and > keep its assets, equipment and all other property in good order and condition > (ordinary wear and tear excepted). > > > >                (e) Observance of Legal Requirements. Observe and comply in all > respects with all laws, ordinances, orders, judgments, rules, regulations, > certifications, franchises, permits, licenses, directions and requirements of > all governmental bodies, which now or at any time hereafter may be applicable > to Maker. > > > > 2 > > > > > >                (f) Inspection. Upon the occurrence of an Event of Default > hereunder, or an event which, with notice or lapse of time, or both, would > constitute an Event of Default, permit representatives of Payee at all > reasonable times during normal business hours, upon prior notice to Maker, to > visit the offices of Maker, to examine the books and records of the Maker and > accountants' reports relating thereto, and to make copies or extracts > therefrom, and to discuss the affairs of Maker with the officers thereto, and > to examine and inspect the property of Maker, provided that in all such events > Payee shall use reasonable efforts to avoid or minimize any interference with > the operations of the business of Maker. > > > >           6.     Events of Default. Any of the following events shall > constitute an "Event of Default" under this Note: > > > >                (a) A failure by Maker to pay any installment of principal of, > interest on or any other sum due under, this Note, within three (3) days after > it shall become due; or > > > >                (b) A default by Maker in the performance of any covenant > contained herein or in the Security Agreement and such default shall continue > for ten (10) days; or > > > >                (c) A proceeding shall have been instituted by or against Maker > or any of its Affiliates (i) seeking to have an order for relief entered in > respect of it or seeking a declaration or entailing a finding that the Maker > or any of its Affiliates is insolvent or a similar declaration or finding, or > seeking dissolution, winding-up charter revocation or forfeiture, liquidation, > reorganization, arrangement, adjustment, composition or other similar relief > with respect to Maker or any Affiliate or its or their assets or debts under > any applicable federal or state law relating to bankruptcy, insolvency, relief > of debtors or protection of creditors, termination of legal status or any > other similar law now or hereafter in effect, or (ii) seeking appointment of a > receiver, trustee, custodian, liquidator, assignee, sequestrator or other > similar official for Maker or any of its Affiliates, or for all or any > substantial part of its properties, and, in the case of clause (i) or (ii), if > against Maker, such proceeding shall remain undismissed and unstayed, or an > order or decree approving or ordering any of the foregoing shall be entered > and continued unstayed and in effect, for a period of thirty (30) consecutive > days (for purposes hereof, "Affiliate" means any person or entity which > directly or indirectly controls the Maker or is controlled by the Maker); or > > > >                (d) Any one of Maker or its Affiliates shall become insolvent, > shall become generally unable to pay its debts as they become due, shall > voluntarily suspend transaction of its businesses, shall make a general > assignment for the benefit of creditors, or shall dissolve, wind-up or > liquidate any substantial part of its properties, or shall take any corporate > action in furtherance of any of the foregoing; or > > > >                (e) One or more judgments for the payment of money or > attachment against any of its properties shall have been entered against Maker > which judgment(s) or attachment(s) in the aggregate exceeds $50,000.00. > > > > > 3 > > >           7.     Remedies. At any time after occurrence and during the > continuance of an Event of Default, Payee may, at its option and without > notice or demand, do any one or more of the following: > > > >                (a) Declare the entire unpaid principal balance of this Note, > together with interest accrued thereon if any, and all other sums due from > Maker hereunder, to be immediately due and payable; or > > > >                (b) Exercise any other right or remedy as may be provided in > this Note, the Security Agreement or as otherwise provided at law or in equity > or otherwise. > > > >           8.     Costs and Attorney's Fees. In any suit, action or proceeding > for the collection of this Note or to enforce any of Payee's rights hereunder, > Payee may recover all reasonable and actual costs of and other expenses in > connection with the suit, action or proceeding, including attorney fees and > disbursements, paid or incurred by Payee, together with any and all other > amounts provided by law. > > > >           9.     Remedies Cumulative. The rights and remedies provided to > Payee in this Note and the Security Agreement (a) are not exclusive and are in > addition to any other rights and remedies Payee may have at law or in equity, > (b) shall be cumulative and concurrent, (c) may be pursued singly, > successively or together against Maker, at the sole discretion of Payee, and > (d) may be exercised as often as occasion therefor shall arise. The failure to > exercise or delay in exercising any such right or remedy shall not be > construed as a waiver or release thereof. > > > >           10.     Waivers and Agreements. Maker and all endorsers, sureties > and guarantors, jointly and severally: (a) waive presentment for payment, > demand, notice of demand, notice of nonpayment or dishonor, protest and notice > of protest of this Note, and all other notices (not expressly provided for in > this Note) in connection with the delivery, acceptance, performance, default, > or enforcement of the payment of this Note; and (b) agree that the liability > of each of them shall be unconditional without regard to the liability of any > other party and with respect to any such endorser, surety or guarantor, shall > not be affected in any manner by any indulgence, extension of time, renewal, > waiver or modification granted or consented to by Payee at any time; such > endorsers, sureties and guarantors, jointly or severally, further (c) consent > to any and all indulgences, extensions of time, renewals, waivers or > modifications granted or consented to by Payee at any time; and (d) agree that > additional makers, endorsers, guarantors or sureties may become parties to > this Note without notice to them or affecting their liability under this Note. > > > >           11.     Payee's Waivers. Payee shall not be deemed, by any act or > omission or commission, to have waived any of its rights or remedies hereunder > unless such waiver is in writing and signed by Payee. Such a written waiver > signed by Payee shall waive Payee's rights and remedies only to the extent > specifically stated in such written waiver. A waiver as to one or more > particular events of defaults shall not be construed as continuing or as a bar > to or waiver of any right or remedy as to another or subsequent event or > default. > > > > 4 > > > > > >           12.     Miscellaneous. > > > >                (a) Successors and Assigns. The words "Payee" and "Maker" shall > include the respective distributees, successors and permitted assigns of Payee > and Maker, respectively. The provisions of this Note shall bind and inure to > the benefit of Payee and Maker and their respective distributees, successors > and assigns. Notwithstanding the foregoing, Maker shall have no right to > distribute, assign, delegate, or otherwise transfer this Note of any of > Maker's obligations hereunder without the prior written consent of Payee. > > > >                (b) No Set-Off. All payments hereunder shall be made without > set-off or counterclaim under any circumstances and in such amounts as may be > necessary in order that all such payments shall not be less than the amounts > otherwise specified to be paid hereunder. > > > >                (c) Amendment of Note. This Note may be modified, amended, > discharged or waived only by an agreement in writing signed by the party > against whom enforcement of any such modification, amendment, discharge or > waiver is sought. > > > >                (d) Governing Law. This Note shall be governed by and construed > according to the laws of the State of Florida without regard to its conflict > of laws principles. > > > >                (e) Partial Invalidity. The unenforceability or invalidity of > any one or more provisions shall not render any other provisions herein > contained unenforceable or invalid. > > > >                (f) Waiver of Jury Trial; Jurisdiction. The Payee and the Maker > hereby waive trial by jury in any litigation in any court with respect to, in > connection with, or arising out of this Note or the validity, protection, > interpretation, collection or enforcement thereof, or any other claim or > dispute howsoever arising between the Payee and the Maker hereunder. The Maker > hereby irrevocably submits to the jurisdiction of any state court located in > Brevard County, Florida, or in a federal court located in the Middle District > of Florida for the purpose of any suit, actions, proceedings, or judgments > relating or arising out of this Note. > > > >                (g) Notice. All notices, requests, demands and other > communications given pursuant to any provision of this Note shall be given in > writing by U.S. certified or registered mail with return receipt requested and > postage prepaid, or by any twenty-four (24) hour courier service with proof of > delivery, addressed to the party for which it is intended at the address of > that party first stated above or such other address of which that party shall > have given notice in the manner provided herein. Any such mail notice shall be > deemed to have been given two days after being deposited in the mail. Any such > courier notice shall be deemed to have been given on the business day > following the business day so deposited. > > > >   > > 5 > >   > >      IN WITNESS WHEREOF, TELTRONICS, INC. has executed this SECURED PROMISSORY > NOTE the day and year first written above. > > > >   > >   MAKER: > TELTRONICS, INC. > > > By:       /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:   Ewen Cameron > Title:     President and CEO > > > ATTEST: > > > > > > ______________________________ > > > >   > >   > >   > > STATE OF FLORIDA: > COUNTY OF _____________________ > > > >           I hereby certify, that on this day, before me, an officer duly > authorized in the State and County aforesaid to take acknowledgements, > personally appeared Ewen Cameron, President and CEO of Teltronics, Inc., known > to me to be the person described in and who executed the foregoing instrument > and he acknowledged before me that he executed the same. > > > >           Witness my hand and official seal in the County and State last > aforesaid this 30th day of June, 2000. > > > > > > > -------------------------------------------------------------------------------- > > Notary Public > > My commission expires > > > > > > > (Seal) > > > >   > > > 6 > >   > > > > EXHIBIT M > >   > > > > > SECURITY AGREEMENT > > between > > HARRIS CORPORATION > > and > > TELTRONICS, INC. > > Dated as of June 30, 2000 > > > > > >   > > > >   > >   > > TABLE OF CONTENTS > > Page       > > ARTICLE I > SECURITY INTEREST  1 > 1.1 > Grant of Security Interest >  1 1.2 Additional Security  2 > ARTICLE II > GENERAL REPRESENTATIONS, > WARRANTIES AND COVENANTS > > >  2 > 2.1 > No Liens >  2 2.2 Other Financing Statements  2 2.3 Chief Executive Office; Records  2 > 2.4 Location of Inventory and Equipment  3 2.5 Recourse  3 2.6 Trade Names; > Change of Name  3 2.7 Payment and Performance  3 2.8 Possession; Sale and > Exchange  3 2.9 Preservation of Collateral  4 2.10 No Significant > Subsidiaries, Etc.  4 > ARTICLE III > SPECIAL PROVISION CONCERNING RECEIVABLES; > CONTRACT RIGHTS; INSTRUMENTS >  4 > 3.1 > Maintenance of Records >  4 3.2 Direction to Account Debtors; Contracting Parties, etc  4 > ARTICLE IV > PROVISIONS CONCERNING ALL COLLATERAL >  4 > 4.1 > Protection of Secured Party's Security >  4 4.2 Further Actions  5 4.3 Financing Statements  5 > ARTICLE V > REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT >  5 > 5.1 > Remedies; Obtaining the Collateral Upon Default >  5 5.2 Remedies; Disposition of the Collateral  6 5.3 Waiver of Claims  7 5.4 > Application of Proceeds  7 5.5 Remedies Cumulative, Etc.  8 > ARTICLE VI > INDEMNITY >  9 6.1 > Indemnity >  9 6.2 Indemnity Obligations Secured by Collateral; Survival 10 > ARTICLE VII > DEFINITIONS > 10 > ARTICLE VIII > MISCELLANEOUS > 12 > 8.1 > Notices > 12 8.2 Waiver; Amendment 12 8.3 Obligations Absolute 12 8.4 Successors and > Assigns 12 8.5 Headings Descriptive 13 8.6 Severability 13 8.7 Inspection 13 > 8.8 Governing Law 13 8.9 Debtor's Duties 13 8.10 Counterparts 13 8.12 > Submission to Jurisdiction; Waiver of Jury Trial 13 > > > > > > > SECURITY AGREEMENT > > > >   > >           SECURITY AGREEMENT, dated as of June 30, 2000, (as modified, > supplemented or amended from time to time, this "Agreement"), between > TELTRONICS, INC., a Delaware corporation (the "Debtor") and HARRIS > CORPORATION, a Delaware corporation (the "Secured Party"). Capitalized terms > used and not otherwise defined herein shall have the respective meanings > assigned thereto in Article VII hereof. > > > >   > > W > > I T N E S S E T H: > > > >   > >           WHEREAS, simultaneously herewith the Debtor has executed and > delivered to Secured Party a promissory note (the "Note"); and > > > >           WHEREAS, Debtor has agreed to provide collateral as security for the > obligations of Debtor under the Note. > > > >           NOW, THEREFORE, to induce the Secured Party to accept the Note from > Debtor and in consideration of the benefits accruing to the Debtor, and for > other good and valuable consideration, the receipt and sufficiency of which > are hereby acknowledged, the Debtor hereby makes the following representations > and warranties to the Secured Party and hereby covenants and agrees with > Secured Party as follows: > > > >   > > ARTICLE I > SECURITY INTERESTS > >           1.1 > >           Grant of Security Interest. (a) As collateral security for the > prompt and complete payment and performance when due (whether by acceleration, > on demand or otherwise) of all of its Obligations, the Debtor does hereby > pledge, assign and transfer unto the Secured Party, and does hereby grant to > the Secured Party a continuing security interest in and a right of setoff > against, all of the right, title and interest of the Debtor in, to and under > all property of the Debtor including but not limited to all of the following, > whether now owned by the Debtor or hereafter from time to time acquired and > whether now existing or hereafter coming into existence, and wherever located: > (i) each and every Receivable, (ii) all Contracts, together with Contract > Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all > Marks, together with the registrations and right to all renewals thereof, and > the goodwill of the business of the Debtor symbolized by the Marks, (vi) all > computer programs of the Debtor and all intellectual property rights therein > and all other proprietary information of the Debtor, including, but not > limited to, trade secrets, (vii) all (a) Goods (b) General Intangibles, (c) > Chattel Paper and Instruments, (d) Documents; and (viii) all Proceeds and > products or substitutes or replacements of any and all of the foregoing (all > of the above collectively, the "Collateral"). The security interest granted > hereunder in the portion of Collateral which represents assets acquired from > Harris Corporation pursuant to the Asset Sale Agreement of even date herewith > (the "Asset Sale > > > > 1 > > > > Agreement") and Proceeds thereon shall be a first priority purchase money > security interest. The security interest granted in the other assets of the > Debtor shall have the priority established by filing of financing statement > and shall as a result be subordinate to any security interests granted to the > senior lenders of the Debtor (including CIT Group/Credit Finance, Inc. and > Finova Mezzanine Capital, Inc.). > > > >                     (b) The security interest of the Secured Party under this > Agreement extends to all Collateral of the kind which is the subject of this > Agreement which the grantor may acquire at any time during the continuation of > this Agreement. > > > >           1.2          Additional Security. The Debtor agrees that within ten > (10) days of the date hereof it will execute and deliver to Secured Party > instruments sufficient to grant the Secured Party a security interest in the > patents, trademarks, copyrights, and other intellectual property rights of the > Debtor. Such instrument and agreement shall be in recordable form and shall be > reasonably satisfactory to the Secured Party. The Debtor agrees to record such > instruments in the Patent and Trademark Office within five (5) days of a > request by the Secured Party. Debtor acknowledges that a default of its > obligations under this Section shall be a material breach entitling Secured > Party to accelerate the maturity of the Note. > >   > > ARTICLE II > GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS > > > > > >           The Debtor represents, warrants and covenants, which > representations, warranties and covenants shall survive execution and delivery > of this Agreement, as follows: > > > >           2.1 > >           No Liens. The Debtor is, and as to Collateral acquired by it from > time to time after the date hereof the Debtor will be, the owner of all > Collateral free from any Lien, security interest, encumbrance or other right, > title or interest of any Person (other than Liens created hereby or Permitted > Liens) and the Debtor shall defend its Collateral against all claims and > demands of all Persons at any time claiming the same or any interest therein > adverse to the Secured Party. > > > > > >           2.2 > >           Other Financing Statements. So long as any of the Obligations remain > unpaid, the Debtor will not execute or authorize to be filed in any public > office any financing statement (or similar statement or instrument of > registration under the law of any jurisdiction) or statements relating to the > Collateral, except financing statements filed or to be filed in respect of and > covering the security interests granted hereby by the Debtor or in connection > with Permitted Liens. > > > > > >           2.3          Chief Executive Office; Records. > > The chief executive office of the Debtor is located at 2150 Whitfield > Industrial Way, Sarasota, Florida 34243. Documents evidencing all Receivables > and Contract Rights of the Debtor and the books of account and records of the > Debtor relating thereto are, and will continue to be, kept at the chief > executive office or at such new locations as the Debtor may establish in > accordance with the next sentence. The Debtor shall not establish a new > location for its chief executive office until (i) it shall have given to the > > > > > > 2 > > > > Secured Party not less than 30 days' prior written notice of its intention so > to do, clearly describing such new location and providing such other > information in connection therewith as the Secured Party may reasonably > request, and (ii) with respect to such new location, it shall have taken all > action, reasonably satisfactory to the Secured Party, to maintain the security > interest of the Secured Party in the Collateral intended to be granted hereby > at all times fully perfected and in full force and effect . > > > >           2.4          Location of Inventory and Equipment. > > All Inventory and Equipment held on the date hereof by the Debtor is located > at premises owned or leased by Debtor or the location of Secured Party. The > Debtor agrees that (i) all Inventory and Equipment now held or subsequently > acquired by it shall be kept at such location under the name of the Debtor, or > such new location as the Debtor may establish in accordance with the next > sentence. The Debtor may establish a new location for Inventory and Equipment > only if (i) it shall have given to the Secured Party not less than 30 days' > prior written notice of its intention so to do, clearly describing such new > location and providing such other information in connection therewith as the > Secured Party may reasonably request, and (ii) with respect to such new > location, it shall have taken all action reasonably satisfactory to the > Secured Party to maintain the security interest of the Secured Party in the > Collateral intended to be granted hereby at all times fully perfected and in > full force and effect. > > > > > >           2.5          Recourse. > > This Agreement is made with full recourse to the Debtor and pursuant to and > upon all the warranties, representations, covenants, and agreements on the > part of the Debtor contained herein, or in any of the Obligations. > > > > > >           2.6          Trade Names; Change of Name. > > The Debtor shall not change its legal name or assume or operate in any > jurisdiction under any trade, fictitious or other name except new names > established in accordance with the following sentence. The Debtor shall not > assume or operate in any jurisdiction under any new trade, fictitious or other > name until (i) it shall have given to the Secured Party not less than 30 days' > prior written notice of its intention so to do, clearly describing such new > name and the jurisdictions in which such new name shall be used and providing > such other information in connection therewith as the Secured Party may > reasonably request, and (ii) with respect to such new name, it shall have > taken all action, reasonably satisfactory to the Secured Party, to maintain > the security interest of the Secured Party in the Collateral intended to be > granted hereby at all times fully perfected and in full force and effect. > > > > > >           2.7          Payment and Performance. > > Debtor shall pay, when due (whether at stated maturity, acceleration or upon > demand), the Obligations and shall timely perform all of its covenants, > agreements and undertakings in accordance with the Obligations. > > > > > >           2.8          Possession; Sale and Exchange. > > (a) Subject to clause (b) of this Section, Debtor will remain in possession of > the Collateral provided that the Secured Party shall be entitled to possession > of the Collateral as set forth herein. > > > > > >                     (b) Until the occurrence of an Event of Default, Debtor > may use, sell or exchange Inventory in the ordinary course of its business > without the written consent of the Secured Party, if such sales or exchanges > are in accordance with Debtor's usual and customary practices with > > > > 3 > > > > respect to terms of sale, credits, allowances and credit policies and as > relating to the Inventory representing assets acquired under the Asset Sale > Agreement. The inclusion of "Proceeds of the Collateral" under the securities > interest granted herein, shall not be deemed a consent by Secured Party to any > sale or other distribution expressly permitted herein. > > > >           2.9          Preservation of Collateral. > > Debtor shall use reasonable care in the custody and preservation of the > Collateral, shall comply with all legal and insurance requirements permitted > with respect to its use, and shall keep the same free from all Liens except > Liens hereunder and Permitted Liens. > > > > > >           2.10          No Significant Subsidiaries, Etc. The Debtor hereby > represents and warrants that it has no "significant subsidiaries" as that term > is defined under the Securities Exchange Act of 1934, as amended and that > substantially all assets of Debtor shown on its consolidated financial > statement are owned directly by the Secured Party and not any subsidiaries. > >   > > ARTICLE III > SPECIAL PROVISION CONCERNING > RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS > > > > > >           3.1          Maintenance of Records. > > At any time when an Event of Default has occurred and is continuing, upon the > request of the Secured Party, the Debtor shall, at its own cost and expense, > deliver all tangible evidence of its Receivables and Contract Rights > (including, without limitation, copies of all documents evidencing the > Receivables and all Contracts and such books and records) to the Secured Party > or to its representatives (copies of which evidence and books and records may > be retained by the Debtor). > > > > > >           3.2          Direction to Account Debtors; Contracting Parties, etc. > > Upon the occurrence and during the continuance of an Event of Default and an > acceleration of amounts and under the Note and if the Secured Party so directs > the Debtor, the Debtor agrees (x) to cause all payments on account of the > Receivables and Contracts to be made directly to the Secured Party and (y) > that the Secured Party may, at its option, directly notify the obligors with > respect to any Receivables and/or under any Contracts to make payments with > respect thereto as provided in the preceding clause (x). > > > >   > > ARTICLE IV > PROVISIONS CONCERNING ALL COLLATERAL > > > >           4.1          Protection of Secured Party's Security. > > Except as expressly permitted herein, the Debtor will do nothing to impair the > rights of the Secured Party in the Collateral. The Debtor will at all times > keep its Inventory and Equipment insured and at Secured Party's option, at the > Debtor's own expense, all policies or certificates with respect to such > insurance shall be endorsed to the Secured Party's satisfaction for the > benefit of the Secured Party (including, without limitation, by naming the > Secured Party as loss payee) and, at the Secured Party's request, deposited > with the Secured Party. If an Event of Default shall be in existence and the > > > > > > 4 > > > > Debtor shall fail to insure its Inventory and Equipment in accordance with the > preceding sentence, or if the Debtor shall fail to so endorse and deposit all > policies or certificates with respect thereto, the Secured Party shall have > the right (but shall be under no obligation) to procure such insurance and the > Debtor agrees to reimburse the Secured Party for all costs and expenses of > procuring such insurance. The Secured Party may apply any proceeds of such > insurance in accordance with Section 5.4 hereof. The Debtor assumes all > liability and responsibility in connection with the Collateral acquired by it > and the liability of the Debtor to pay its Obligations shall in no way be > affected or diminished by reason of the fact that such Collateral may be lost, > destroyed, stolen, damaged or for any reason whatsoever unavailable to the > Debtor. > > > >           4.2          Further Actions. > > The Debtor will, at its own expense, make, execute, endorse, acknowledge, file > and/or deliver to the Secured Party from time to time such lists, descriptions > and designations of its Collateral, bills of lading, documents of title, > vouchers, invoices, schedules, confirmatory assignments, conveyances, > financing statements, transfer endorsements, powers of attorney, certificates, > reports and other assurances or instruments and take such further steps > relating to the Collateral and other property or rights covered by the > security interest hereby granted, which the Secured Party deems reasonably > appropriate or advisable to perfect, preserve or protect its security interest > in the Collateral. > > > > > >           4.3          Financing Statements. > > The Debtor agrees to execute and deliver to the Secured Party such financing > statements (or similar statements or instruments of registration under the law > of any jurisdiction), in form acceptable to the Secured Party, as the Secured > Party may from time to time reasonably request or as are necessary or > desirable in the opinion of the Secured Party to establish and maintain a > valid, enforceable, first priority security interest in the Collateral as > provided herein in the Collateral which represents assets acquired under the > Asset Purchase Agreement and the other rights and security contemplated hereby > all in accordance with the Uniform Commercial Code as enacted in any and all > relevant jurisdictions or any other relevant law. The Debtor will pay any > applicable filing fees and related expenses including any documentary or > intangible stamp taxes. The Debtor authorizes the Secured Party to file any > such financing statements without the signature of the Debtor to the extent > permitted by law. > > > > > >   > > ARTICLE V > REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT > > > >           5.1          Remedies; Obtaining the Collateral Upon Default. > > The Debtor agrees that, if any Event of Default shall have occurred and be > continuing, then and in every such case, subject to any mandatory requirements > of applicable law then in effect, the Secured Party, in addition to any rights > now or hereafter existing under applicable law, shall have all rights as a > secured creditor under the Uniform Commercial Code in all relevant > jurisdictions and may: > > > > > >                     (a) declare all Obligations to be due and payable, without > notice, protest, presentment or demand all of which are expressly waived by > Debtor; > > > > > > 5 > > > >                     (b) personally, or by agents or attorneys, immediately > take possession of the Collateral or any part thereof, from the Debtor or any > other Person who then has possession of any part thereof with or without > notice or process of law, and for that purpose may enter upon the Debtor's > premises where any of the Collateral is located and remove the same and use in > connection with such removal any and all services, supplies, aids and other > facilities of the Debtor; and > > > >                     (c) instruct the obligor or obligors on any agreement, > instrument or other obligation constituting the Collateral to make any payment > required by the terms of such instrument or agreement directly to the Secured > Party; and > > > >                     (d) sell, assign or otherwise liquidate, or direct the > Debtor 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; and > > > >                     (e) take possession of the Collateral or any part thereof, > by directing the Debtor in writing to deliver the same to the Secured Party at > any place or places designated by the Secured Party, in which event the Debtor > shall at its own expense (i) forthwith cause the same to be moved to the place > or places so designated by the Secured Party and there delivered to the > Secured Party, (ii) store and keep any Collateral so delivered to the Secured > Party at such place or places pending further action by the Secured Party as > provided in Section 5.2 hereof, and (iii) while the Collateral shall be so > stored and kept, provide such guards and maintenance services as shall be > necessary to protect the same and to preserve and maintain them in good > condition; it being understood that the Debtor's obligation so to deliver the > Collateral is of the essence of this Agreement and that, accordingly, upon > application to a court of equity having jurisdiction, the Secured Party shall > be entitled to a decree requiring specific performance by the Debtor of said > obligation. > > > >           5.2          Remedies; Disposition of the Collateral. > > Any Collateral repossessed by the Secured Party under or pursuant to Section > 5.1 hereof and any other Collateral whether or not so repossessed by the > Secured Party, 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 Secured Party may, in compliance with any mandatory requirements of > applicable law, determine to be commercially reasonable. Any of the Collateral > may be sold, leased or otherwise disposed of, in the condition in which the > same existed when taken by the Secured Party or after any overhaul or repair > which the Secured Party shall determine to be commercially reasonable. Any > such disposition which shall be a private sale or other private proceedings > permitted by such requirements shall be made upon not less than 10 days' > written notice to the Debtor specifying the time at which such disposition is > to be made and the intended sale price or other consideration therefor, and > shall be subject, for the 10 days after the giving of such notice, to the > right of the Debtor or any nominee of the Debtor to acquire the Collateral > involved at a price or for such other consideration at least equal to the > intended sale price or other consideration so specified. Any such disposition > which shall be a public sale permitted by such requirements shall be made upon > not less than 10 days' written notice to the Debtor specifying the time and > place of such sale and, in the absence of applicable requirements of law, > > > > > > 6 > > > > shall be by public auction (which may, at the Secured Party's option, be > subject to reserve) after publication of notice of such auction not less than > 10 day's prior thereto in a newspaper in general circulation. To the extent > permitted by any such requirement of law, the Secured Party may bid for and > become the purchaser of the Collateral or any item thereof, offered for sale > in accordance with this Section without accountability to the Debtor (except > to the extent of surplus money received). If, under mandatory requirements of > applicable law, the Secured Party shall be required to make disposition of the > Collateral within a period of time which does not permit the giving of notice > to the Debtor as hereinabove specified, the Secured Party need give the Debtor > only such notice of disposition as shall be reasonably practicable in view of > such mandatory requirements of applicable law. > > > >           5.3          Waiver of Claims. > > Except as otherwise provided in this Agreement, THE DEBTOR HEREBY WAIVES, TO > THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN > CONNECTION WITH THE SECURED PARTY'S TAKING POSSESSION OR THE SECURED PARTY'S > DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND > ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY > SUCH RIGHT WHICH DEBTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY > STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Debtor hereby further > waives, to the extent permitted by law: > > > > > >                     (a) all damages occasioned by such taking of possession > except any damages which are the direct result of the Secured Party's gross > negligence or willful misconduct; > > > >                     (b) all other requirements as to the time, place and terms > of sale or other requirements with respect to the enforcement of the Secured > Party's rights hereunder; > > > >                     (c) all rights of redemption, appraisement, valuation, > stay, extension or moratorium now or hereafter in force under any applicable > law in order to prevent or delay the enforcement of this Agreement or the > absolute sale of the Collateral or any portion thereof, and the Debtor, for > itself and all who may claim under it, insofar as it or they now or hereafter > lawfully may, hereby waives the benefit of all such laws; and > > > >                     (d) demand, notice of non-payment, dishonor and notice of > acceptance of this Agreement, notice of loans made, credit extended, > collateral received or delivered or other action taken in reliance heron. > > > >                     Any sale of, or the grant of options to purchase, or any > other realization upon, any Collateral shall operate to divest all right, > title, interest, claim and demand, either at law or in equity, of the Debtor > therein and thereto, and shall be a perpetual bar both at law and in equity > against the Debtor and against any and all Persons claiming or attempting to > claim the Collateral so sold, optioned or realized upon, or any part thereof, > from, through and under such Debtor. > > > >           5.4          Application of Proceeds. > > The proceeds of any Collateral obtained pursuant to Section 5.1 or disposed of > pursuant to Section 5.2 shall be applied as follows: > > > > > > > > 7 > > > >                     (a) to the payment of any and all expenses and fees > (including reasonable attorneys' fees) incurred by Secured Party in obtaining, > taking possession of, removing, insuring, > > repairing, storing and disposing of Collateral and any and all amounts > incurred by Secured Party in connection therewith; > > > >                     (b) next, any surplus then remaining to the payment of the > Obligations in the following order of priority: > > > >                               (i)           all interest accrued and unpaid; >                               (ii)          the principal amount owing on the > Note; >                               (iii)          the fees then owing to Secured > Party; and >                               (iv)          all other Obligations then owing; > > > >                     (c) if no Obligation is outstanding, any surplus then > remaining shall be paid to Debtor, subject, however, to the rights of the > holder of any then existing Lien of which Secured Party has actual notice > (without investigation); it being understood that Debtor shall remain liable > to the extent of any deficiency between the amount of the proceeds of the > Collateral and the aggregate amount of the sums referred to in clauses (a) and > (b) of this Section with respect to Debtor. > > > >           5.5          Remedies Cumulative, etc. > > Each and every right, power and remedy hereby specifically given to the > Secured Party shall be in addition to every other right, power and remedy > specifically given under this Agreement or any of the Obligations, or any > document related thereto or now or hereafter existing at law or in equity, or > by statute and each and every right, power and remedy whether specifically > herein given or otherwise existing may be exercised from time to time or > simultaneously and as often and in such order as may be deemed expedient by > the Secured Party. All such rights, powers and remedies shall be cumulative > and the exercise or the beginning of exercise of one shall not be deemed a > waiver of the right to exercise of any other or others. No delay or omission > of the Secured Party in the exercise of any such right, power or remedy and no > renewal or extension of any of the Obligations shall impair any such right, > power or remedy or shall be construed to be a waiver of any Event of Default > or an acquiescence therein. No notice to or demand on the Debtor in any case > shall entitle the Debtor to any other or further notice or demand in similar > or other circumstances or constitute a waiver of the rights of the Secured > Party to any other further action in any circumstances without notice or > demand. In the event that the Secured Party shall bring any suit to enforce > any of its rights hereunder and shall be entitled to judgment, then in such > suit the Secured Party may recover reasonable expenses, including attorneys' > fees, and the amounts thereof shall be included in such judgment. With respect > to both the Obligations and the Collateral, Debtor assents to any extension or > postponements of the time of payment or any other indulgence, to any > substitution, exchange or release of collateral, to the addition or release of > any party or person primarily or secondarily liable, to the acceptance of > partial payment thereon and the settlement, compromising or adjusting of any > thereof, all in such manner and at such time or times as Secured Party may > deem advisable. Secured Party shall have no duty as to the collection of > protection of the Collateral or any income thereon, nor as to the preservation > thereto beyond the safe custody thereof. > > > > > > ARTICLE VI > INDEMNITY > > > > > > 8 > > > >           6.1          Indemnity. > > (a) The Debtor agrees to indemnify, reimburse and hold the Secured Party and > its successors, assigns, employees, agents and servants (hereinafter in this > Section 6.1 referred to individually as "Indemnitee," and collectively as > "Indemnitees") harmless from any and all liabilities, obligations, damages, > injuries, penalties, claims, demands, actions, suits, judgments and any and > all costs and expenses (including reasonable attorneys' fees and expenses) > (for the purposes of this Section 6.1 the foregoing are collectively called > "expenses") of whatsoever kind and nature imposed on, asserted against or > incurred by any of the Indemnitees in any way relating to or arising out of > this Agreement or the documents executed in connection herewith or in any > other way connected with the administration of the transactions contemplated > hereby or the enforcement of any of the terms of, or the preservation of any > rights under any thereof, or in any way relating to or arising out of the > manufacture, ownership, ordering, purchase, delivery, control, acceptance, > lease, financing, possession, operation, condition, sale, return or other > disposition, or use of the Collateral (including, without limitation, latent > or other defects, whether or not discoverable), the violation of the laws of > any country, state or other governmental body or unit, any tort (including, > without limitation, claims arising or imposed under the doctrine of strict > liability, or for or on account of injury to or the death of any Person > (including any Indemnitee), or property damage), or contract claim; provided > that no Indemnitee shall be indemnified pursuant to this Section 6.1(a) for > losses, damages or liabilities to the extent caused by the gross negligence or > willful misconduct of such Indemnitee. The Debtor agrees that upon written > notice by any Indemnitee of the assertion of such a liability, obligation, > damage, injury, penalty, claim, demand, action, judgment or suit, the Debtor > shall assume full responsibility for the defense thereof. Each Indemnitee > agrees to use its best efforts to promptly notify the Debtor of any such > assertion of which such Indemnitee has knowledge, however, the failure to so > notify the Debtor shall not effect its obligations hereunder. > > > > > >                     (b) Without limiting the application of Section 6.1(a), > the Debtor agrees to pay, or reimburse the Secured Party for (if the Secured > Party shall have incurred fees, costs or expenses because the Debtor shall > have failed to comply with its obligations under this Agreement), any and all > fees, costs and expenses of whatever kind or nature incurred in connection > with the creation, preservation or protection of the Secured Party's Liens on, > and security interest in, the Collateral, including, without limitation, all > fees and taxes in connection with the recording or filing of instruments and > documents in public offices, payment or discharge of any taxes or Liens upon > or in respect of the Collateral, premiums for insurance with respect to the > Collateral and all other fees, costs and expenses in connection with > protecting, maintaining or preserving the Collateral and the Secured Party's > interest therein, whether through judicial proceedings or otherwise, or in > defending or prosecuting any actions, suits or proceedings arising out of or > relating to the Collateral. > > > >                     (c) If and to the extent that the obligations of the > Debtor under this Section 6.1 are unenforceable for any reason, the Debtor > hereby agrees to make the maximum contribution to the payment and satisfaction > of such obligations which is permissible under applicable law. > > > > > > 9 > > > >           6.2           Indemnity Obligations Secured by Collateral; Survival. > > Any amounts paid by any Indemnitee as to which such Indemnitee has the right > to reimbursement shall constitute Obligations secured by the Collateral. The > indemnity obligations of the Debtor contained in this Article VI > > > > shall continue in full force and effect notwithstanding the full payment of > all other Obligations and notwithstanding the discharge thereof. > > > >   > > ARTICLE VII > DEFINITIONS > > > >           The following terms shall have the meanings herein specified unless > the context otherwise requires. Such definitions shall be equally applicable > to the singular and plural forms of the terms defined. > > > >           "Chattel Paper" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Contracts" > > shall mean all contracts between the Debtor and one or more additional > parties. > > > > > >           "Contract Rights" > > shall mean all rights of the Debtor (including without limitation all rights > to payments and indemnities) under each Contract. > > > > > >           "Documents" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Equipment" > > shall mean any "equipment," as such term is defined in the Uniform Commercial > Code as in effect on the date hereof in the State of Florida, now or hereafter > owned by the Debtor and, in any event, shall include, but shall not be limited > to all machinery, equipment, furnishings, movable trade fixtures and vehicles > now or hereafter owned by the Debtor and any and all additions, substitutions > and replacements of any of the foregoing, wherever located, together with all > attachments, components, parts, equipment and accessories installed thereon or > affixed thereto. > > > > > >           "Event of Default" > > shall mean any event of default under, and as defined in, the Note and shall > also include the Debtor's failure to pay when due any amounts owing to the > Secured Party under any Obligations or to perform any of its covenants or > agreements hereunder or under any other document creating any Obligations or > the making of any levy, seizure or attachment upon any of the Collateral. > > > > > >           "General Intangibles" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Goods" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > > 10 > > > > > >           "Instrument" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Inventory" > > shall mean all raw materials, work-in-process, and finished inventory of the > Debtor of every type or description and all documents of title covering such > inventory, and shall specifically include all "inventory" as such term is > defined in the Uniform Commercial Code as in effect on the date hereof in the > State of Florida, now or hereafter owned by the Debtor and wherever located. > > > > > >           "Liens" > > shall mean any security interest, mortgage, pledge, lien, claim, charge, > encumbrance, title retention agreement, lessor's interest in a financing lease > or analogous instrument, in, of, or on the Debtor's property. > > > > > >           "Marks" > > shall mean any trademarks and service marks now held or hereafter acquired by > the Debtor whether registered or not, including all trade dress, logos or > designs. > > > > > >           "Obligations" > > shall mean: > > > > > >           (i) the full and prompt payment when due of amounts under the Note > (whether by demand, upon acceleration or otherwise); > > > >           (ii) any and all sums advanced by the Secured Party in order to > preserve the Collateral or preserve its security interest in the Collateral; > and > > > >           (iii) in the event of any proceeding for the collection or > enforcement of any indebtedness, obligations, or liabilities of the Debtor > referred to in clauses (i) and (ii), the reasonable expenses of re-taking, > holding, preparing for sale or lease, selling or otherwise disposing or > realizing on the Collateral, or of any exercise by the Secured Party of its > rights hereunder, together with reasonable attorneys' fees and court costs and > all amounts paid by any Indemnitee which has the right to reimbursement under > Section 6.1 of this Agreement. > > > >           "Permitted Liens" > > shall mean (i) Liens granted to the Secured Party, (ii) purchase money Liens > on newly acquired assets, which Liens shall extend solely to the assets so > acquired, (iii) Liens expressly junior and subordinate in right to those > created under this Agreement; and (iv) liens in existence on the date hereof > (except in the case of Collateral which represent assets acquired under the > Asset Sale Agreement which shall be senior in all respects to any previously > filed Liens). > > > > > >           "Proceeds" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida or under other relevant law and, in > any event, shall include, but not be limited to, (i) any and all proceeds of > any insurance, indemnity, warranty or guaranty payable to the Secured Party or > the Debtor from time to time with respect to any of the Collateral, (ii) any > and all payments (in any form whatsoever) made or due and payable to the > Debtor from time to time in connection with any requisition, confiscation, > condemnation, seizure or forfeiture of all or any part of the Collateral by > any governmental > > > > > > 11 > > > > authority (or any person acting under color of governmental authority) and > (iii) any and all other amounts from time to time paid or payable under or in > connection with any of the Collateral. > >           "Receivables" > > shall mean any "account" as such term is defined in the Uniform Commercial > Code as in effect on the date hereof in the State of Florida, now or hereafter > owned by Debtor and all of the Debtor's rights to payment for goods sold or > leased or services performed by the Debtor, whether now in existence or > arising from time to time hereafter, including, without limitation, rights > evidenced by an account, note, contract, security agreement, chattel paper, or > other evidence of indebtedness or security, together with (a) all security > pledged. assigned, hypothecated or granted to or held by the Debtor to secure > the foregoing, (b) all of the Debtor's right, title and interest in and to any > goods, the sale of which gave rise thereto, (c) all guarantees, endorsements > and indemnifications on, or of, any of the foregoing, (d) all powers of > attorney for the execution of any evidence of indebtedness or security or > other writing in connection therewith, (e) all books, records, ledger cards, > and invoices relating thereto, (f) all evidences of the filing of financing > statements and other statements and the registration of other instruments in > connection therewith and amendments thereto, notices to other creditors or > secured parties, and certificates from filing or other registration officers, > (g) all credit information, reports and memoranda relating thereto, and (h) > all other writings related in any way to the foregoing. > > > > > > ARTICLE VIII > MISCELLANEOUS > > > >           8.1          Notices. > > Except as otherwise specified herein, all notices, requests, demands or other > communications to or upon the respective parties hereto shall be deemed to > have been duly given or made when delivered to the party to which such notice, > request, demand or other communication is required or permitted to be given or > made under this Agreement, addressed to such party at its address set forth > below its signature below, or at such other address as any of the parties > hereto may hereafter notify the others in writing. > > > > > >           8.2          Waiver; Amendment. > > None of the terms and conditions of this Agreement may be changed, waived, > modified or varied in any manner whatsoever except in a writing signed by the > parties hereto. > > > > > >           8.3          Obligations Absolute. > > The obligations of the Debtor hereunder shall remain in full force and effect > without regard to, and shall not be impaired by, (a) any bankruptcy, > insolvency, reorganization, arrangement, readjustment, composition, > liquidation or the like of the Debtor; (b) any exercise or non-exercise, or > any waiver of, any right, remedy, power or privilege under or in respect of > this Agreement, or any other document; or (c) any amendment to or modification > of the Note or any other document or any security for any of the Obligations, > whether or not the Debtor shall have notice or knowledge of any of the > foregoing. The rights and remedies of the Secured Party herein provided are > cumulative and not exclusive of any rights or remedies which the Secured Party > would otherwise have. > > > > > > > > 12 > > > >           8.4          Successors and Assigns. > > This Agreement shall be binding upon the Debtor and its successors and assigns > and shall inure to the benefit of the Secured Party and its successors and > assigns, provided that the Debtor may not transfer or assign any or all of its > rights or obligations hereunder without the written consent of the Secured > Party. All agreements, statements, representations and warranties made by the > Debtor herein or in any certificate or other instrument delivered by the > Debtor or on its behalf under this Agreement shall be considered to have been > relied upon by the Secured Party and shall survive the execution and delivery > of this Agreement regardless of any investigation made by the Secured Party. > > > > > >           8.5          Headings Descriptive. > > The headings of the several sections of this Agreement are inserted for > convenience only and shall not in any way affect the meaning or construction > of any provision of this Agreement. > > > > > >           8.6          Severability. > > Any provision of this Agreement which is prohibited or unenforceable in any > jurisdiction shall, as to such jurisdiction, be ineffective to the extent of > such prohibition or unenforceability without invalidating the remaining > provisions hereof, and any such prohibition or unenforceability in any > jurisdiction shall not invalidate or render unenforceable such provision in > any other jurisdiction. > > > > > >           8.7          Inspection. > > Debtor agrees that Secured Party shall at all time have free access to and > right of inspection of the Collateral and any records pertaining thereto (and > the right to make extracts from and to receive from Debtor originals or true > copies of such records. > > > > > >           8.8          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 > FLORIDA WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS THEREOF. > > > > > >           8.9          Debtor's Duties. > > It is expressly agreed, anything herein contained to the contrary > notwithstanding, that the Debtor shall remain liable to perform all of the > obligations, if any, assumed by it with respect to the Collateral and the > Secured Party shall not have any obligations or liabilities with respect to > any Collateral by reason of or arising out of this Agreement, nor shall the > Secured Party be required or obligated in any manner to perform or fulfill any > of the obligations of the Secured Party under or with respect to any > Collateral. > > > > > >           8.10          Counterparts. > > This Agreement may be executed in any number of counterparts and by the > different parties hereto on separate counterparts, each of which when so > executed and delivered shall be an original, but all of which shall together > constitute one and the same instrument. > > > > > >           8.11          Submission to Jurisdiction; Waiver of Jury Trial. > > THE DEBTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT > LOCATED WITHIN THE COUNTY OF BREVARD, STATE OF FLORIDA, AND IRREVOCABLY AGREES > THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT MAY BE LITIGATED IN > SUCH COURTS, AND THE DEBTOR WAIVES ANY > > > > > > 13 > > > > OBJECTION WHICH IT MIGHT HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS. > >           THE PARTIES ACKNOWLEDGE THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL > BY JURY EXCEED THE TIME AND EXPENSE FOR A BENCH TRIAL AND HEREBY WAIVE, TO THE > EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY > > LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE > TRANSACTIONS CONTEMPLATED HEREBY. > > > >   > > > > 14 > > > > > >           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to > be executed and delivered by their duly authorized officers as of the date > first above written. > > > > Debtor: > > TELTRONICS, INC.Secured Party: > > HARRIS CORPORATION > > By:          /s/ Ewen Cameron > > -------------------------------------------------------------------------------- > > Name:     Ewen Cameron > Title:       President and CEO > > Address:      2150 Whitfield Way >                     Sarasota, Florida 34243 > > By:          /s/ Daniel R. Pearson > > -------------------------------------------------------------------------------- > > Name:     Daniel R. Pearson > Title:       President, Network Support Division > > Address:      1025 West NASA Blvd. >                     Melbourne, FL 32919 > > >   > >   > > STATE OF FLORIDA >                            :ss.: > COUNTY OF BREVARD > > > >           On this 30th day of June, 2000, before me personally appeared Ewen > Cameron, to be personally known, who, being by me duly sworn, says that he is > President of Teltronics, Inc. that said instrument was signed on behalf of > said corporation by authority of its Board of Directors, and he acknowledged > that the execution of the foregoing instrument was the free act and deed of > said corporation. > >   > >        /s/ Margaret E. Vickery          > > > Notary Seal > > > > >   > > STATE OF FLORIDA > COUNTY OF BREVARD > > > >           The foregoing instrument was acknowledged before me this 30th day of > June, 2000, by Daniel R. Pearson, President of the Network Support Division of > Harris Corporation, a Delaware corporation, on behalf of the corporation. He > is personally known to me. > > > > >        /s/ Margaret E. Vickery          > > > Notary Seal > > > > > 15 > > > > > > > >   > > ATTACHMENT TO UCC-1 > > > >   > > DEBTOR:        Teltronics, Inc. > > > > SECURED > PARTY:         Harris Corporation > > > > This Financing Statement covers the following types (or items) of property: > > > >           (a) all of the right, title and interest of the Debtor in, to and > under all personal property of the Debtor including but not limited to all of > the following, whether now owned by the Debtor or hereafter from time to time > acquired and whether now existing or hereafter coming into existence, and > wherever located: > > > >                     (i) each and every Receivable; >                     (ii) all Contracts, together with Contract Rights arising > thereunder; >                     (iii) all Inventory; >                     (iv) all Equipment; >                     (v) all Marks, together with the registrations and right > to all renewals thereof, and the goodwill of the business of the Debtor > symbolized by the Marks; >                     (vi) all computer programs of the Debtor and all > intellectual property rights therein and all other proprietary information of > the Debtor, including, but not limited to, trade secrets; >                     (vii) all (a) Goods (b) General Intangibles, (c) Chattel > Paper and Instruments, (d) Documents; and >                     (viii) all Proceeds and products of any and all of the > foregoing. All terms referred to herein are as defined below. > > > > DEFINITIONS > > > >           The following terms shall have the meanings herein specified unless > the context otherwise requires. Such definitions shall be equally applicable > to the singular and plural forms of the terms defined. > > > >   > >           "Chattel Paper" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Contracts" > > shall mean all contracts between the Debtor and one or more additional > parties. > > > > > >           "Contract Rights" > > shall mean all rights of the Debtor (including without limitation all rights > to payments and indemnities) under each Contract. > > > > > > 16 > > > > > >           "Documents" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Equipment" > > shall mean any "equipment," as such term is defined in the Uniform Commercial > Code as in effect on the date hereof in the State of Florida, now or hereafter > owned by the Debtor and, in any event, shall include, but shall not be limited > to all machinery, equipment, furnishings, movable trade fixtures and vehicles > now or hereafter owned by the Debtor and any and all additions, substitutions > and replacements of any of the foregoing, wherever located, together with all > attachments, components, parts, equipment and accessories installed thereon or > affixed thereto. > > > > > >           "General Intangibles" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Goods" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Instrument" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida. > > > > > >           "Inventory" > > shall mean all raw materials, work-in-process, and finished inventory of the > Debtor of every type or description and all documents of title covering such > inventory, and shall specifically include all "inventory" as such term is > defined in the Uniform Commercial Code as in effect on the date hereof in the > State of Florida, now or hereafter owned by the Debtor and wherever located. > > > > > >           "Marks" > > shall mean any trademarks and service marks now held or hereafter acquired by > the Debtor whether registered or not, including all trade dress, logos or > designs. > > > > > >           "Proceeds" > > shall have the meaning provided under the Uniform Commercial Code as in effect > on the date hereof in the State of Florida or under other relevant law and, in > any event, shall include, but not be limited to, (i) any and all proceeds of > any insurance, indemnity, warranty or guaranty payable to the Secured Party or > the Debtor from time to time with respect to any of the Collateral, (ii) any > and all payments (in any form whatsoever) made or due and payable to the > Debtor from time to time in connection with any requisition, confiscation, > condemnation, seizure or forfeiture of all or any part of the Collateral by > any governmental authority (or any person acting under color of governmental > authority) and (iii) any and all other amounts from time to time paid or > payable under or in connection with any of the Collateral. > > > > > >           "Receivables" > > shall mean any "account" as such term is defined in the Uniform Commercial > Code as in effect on the date hereof in the State of Florida, now or hereafter > owned by Debtor and all of the Debtor's rights to payment for goods sold or > leased or services performed by the Debtor, whether now in existence or > arising from time to time hereafter, including, without limitation, rights > evidenced by an account, note, contract, security agreement, chattel paper, or > other evidence of indebtedness or security, together with (a) all security > pledged. assigned, hypothecated or granted to or held by the Debtor to secure > the foregoing, > > > > > > 17 > > (b) all of the Debtor's right, title and interest in and to any goods, the > sale of which gave rise thereto, (c) all guarantees, endorsements and > indemnifications on, or of, any of the foregoing, (d) all powers of attorney > for the execution of any evidence of indebtedness or security or other writing > in connection therewith, (e) all books, records, ledger cards, and invoices > relating thereto, (f) all evidences of the filing of financing statements and > other statements and the registration of other instruments in connection > therewith and amendments thereto, notices to other creditors or secured > parties, and certificates from filing or other registration officers, (g) all > credit information, reports and memoranda relating thereto, and (h) all other > writings related in any way to the foregoing. > > > > 18
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10 AMENDMENT NO. 3 TO DIRECT FOCUS, INC. STOCK OPTION PLAN     Effective June 26, 2000, the board of directors and the shareholders of Direct Focus, Inc. approved and adopted the following amendment to the first sentence of Section 4.1 the Direct Focus, Inc. Stock Option Plan (the "Plan") to increase by 500,000 shares the aggregate number of shares of common stock that may be issued under the Plan: The Committee, from time to time, may provide for the option and sale in the aggregate of up to 2,357,961 shares of Common Stock, to be made available from authorized, but unissued, or re-acquired shares of Common Stock. 20 -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT NO. 3 TO DIRECT FOCUS, INC. STOCK OPTION PLAN
Exhibit 10-37 ENERGY EAST CORPORATION 2000 Stock Option Plan 2000 STOCK OPTION AWARD AGREEMENT   1.         Pursuant to the provisions of the 2000 Stock Option Plan, as it may be amended from time to time (hereinafter called the "Plan"), of Energy East Corporation (hereinafter called the "Company"), the Company hereby grants to _____________________ (hereinafter called the "Optionee"), subject in all respects to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, the right and option to purchase from the Company all or any part of an aggregate of ______ shares of Common Stock ($.01 Par Value) of the Company at the purchase price of $________ per share (hereinafter called the "Option"). Capitalized terms not defined herein shall have the same definitions as in the Plan. 2.         The Option is a Non-Statutory Stock Option and is intended not to qualify as an Incentive Stock Option under Section 422 of the Code. 3.         Except as otherwise provided herein, the Option will become exercisable in installments as follows: The Option may be exercised on and after its grant date of ____________ ("Option Grant Date") in aggregate as to no more than ____ % of the total number of shares originally optioned, rounded to the next whole number; on and after ____________in aggregate as to no more than _____ % of the total number of shares originally optioned, rounded to the next whole number; and on _______________ as to all optioned shares which have not previously been exercised. Partial exercises of the Option shall be made only with respect to whole shares of the Company's Common Stock. In no event may the Option granted hereunder be exercised after _______________ ("Option Expiration Date"). 4.         In addition to the grant of the Option hereunder, the Optionee is hereby granted Stock Appreciation Rights in tandem with the Option which entitle the Optionee to receive from the Company, upon the exercise of such Stock Appreciation Rights, an amount equal to the excess of the Fair Market Value of a share of the Company's Common Stock, determined on the date of the exercise, over the exercise price of the Option. Stock Appreciation Rights shall be exercisable under the same terms and conditions contained in Article 3 herein and shall expire on the Option Expiration Date. Upon their exercise, Stock Appreciation Rights shall be settled in cash. The exercise of Stock Appreciation Rights granted shall result in the corresponding cancellation of the Option to the extent of the number of shares of the Company's Common Stock as to which Stock Appreciation Rights are exercised. The exercise of the Option shall result in the corresponding cancellation of the Stock Appreciation Rights to the extent of the number of shares of the Company's Common Stock as to which the Option is exercised. The Option and the Stock Appreciation Rights are collectively referred to hereinafter as "Awards". 5.         Neither the Option nor any right hereunder shall be assignable or transferrable by the Optionee or be subject to any lien, obligation or liability of the Optionee, except that the Option may be transferred: (a)    by the Optionee by will or the laws of descent and distribution; (b)    by the Optionee, with the prior written consent of the committee administering the Plan ("Committee"), by gift to (i) the Optionee's spouse or a child or grandchild of the Optionee or of the Optionee's spouse, or (ii) a trust or an estate in which the Optionee or the Optionee's spouse or a child or grandchild of the Optionee or of the Optionee's spouse has a substantial interest; and (c)    by the Optionee, with the prior written consent of the Committee, pursuant to a domestic relations order as defined in Section 414 of the Code, or any successor provision. In the event of a transfer, the Option shall continue to be subject to all the terms and conditions contained herein and the Optionee shall remain obligated to pay to the Company, upon the exercise of the Option by the Optionee's transferee, amounts sufficient to satisfy any applicable federal, state and local withholding tax requirements. The Option may not be further transferred by the Optionee's transferee, except by will or the laws of descent and distribution. Moreover, the Committee may require a transferee who acquires the Option pursuant to Subsections (b) or (c) above to furnish to the Company, as a condition to the issuance of shares upon the exercise of the Option, an agreement (in such form as the Committee may specify) that is executed by the transferee and that contains such provisions, including representations and restrictions as to the transferability of the shares, as are required by the Committee. In the event of the termination of the employment of the Optionee, the Option shall be exercisable by the Optionee's transferee only to the extent specified, and during the applicable periods set forth, in Section 11 hereof. A transfer of all or any portion of the Option shall result in the concurrent transfer of the related tandem Stock Appreciation Rights. Stock Appreciation Rights may not be transferred by themselves. 6.         Unless otherwise provided by the Committee, the Option, or any portion thereof, shall be exercised by a written notice (in such form as the Committee may specify) that is addressed to the Secretary of the Company and that specifies the number of shares with respect to which it is being exercised and the total exercise price. The written notice shall be accompanied by the payment of the exercise price in cash or the equivalent payable to the Company, or, unless otherwise provided by the Committee, by tendering (either actually or by delivery of a Committee-approved form attesting to stock ownership) previously acquired shares of the Company's Common Stock which are owned by the Optionee (or the Optionee's transferee) and which are not subject to any pledge or other security interest, or by any combination of the foregoing. With respect to shares tendered in lieu of the payment of cash or cash equivalents, such shares shall be valued on the basis of their Fair Market Value on the date of exercise. Unless otherwise provided by the Committee, an Option shall not be deemed exercised until the date ("Exercise Date") that both a written notice of exercise and the payment of the exercise price in the form required herein is provided to the Company in accordance with the provisions of Section 10 hereof. The Committee, in its sole discretion, may, in lieu of delivering shares covered by the exercised Option, settle the exercise of the Option by means of a cash payment to the Optionee (or the Optionee's transferee) equal to the difference between the Fair Market Value of the Company's Common Stock determined on the Exercise Date and the Option Price. The Committee shall at the same time return to the Optionee (or the Optionee's transferee) any payment for the shares covered by the Option. Unless otherwise provided by the Committee, (i) the Stock Appreciation Rights shall be exercised by delivery of a written notice that is addressed to the Secretary of the Company and that specifies the number of shares with respect to which the Stock Appreciation Right is being exercised, and (ii) the Exercise Date with respect to a Stock Appreciation Right shall be the date the written notice of exercise of the Stock Appreciation Right is provided to the Company in accordance with the provisions of Section 10 hereof. 7.         As a condition to the issuance of shares of Common Stock of the Company under the Option, the Optionee shall remit (or cause to be remitted) to the Company an amount sufficient to satisfy any applicable federal, state and local withholding tax requirements. An Optionee may, totally or in part, satisfy this obligation by electing to have shares withheld (with the consent of the Optionee's transferee, in the event the Option is exercised by a transferee) or by delivering other shares having a Fair Market Value equal to the amount required to be withheld, provided that this election is made in writing on or prior to the date of the exercise of the Option. The Fair Market Value of any shares so withheld or delivered shall be determined as of the date the taxes are required to be withheld. 8.         Except as otherwise provided herein, to the extent that all or any portion of the exercise price, or taxes incurred in connection with the exercise of the Option, are paid by the Optionee by surrendering shares of the Company's Common Stock (or, in the case of the payment of taxes, by the withholding of shares) then, concurrently with such surrender or withholding, the Optionee shall be granted as an additional option a replacement option, subject in all respects to the provisions of the Plan, including but not limited to Article V thereof. The replacement option, to the extent permissible, shall cover the number of shares of the Company's Common Stock surrendered to pay the exercise price plus the number of shares surrendered or withheld to satisfy the Optionee's tax liability and shall have an exercise price equal to 100% of the Fair Market Value of the Company's Common Stock determined on the date such replacement option is granted. The replacement option shall not be exercisable for six months from the date of its grant and shall expire on the Option Expiration Date. No replacement option shall be issued after _________________. Replacement options shall be issued with respect to options which are themselves replacement options. Notwithstanding the foregoing, neither the surrender of shares in connection with the exercise of the Option (or a replacement option) by the Optionee's transferee, nor the surrender or withholding of shares in connection with the payment of any taxes incurred with respect to such an exercise, shall result in the grant of a replacement option to any party. 9.         The Company shall, on or as soon as practicable after the date of the exercise of all or a portion of the Option, deliver to the Optionee (or the Optionee's transferee) a certificate or certificates for the appropriate number of shares of the Company's Common Stock (or in the event that the Company is using a book entry system, make the appropriate book entry). Notwithstanding anything to the contrary contained in the Plan or this Agreement, the Company shall not be required to issue shares of Common Stock until all applicable legal, listing, registration and regulatory requirements or approvals relating to the issuance have been satisfied or obtained. The shares of the Company's Common Stock issued upon the exercise of an Option may not be transferred except in accordance with all applicable federal and state securities laws, rules and regulations. Certificates issued to transferees of the Optionee may contain legends reflecting any restrictions on transferability imposed by the Company in order to comply with such laws, rules and regulations. The Company shall not be required to register any shares issued to any transferees of the Optionee. 10.       All notices under this Agreement shall be in writing. Notices, other communications and payments provided for in this Agreement shall be deemed to have been duly given or made when delivered in person or when mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Company at the address set forth below or to the Optionee at the address set forth on the signature page of this Agreement or to such substitute address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: Corporate Secretary Energy East Corporation Corporate Drive - Kirkwood Industrial Park Binghamton, New York 13902-5224   11.       Termination of Employment. (a)    In the event that the Optionee ceases to be an employee of any of the Company and its affiliates by reason of death, retirement, or permanent disability, the Awards may be exercised by the Optionee or by the Optionee's legal representative or representatives or by the persons entitled to do so under the Optionee's will or the laws of descent and distribution, to the extent the Awards are then otherwise exercisable, during the one-year period following the date the Optionee ceases to be an employee of any of the Company and its affiliates, but not after the expiration of such period. (b)    In the event that the Optionee ceases to be an employee of any of the Company and its affiliates by reason of termination by any of the Company and its affiliates of the Optionee's employment for cause (as determined in the sole discretion of the Committee), the Awards shall expire to the extent that they are unexercised at the time of such termination of employment. (c)    In the event that the Optionee ceases to be an employee of any of the Company and its affiliates for any reason other than death, retirement, permanent disability or termination of employment by any of the Company and its affiliates for cause, the Awards shall expire to the extent that they are unexercised at the time such Optionee ceases to be an employee of any of the Company and its affiliates unless otherwise determined by the Committee in its sole discretion. 12.       In the event of any change in the number of outstanding shares of the Company's Common Stock or the Common Stock price by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination, exchange of shares or other similar corporate change, then in any such event the number and kind of shares subject to the Awards and the exercise price per share may be appropriately adjusted consistent with such change in such manner as the Committee in its sole discretion may deem equitable. Any adjustments made by the Committee shall be conclusive and binding for all purposes of the Plan. In the event of the dissolution or complete liquidation of the Company, or upon a reorganization, merger or consolidation of the Company which results in the outstanding shares of the Company's Common Stock subject to this Option being changed into or exchanged for property (including cash), rights or securities not issued by the Company, or any combination thereof, or the sale of all or substantially all of the Company's assets to, or the acquisition of shares of the Company representing more than seventy-five percent (75%) of the voting power of the stock of the Company then outstanding by, another corporation or person, the Awards shall terminate, unless provision is made in writing in connection with such transaction for the assumption of the Awards, or the substitution for the Awards of an award covering the shares of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments in accordance with the provisions hereinabove as to the number and kind of shares awarded and their exercise price, in which event the Awards shall continue in the manner and under the terms so provided. 13.       The Awards shall not confer upon the Optionee any right with respect to the continuance of employment with any of the Company and its affiliates, nor shall it affect any right which any of the Company and its affiliates may have to terminate the employment of the Optionee. 14.       The Optionee (or Optionee's transferee) shall not be entitled to the rights of a stockholder with respect to any shares of the Company's Common Stock subject to the Option prior to the date of issuance of a certificate or certificates for such shares (or in the event that the Company is using a book entry system, the date the Company makes the appropriate book entry). No adjustment shall be made for dividends or distributions or other rights with respect to such shares for which the record date is prior to the date the stock certificate or certificates are issued (or appropriate book entry is made). 15.       A copy of the Plan has been delivered to the Optionee prior to the execution hereof and is on file at the Company's corporate offices in Binghamton and Ithaca, New York. 16.       This Agreement shall be governed by the laws of the State of New York, other than its conflicts of laws provisions. In the event of an inconsistency between any term of the Plan and any term of this Agreement, the terms of the Plan shall govern. 17.       Notwithstanding anything to the contrary contained in any other Section of this Agreement, the Options and Stock Appreciation Rights granted hereunder shall become immediately exercisable upon the occurrence of a Potential Change in Control. For purposes of this Section 17, the following terms shall have the meanings indicated below: (a)    "Beneficial Owner" shall have the meaning defined in Rule 13d-3 of the Exchange Act. (b)    A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (i)  any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 25% or more of the combined voting power of the Company's then outstanding securities; or (ii)  during any period of two consecutive years (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in paragraph (I), (III) or (IV) of this Change in Control definition or a director 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 solicitations of proxies or consents by or on behalf of a Person other than the Board) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii)  the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv)  the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (c)    "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (d)    A "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. (e)    A "Potential Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (i)  the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii)  the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; (iii)  any Person (x) is or becomes the Beneficial Owner, directly or indirectly, (y) discloses directly or indirectly to the Company (or publicly) a plan or intention to become the Beneficial Owner, directly or indirectly, or (z) makes a filing under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended, with respect to securities to become the Beneficial Owner, directly or indirectly, of securities of the Company representing 9.9% or more of the combined voting power of the Company's then outstanding securities; or (iv)  the Committee adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. ENERGY EAST CORPORATION By:  _____________________________________                 Secretary Dated:  _______________   ACCEPTED AND AGREED TO: Optionee acknowledges receipt of a copy of the Plan and represents that Optionee is familiar with the terms and provisions contained therein. Optionee hereby accepts the Awards subject to all of the terms and provisions of the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee as to any questions arising under the Plan, the Option and the Stock Appreciation Rights. __________________________
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.2 SEPARATION AGREEMENT AND GENERAL RELEASE     This Separation Agreement and General Release ("Agreement") is made and entered into this 29th day of September 2000 by and between Geoffrey B. Courtright ("you"), a resident of the state of Minnesota, and Alliant Techsystems Inc. ("Alliant"), a Delaware corporation with its principal place of business in Hopkins, Minnesota.     You and Alliant have agreed that your employment will conclude as provided in this Agreement and, in connection with the termination of your employment, Alliant has agreed to provide you with certain payments to which you would not be entitled absent your execution of this Agreement. Further, you and Alliant desire to settle any and all disputes related directly or indirectly to your employment by Alliant and/or your termination from employment, in accordance with the terms and conditions set forth in this Agreement. Therefore, in consideration of the mutual covenants and agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, you and Alliant agree as follows:      1.  Termination of Employment.       (a) Effective on September 20, 2000, you will voluntarily resign as an Executive Officer of Alliant.     (b) Effective September 21, 2000, you will be placed on a special assignment reporting to Scott Meyers to support the information services systems of Alliant.     (c) Effective as of the close of business on April 1, 2001, you will no longer be an employee of Alliant. Except as otherwise set forth in this Agreement or as set forth in the applicable employee benefit plan, all of your privileges as an Alliant employee will end.      2.  Payments.       (a) In connection with your termination of employment, Alliant will provide you the following payments and benefits:      (i) Severance.  Pursuant to the Alliant Techsystems Severance Plan, Alliant will pay to you the sum of $11,923 for one year of service. This severance amount will be paid in accordance with Alliant's normal payroll disbursements as salary continuation during the last month of your special assignment. Alliant will make this payment to you only on the condition that you have signed this Agreement and have not exercised your right to rescind it pursuant to paragraph 10 below. Alliant will withhold required deductions, including deductions for applicable state and federal taxes, social security and all other standard deductions. The amount of your severance payment will be considered "Earnings" or "Recognized Compensation" for purposes of any of Alliant's qualified or non-qualified employee benefit plans.     (ii) Salary.  Your monthly base pay for the period of September 21, 2000, through April 1, 2001, will remain $12,916. For your last four (4) weeks of employment, you will be paid your severance as stated in 2(a)(i). You shall not be paid both salary and severance. Your salary will be paid in accordance with Alliant's normal payroll disbursements during your special assignment. Alliant will make these payments to you only on the condition that you have signed this Agreement and have not exercised your right to rescind it pursuant to paragraph 10 below. Alliant will withhold required deductions, including deductions for applicable state and federal taxes, social security and all other standard deductions. This amount will be considered "Earnings" or "Recognized Compensation" for purposes of any of Alliant's qualified or non-qualified employee benefit plans. 26 --------------------------------------------------------------------------------     (iii) Executive Outplacement Services.  You will be entitled, at the expense of Alliant, to receive outplacement services up to a total amount not to exceed $23,250 (15% of your base salary). You must present invoices for the costs thereof which are (a) not paid for by a prospective or subsequent employer, and (b) incurred prior to the expiration of one (1) year from the effective date of this Agreement.     (iv) Accrued but Unused Vacation.  As soon as administratively feasible after April 1, 2001, or as dictated by state law, Alliant will pay to you any amount owed to you of accrued and unused vacation. This sum will be paid regardless of whether or not you execute this Agreement. No vacation will accrue during the time period from September 21, 2000, through April 1, 2000.     (v) MIP.  Your AFY2001 MIP target was $46,500. You will be eligible to receive a payment under the ATK Management Incentive Plan for AFY2001 in accordance with the terms of that plan, but any payment will be prorated for the seven-month period during AFY2001 when you were an active employee and a participant in the plan. The payment will be made at the same time as all other MIP payments are made by the company. Any election to defer AFY2001 incentives will be cancelled.     (vi) Stock Options.  Non-vested stock options shall be forfeited effective close of business April 1, 2001. Vested stock options are exercisable for a period which is equal to the lesser of (a) three (3) years from April 1, 2001 or (b) the stock option normal expiration date, whichever is sooner. You presently have 4,000 options. On April 1, 2001, you will have 1,333 vested options. The number of options that will expire after April 1, 2001 is 2,667.    (vii) Restricted Stock.  You presently have 333 shares of restricted stock. All 333 shares will vest on April 1, 2001.    (viii) Performance Share Incentive Stock.  In August 1999 you were granted 750 shares, 50% to vest in AFY2001 and 50% to vest in AFY2002. Therefore, 375 shares shall vest on April 1, 2001, (to the extent that Alliant achieves AFY2001 EPS goals) and the remaining 375 shares shall be forfeited effective close of business April 1, 2001. In March of 2000 you were granted 2,000 shares which would vest over a three year period. One-third of these shares, 667, shall be vested on April 1, 2001, subject to the performance requirements of the plan, and the remaining 1,333 shares shall be forfeited effective close of business April 1, 2001.     (ix) Medical and/or Dental Benefits.  Medical and/or dental benefits will continue during your special assignment.     (x) Employee Benefit Plans.  Your rights to benefits under all other Alliant employee benefit plans will be governed by the terms of such plans.     (xi) Other Matters.  Participation in the Executive Perquisite Accounts Plan shall cease on September 21, 2000. Your coverage under the Executive Life Insurance Policy shall discontinue on April 1, 2001. Your use of the financial counseling services shall continue until April 1, 2001.     (b) Except as provided above, you acknowledge that you have received all other compensation and benefits due and owing to you from Alliant and that you have no further claim to any compensation or employee benefits from Alliant. You acknowledge that you are not entitled to the payment in paragraph 2(a)(i) and (ii) above unless you sign this Agreement and that Alliant has agreed to provide this payment solely as consideration for your signing this Agreement.      3.  Your Death.  Alliant agrees that the compensation described in paragraph 2(a)(i) and (ii) above will be paid to your estate in the event of your death, on the condition that you have signed this Agreement and have not exercised your right to rescind. 27 --------------------------------------------------------------------------------      4.  Unemployment Compensation.  Alliant agrees not to challenge your entitlement to unemployment compensation benefits as provided by law.      5.  Attorneys' Fees and Expenses.  You agree that you are responsible for payment of all of your own attorneys' fees and expenses incurred in conjunction with the review of this Agreement and resolution of any and all claims you may have against Alliant.      6.a.  Confidential Information.  You acknowledge that in the course of your employment with Alliant or any of its predecessor companies, you have had access to confidential information and trade secrets relating to business affairs of Alliant and/or its predecessor or related companies and entities. You agree that you will maintain the confidentiality of Alliant's confidential information and/or trade secrets. You agree that, at no time following your execution of this Agreement, will you disclose or otherwise make available to any person, company or other party confidential information or trade secrets. This Agreement shall not limit any obligations you have under any other Alliant confidentiality agreement or applicable federal or state law.      6.b.  Non-solicitation.  You shall not, either directly or indirectly, on your behalf or on the behalf or others, solicit, divert or hire away, or attempt to solicit, divert or hire away, to any other business, any person employed by Alliant or its affiliates or subsidiaries whether or not such employee is a full-time employee or a temporary employee of Alliant or its affiliates or subsidiaries.      7.  Return of Alliant Property.  You acknowledge that prior to your last day of active employment, you will return all property owned by Alliant which is in your possession, including, but not limited to, any company credit card (or credit card on which Alliant is a guarantor), computer, telephone, pager, fax or printer. Further, you agree to repay to Alliant the amount of any permanent or temporary advances previously made to you by Alliant which remain outstanding and any balance owing on any credit cards of any moneys due and owing Alliant or for which Alliant is a guarantor.      8.  Release.  You fully release and discharge the companies and individuals listed below from all liability for damages or claims of any kind arising out of any action, inaction, decision, or event occurring through the date of your execution of this Agreement: •Alliant, and its predecessor companies; •All companies owned by, connected with, or affiliated with Alliant; and •Alliant's current and former Directors, Officers, Managers, Employees, Agents, Insurers, Counsel, and Shareholders.     You understand that you are giving up any and all manner of actions or causes of actions, suits, debts, claims, complaints, or demands of any kind whatsoever, whether direct or indirect, fixed or contingent, known or unknown, in law or in equity, that you have or may have for claims arising under or based on, but not limited to, the: •Minnesota Human Rights Act, Minn. Stat. § 363.01, et seq.or any other similar state statute applicable in your state of residence; •Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq., as amended by the Older Workers Benefit Protection Act; •Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.; •Employee Retirement Income and Security Act, 29 U.S.C. § 1001, et seq.; •Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; •Family and Medical Leave Act, 29 U.S.C. §2601, et seq.; •National Labor Relations Act, 29 U.S.C. § 151, et seq.; 28 -------------------------------------------------------------------------------- •Occupational Safety and Health Act, 29 U.S. C. § 651, et seq.; •Rehabilitation Act, 29 U.S.C. § 701 et seq.; •Title VII, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 2000e, et seq.; •Worker Adjustment and Retaining Notification Act of 1988, 29 U.S.C. § 2101, et seq.; or •Any other federal, state or local law, including any attorneys' fees that could be awarded in connection with these or any other claims.     You further understand that this Agreement extends to, but is not limited to, all claims that you have or may have in contract or tort theories. This includes, but is not limited to, the following potential claims: •Wrongful discharge, or wrongful discharge in violation of public policy; •Breach of contract, breach of an express or implied promise, breach of the implied covenant of good faith and fair dealing, or breach of fiduciary duty; •Interference with contractual relations; •Promissory estoppel; •Breach of employee handbooks, manuals or other policies; •Assault or battery; •Intentional or negligent misrepresentation, or fraud; •Retaliation, or intentional or negligent infliction of emotional distress; •Defamation (including all forms of libel, slander, and self-defamation); •Negligent hiring, retention or supervision; and/or •Any other claim otherwise based on any theory, whether developed or undeveloped, arising from or related to your employment or the termination of your employment with Alliant, or any other fact or matter occurring prior to your execution of this Agreement.     You further agree that you will not institute any claim for damages, or any other relief, nor request any other party or entity, to institute any claim for damages on your behalf. You understand that you waive your right to money damages or other legal or equitable relief awarded as a result of any claim filed on your behalf by any other person, entity or governmental agency.      9.  Consideration Period.  You have been informed that the terms of this Agreement shall be open for consideration by you for a period of at least forty five (45) calendar days after the date set forth above, during which time you may consider whether or not to accept this Agreement and seek legal counsel to advise you of your rights. You agree that changes to this Agreement, whether material or immaterial, will not restart this acceptance period. You further understand that you are not required to take the entire forty five (45) day period to decide whether you wish to execute the Agreement and that you may do so on an accelerated basis without prejudice to your own or Alliant's rights under this Agreement.     10.  Right to Rescind.  You understand that you have the right to rescind this Agreement for any reason by informing Alliant of your intent to rescind this Agreement within fifteen (15) calendar days after you sign it. You understand that this Agreement will not become effective or enforceable unless and until you execute the Agreement and the applicable rescission period has expired. Any such rescission must be in 29 -------------------------------------------------------------------------------- writing and hand-delivered to the person listed below or, if sent by mail, must be received by such person within the applicable time period, sent by certified mail, return receipt requested, and addressed as follows: Sandy Ketchmark, MN11-1025 Alliant Techsystems 600 2nd Street NE Hopkins, MN 55343 In the event that you effectively rescind the Agreement, neither you nor Alliant will have any rights or obligations whatsoever under this Agreement. Any rescission, however, does not affect your termination of employment from Alliant, effective as of the date set forth in paragraph 1.     11.  Effective Date.  This Agreement does not become effective until sixteen (16) calendar days after you sign it and return it to the person named above and then only if it has not been rescinded by you under the procedures of paragraph 10.     12.  No Admission.  This Agreement is not an admission by Alliant that any of its actions or inactions are unjustified, unwarranted, discriminatory, wrongful or in violation of any federal, state or local law and this Agreement shall not be interpreted as such. Alliant disclaims any liability to you or any other person on the part of itself and/or its current or former directors, officers, employees, representatives, and agents. You agree and acknowledge that this Agreement shall not be interpreted to render either party to be a prevailing party for any purpose including, but not limited to, an award of attorney's fees under any statute or otherwise.     13.  Effect of Breach.  In the event that you breach any provision of this Agreement, Alliant will have no further obligations under paragraph 2(a)(i), (ii) and (iii) of this Agreement. You agree that in the event of your breach Alliant will be entitled to repayment of all moneys paid to you under such section together with the attorneys' fees and costs incurred to collect the money and to seek injunctive relief.     14.  No Adequate Remedy.  You agree that it is impossible to measure in money all of the damages which will accrue to Alliant by reason of your breach of any of your obligations under this Agreement. Therefore, if Alliant shall institute any action or proceeding to enforce the provisions hereof, you hereby waive the claim or defense that Alliant has an adequate remedy at law, and you shall not raise in any such action or proceeding the claim or defense that Alliant has an adequate remedy at law.     15.  No Assignment.  This Agreement is personal to you and may not be assigned by you.     16.  Enforceable Contract.  This Agreement shall be governed by the laws of the State of Minnesota. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.     17.  Entire Agreement.  You agree that this Agreement contains the entire agreement between you and Alliant with respect to the subject matter hereof and there are no promises, undertakings or understandings outside of this Agreement, except with respect to your continued requirement to not reveal confidential, secret or top secret information, patent, trademark or similar matters and as specifically set forth herein. This Agreement supersedes all prior or contemporaneous discussions, negotiations and agreements, whether written or oral, except as specifically set forth herein. Your right to payments or employee benefits from Alliant are specified exclusively and completely in this Agreement. Any modification or addition to this Agreement must be in writing, signed by an officer of Alliant and you.     18.  Acknowledgment.  You affirm that you have read this Agreement, and have had adequate time to consider the terms of the Agreement. Further, you have been advised that you should consult with 30 -------------------------------------------------------------------------------- an attorney prior to signing this Agreement. You acknowledge that the provisions of this Agreement are understandable to you and to the extent that you have not understood any section, paragraph, sentence, clause or term, you have taken steps to ensure that it was explained to you. You have entered into this Agreement freely and voluntarily.     IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below.   Dated: September 29, 2000       Geoffrey B. Courtright /s/ -------------------------------------------------------------------------------- Your signature   Dated: September 29, 2000       Alliant Techsystems Inc.   Scott S. Meyers -------------------------------------------------------------------------------- (Print name)       /s/ SCOTT S. MEYERS    -------------------------------------------------------------------------------- Signature           Executive VP and CFO -------------------------------------------------------------------------------- Title 31 -------------------------------------------------------------------------------- QUICKLINKS SEPARATION AGREEMENT AND GENERAL RELEASE
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 ADDENDUM TO FIRST AMENDMENT TO EMPLOYMENT AGREEMENT The First Amendment To Employment Agreement provides a non-qualified Supplemental Employees Retirement Plan (SERP) under which certain benefits are to be provided to the Executive. Section 4(b)(i)(A) of the Agreement defines the SERP to be a multiple of the Executive's base salary and annual cash incentive bonus. The purpose of this addendum is to clarify the meaning of annual cash incentive bonus. The annual cash incentive bonus is the amount calculated by applying a performance percent, as determined by the Personnel and Compensation Committee of the Board, to the executive's annual target bonus for each year (or portion of a year) that the executive is employed as Chief Executive Officer of Alliant Techsystems Inc.; the annual cash incentive bonus amount is calculated before any deferral or conversion to ATK stock. /s/ Daryl L. Zimmer   /s/ Paul David Miller -------------------------------------------------------------------------------- Daryl L. Zimmer   -------------------------------------------------------------------------------- Paul David Miller Vice President, General Counsel and Secretary   Chairman and Chief Executive Officer   Date: August 9, 2000       Date: August 9, 2000 -------------------------------------------------------------------------------- QUICKLINKS ADDENDUM TO FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 10(e) Contract No. 117183   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 1 DATED March 31, 2000 TO AGREEMENT DATED March 16, 2000 (Agreement)   1. [ ] Exhibit A dated March 31, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated March 31, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [ ] Exhibits A and B dated March 31, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [ ] Exhibit C dated March 31, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [ ] Revise Agreement MDQ: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBTU for MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [X] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [X] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 1 becomes effective April 1, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President
AMENDMENT TO THE NETCORE SYSTEMS, INC. 1997 STOCK OPTION PLAN   WHEREAS, Netcore Systems, Inc. has heretofore established the Netcore Systems, Inc. 1997 Stock Option Plan (the "Plan") for the benefit of employees, officers, directors, consultants and advisors of Netcore Systems, Inc. and its subsidiaries; WHEREAS, Netcore Systems, Inc. was acquired by Tellabs, Inc. (the "Company"; provided, however, that prior to the effective time of the merger, "Company" means Netcore Systems, Inc.) in a merger on August 30, 1999, which was accounted for as a pooling of interests; WHEREAS, the Board of Directors of the Company deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of the Company; and WHEREAS, the Board of Directors of the Company has considered the recommendations and has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. The Plan shall hereby be amended by adding a new Section 2A to read: 2A. Definitions a. "Change in Control" means the first to occur of: (1) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, Tellabs, Inc. ("Tellabs") or any subsidiary of Tellabs, or any employee benefit plan of Tellabs or any subsidiary of Tellabs, or any person or entity organized, appointed or established by Tellabs for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of Tellabs, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Tellabs representing 20% or more of the combined voting power of Tellabs' then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by Tellabs; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (2) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of Tellabs and any new director (except for a director designated by a person who has entered into an agreement with Tellabs to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by Tellabs' stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the " Incumbent Board") cease for any reason to constitute at least a majority of the Board; (3) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Tellabs (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of Tellabs immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns Tellabs or all or substantially all of Tellabs' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of Tellabs; (ii) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of Tellabs or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the stockholders of Tellabs of a complete liquidation or dissolution of Tellabs. b. "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. II. Subsection 6(d) shall be amended in its entirety to read as follows: d. Termination of Status. Except as set forth in Section 6A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option Agreement, the following rules shall apply upon termination of the Participant's status with the Company and all Subsidiaries: (1) Except as set forth in subsections (2), (3), and (4) below, the Board shall determine the effect on an Option of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant's legal representative, conservator, guardian or the beneficiary designated by a Participant in the event of the Participant's death (the " Designated Beneficiary") may be exercised. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. (2) In the event of termination of employment due to the death the Participant, each option held by the Participant shall become exercisable in full and may be exercised at any time prior to the expiration date of the option or within one year after the date of the Participant's death, whichever period is shorter. (3) In the event of termination of employment due to the Disability (as defined in the Plan) of the Participant, each option held by the Participant may, to the extent exercisable at the time of termination of employment, be exercised at any time prior to the expiration date of the option or within three years after the date of the Participant's termination of employment, whichever period is shorter. (4) In the event of termination of employment due to the retirement of the Participant on or after attaining age 55, all or a portion of each option held by the Participant, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Participant's attained age and one point for each year of continuous service with the Company or its affiliates as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Company or an affiliate of the Company, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points          75% of each unvested option shall vest At least 90 points                                  100% of each unvested option shall vest and all options held by the Participant to the extent then exercisable may be exercised at any time prior to the expiration date of the option or within three years after the date of the Participant's retirement, whichever period is shorter. (5) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death shall be treated as a Nonstatutory Stock Option. III. The Plan shall be hereby amended by adding thereto a new Section 6A to read: 6A. Change in Control a. Effect of Change in Control. Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. b. Change in Control Not Approved by Incumbent Board. Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. IV. Subsection 6(e) of the Plan shall be amended in its entirety to read as follows: e. Acquisition Events. (1) Consequences of Acquisition Events. Upon the occurrence of an Acquisition Event (as defined below), or the execution by the Company of any agreement with respect to an Acquisition Event, the Board may to the extent deemed appropriate take any one or more of the following actions with respect to then outstanding Options: (i) provide that outstanding Options shall be assumed, or equivalent Options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such Options substituted for Incentive Stock Options shall satisfy, in the determination of the Board, the requirements of Section 424(a) of the Code; and (ii) in the event of an Acquisition Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition Price"), provided that all outstanding Options shall terminate upon consummation of such Acquisition Event and each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. An "Acquisition Event" shall mean: (a) a Change in Control; (b) any sale of all or substantially all of the assets of the Company; or (c) the complete liquidation of the Company. (2) Assumption of Options Upon Certain Events. The Board may grant Options under the Plan in substitution for options and other stock-based awards held by employees of another corporation who become employees of the Company as a result of a merger or consolidation of the employing corporation with the Company or the acquisition by the Company of property or stock of the employing corporation. The substitute Options shall be granted on such terms and conditions as the Board considers appropriate in the circumstances. IN WITNESS WHEREOF, the foregoing amendments to the Netcore Systems, Inc. 1997 Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   NETCORE SYSTEMS, INC.   By: /s Michael J. Birck Name: Michael J. Birck Its: President
EXHIBIT 10.07 CONFORMED COPY -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of October 31, 2000 Among EXODUS COMMUNICATIONS, INC. The Lenders Party Hereto THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent and CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent -------------------------------------------------------------------------------- CHASE SECURITIES INC., as Sole Book Manager and Joint Lead Arranger GOLDMAN SACHS CREDIT PARTNERS L.P., as Joint Lead Arranger and Co-Documentation Agent MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Syndication Agent MORGAN STANLEY SENIOR FUNDING, INC., as Co-Documentation Agent -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I Definitions 1   SECTION 1.01. Defined Terms 1   SECTION 1.02. Classification of Loans and Borrowings 20   SECTION 1.03. Terms Generally 20   SECTION 1.04. Accounting Terms; GAAP 21   SECTION 1.05. Exchange Rate 21   ARTICLE II The Credits 21   SECTION 2.01. Commitments 21   SECTION 2.02. Loans and Borrowings 21   SECTION 2.03. Requests for Borrowings 22   SECTION 2.04. Letters of Credit 23   SECTION 2.05. Funding of Borrowings 26   SECTION 2.06. Interest Elections 26   SECTION 2.07. Termination and Reduction of Commitments 27   SECTION 2.08. Repayment of Loans; Evidence of Debt 27   SECTION 2.09. Amortization of Term Loans 28   SECTION 2.10. Prepayment of Loans 29   SECTION 2.11. Fees 30   SECTION 2.12. Interest 31   SECTION 2.13. Alternate Rate of Interest 31   SECTION 2.14. Increased Costs 31   SECTION 2.15. Break Funding Payments 32   SECTION 2.16. Taxes 33   SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs 34   SECTION 2.18. Mitigation Obligations; Replacement of Lenders 35   SECTION 2.19. Incremental Facility 35   ARTICLE III Representations and Warranties 36   SECTION 3.01. Organization; Powers 36   SECTION 3.02. Authorization; Enforceability 36   SECTION 3.03. Governmental Approvals; No Conflicts 36   SECTION 3.04. Financial Condition; No Material Adverse Change 37   SECTION 3.05. Properties 37   SECTION 3.06. Litigation and Environmental Matters 37   SECTION 3.07. Compliance with Laws and Agreements 37   SECTION 3.08. Investment and Holding Company Status 38   SECTION 3.09. Taxes 38   SECTION 3.10. ERISA 38   SECTION 3.11. Disclosure 38   SECTION 3.12. Subsidiaries 38   SECTION 3.13. Insurance 38   SECTION 3.14. Labor Matters 38   SECTION 3.15. Intellectual Property 38   SECTION 3.16. Security Interests 39   SECTION 3.17. FCC Matters 39 i -------------------------------------------------------------------------------- Page ARTICLE IV Conditions 39   SECTION 4.01. Effective Date 39   SECTION 4.02. Each Credit Event 41   ARTICLE V Affirmative Covenants 41   SECTION 5.01. Financial Statements and Other Information 41   SECTION 5.02. Notices of Material Events 42   SECTION 5.03. Information Regarding Collateral 43   SECTION 5.04. Existence; Conduct of Business 43   SECTION 5.05. Payment of Obligations 43   SECTION 5.06. Maintenance of Properties 43   SECTION 5.07. Insurance 43   SECTION 5.08. Casualty and Condemnation 43   SECTION 5.09. Books and Records; Inspection and Audit Rights 44   SECTION 5.10. Compliance with Laws 44   SECTION 5.11. Use of Proceeds and Letters of Credit 44   SECTION 5.12. Additional Subsidiaries 44   SECTION 5.13. Further Assurances 44   ARTICLE VI Negative Covenants 45   SECTION 6.01. Indebtedness of the Borrower; Certain Equity Securities 45   SECTION 6.02. Indebtedness of Restricted Subsidiaries 46   SECTION 6.03. Liens 47   SECTION 6.04. Sale and Lease-Back Transactions 48   SECTION 6.05. Fundamental Changes 48   SECTION 6.06. Investments, Loans, Advances, Guarantees and Acquisitions 49   SECTION 6.07. Asset Sales 50   SECTION 6.08. Hedging Agreements 50   SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness 50   SECTION 6.10. Transactions with Affiliates 51   SECTION 6.11. Restrictive Agreements 51   SECTION 6.12. Amendment of Material Documents 51   SECTION 6.13. Leasehold Data Centers 52   SECTION 6.14. Minimum EBITDA 52   SECTION 6.15. Senior Secured Debt to Total Capital 52   SECTION 6.16. Senior Debt to Total Capital 52   SECTION 6.17. Leverage Ratio 53   SECTION 6.18. Senior Secured Debt to Annualized Consolidated EBITDA 53   SECTION 6.19. Interest Expense Coverage Ratio 53   SECTION 6.20. Capital Expenditures 53   SECTION 6.21. Unrestricted Cash 54   SECTION 6.22. Designation of Unrestricted Subsidiaries 54   ARTICLE VII Events of Default 55   ARTICLE VIII The Administrative Agent 57   ARTICLE IX Miscellaneous 58   SECTION 9.01. Notices 58   SECTION 9.02. Waivers; Amendments 58   SECTION 9.03. Expenses; Indemnity; Damage Waiver 60   SECTION 9.04. Successors and Assigns 61   SECTION 9.05. Survival 62 ii -------------------------------------------------------------------------------- Page   SECTION 9.06. Counterparts; Integration; Effectiveness 62   SECTION 9.07. Severability 63   SECTION 9.08. Right of Setoff 63   SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 63   SECTION 9.10. WAIVER OF JURY TRIAL 63   SECTION 9.11. Headings 64   SECTION 9.12. Confidentiality 64   SECTION 9.13. Interest Rate Limitation 64   SECTION 9.14. Special Funding Option 64   SECTION 9.15. Release of Subsidiaries 65   SECTION 9.16. Conversion of Currencies 66   SCHEDULES:     Schedule 2.01                     —Commitments   Schedule 2.04                     —Existing Letters of Credit   Schedule 3.03                     —Governmental Approvals, etc.   Schedule 3.05                     —Mortgaged Properties   Schedule 3.06                     —Disclosed Matters   Schedule 3.12                     —Subsidiaries   Schedule 3.13                     —Insurance   Schedule 3.15                     —Mortgage Filing Offices   Schedule 6.01(a)                 —Existing Indebtedness of the Borrower   Schedule 6.01(a)(x)            —GlobalCenter Letters of Credit   Schedule 6.02                     —Existing Subsidiary Indebtedness   Schedule 6.03                     —Existing Liens   Schedule 6.06                     —Existing Investments   Schedule 6.09                     —Restricted Payments   Schedule 6.10                     —Existing Affiliate Transactions   Schedule 6.11                     —Existing Restrictions     EXHIBITS:     Exhibit A                     —Form of Assignment and Acceptance   Exhibit B-1                  —Form of Opinion of Fenwick & West LLP   Exhibit B-2                  —Form of Opinion of Adam W. Wegner, General Counsel of the Borrower   Exhibit B-3                  —Form of Opinion of Regulatory Counsel   Exhibit B-4                  —Form of Opinion of Local Counsel   Exhibit C                     —Form of Security Agreement   Exhibit D                     —Form of Pledge Agreement   Exhibit E                      —Form of Guarantee Agreement   Exhibit F                      —Form of Indemnity, Subrogation and Contribution Agreement   Exhibit G                     —Form of Promissory Note   Exhibit H                     —Form of Mortgage   Exhibit I                       —Form of Perfection Certificate   iii -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of October 31, 2000 among EXODUS COMMUNICATIONS, INC., the LENDERS party hereto, THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent, and CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent. The parties hereto agree as follows: ARTICLE I Definitions               SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:               “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.               “Additional Lender” is defined in Section 2.19.               “Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.               “Administrative Agent” means The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder.               “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.               “Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.               “Agent” means The Chase Manhattan Bank, in its capacities as Administrative Agent and Collateral Agent.               “Agreement Currency” is defined in Section 9.16(b).               “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.               “Annualized Consolidated EBITDA” means, for any fiscal quarter, Consolidated EBITDA for such fiscal quarter multiplied by four.               “Applicable Agent” means (a) with respect to a Revolving Loan or Borrowing denominated in Euro, the London Agent or (b) with respect to a Loan, Borrowing or Letter of Credit denominated in dollars, the Administrative Agent.               “Applicable Commitment Fee Rate” means, with respect to the commitment fee payable pursuant to Section 2.11(a), a rate per annum equal to (x) 1.25% for each day on which Usage is less than 25.0%, (y) 0.75% for each day on which Usage is equal to or greater than 25.0% but less than or equal to 50.0% and (z) 0.50% for each day on which Usage is greater than 50.0%. For purposes of the foregoing, “Usage” means, on any date, the percentage obtained by dividing (i) the sum of the aggregate outstanding Tranche A Term Loans and the aggregate Revolving Exposure on such date by (ii) the sum of the aggregate outstanding Tranche A Term Loans, unutilized Tranche A Commitments and Revolving Commitments on such date. 1 --------------------------------------------------------------------------------               “Applicable Creditor” is defined in Section 9.16(b).               “Applicable Percentage” means, with respect to any Revolving Lender, the percentage of the total Revolving Commitments represented by such Lender’s Revolving Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments.               “Applicable Rate” means, for any day (a) with respect to any Tranche B Term Loan, (i) 2.25% per annum, in the case of an ABR Loan and (ii) 3.25% per annum, in the case of a Eurocurrency Loan, and (b) with respect to any ABR Loan or Eurocurrency Loan that is a Revolving Loan or a Tranche A Term Loan, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread” or “Eurocurrency Spread”, as the case may be, based upon the Leverage Ratio as of the most recent determination date: Category Leverage Ratio ABR Spread Eurocurrency Spread   IV less than 2.00 to 1.00 1.25% 2.25%   III equal to or greater than 2.00 to 1.00 and less than 3.00 to 1.00 1.50% 2.50%   II equal to or greater than 3.00 to 1.00 and less than 4.00 to 1.00 1.75% 2.75%   I greater than or equal to 4.00 to 1.00 2.00% 3.00%               For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrower’s fiscal year based upon the Borrower’s consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category I (A) during the period commencing with the Effective Date and ending on the date upon which the Borrower first delivers consolidated financial statements pursuant to Section 5.01(a) or (b) after the Effective Date, (B) at any time tha t an Event of Default has occurred and is continuing or (C) at the option of the Administrative Agent or at the request of the Required Lenders if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof (without regard to any period of grace) until such consolidated financial statements are delivered.               “Asia-Pacific Joint Venture” means the joint venture established pursuant to the Joint Venture Agreement relating to Exodus Asia-Pacific Ltd. dated as of September 28, 2000, between the Borrower and Asia Global Crossing, Ltd., a company organized under the laws of Bermuda.               “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.               “Attributable Debt” means, on any date, in respect of any lease of the Borrower or any Restricted Subsidiary entered into as part of a sale and leaseback transaction subject to Section 6.04, (i) if such lease is a Capital Lease Obligation, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (ii) if such lease is not a Capital Lease Obligation, the capitalized amount of the remaining lease payments under such lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease Obligation. 2 --------------------------------------------------------------------------------               “Board” means the Board of Governors of the Federal Reserve System of the United States of America.               “Board of Directors” means the Board of Directors of the Borrower.               “Borrower” means Exodus Communications, Inc., a Delaware corporation.               “Borrowing” means Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.               “Borrowing Minimum” means (a) in the case of a Borrowing denominated in dollars, $5,000,000 and (b) in the case of a Borrowing denominated in Euro, EU5,000,000.               “Borrowing Multiple” means (a) in the case of a Borrowing denominated in dollars, $1,000,000 and (b) in the case of a Borrowing denominated in Euro, EU1,000,000.               “Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.               “Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, (a) when used in connection with a Eurocurrency Loan denominated in any currency other than Euros, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in such currency in the London interbank market and (b) when used in connection with a Loan denominated in Euro, the term “Business Day” shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in Euro.               “Calculation Date” means the last Business Day of each month.               “Capital Expenditures” means, for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and the Restricted Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP (other than to the extent, if any, attributable to Capital Lease Obligations incurred during such period) and (b) all payments made during such period of the principal portion of Capital Lease Obligations of the Borrower and the Restricted Subsidiaries (regardless of when incurred).               “Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.               “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase or subscribe for any of the foregoing, or any warrants, rights or options to purchase or subscribe for any such warrants, rights or options.               “Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender or by such Lender’s or Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.               “Change of Control” means (i) the sale, conveyance, transfer or lease of all or substantially all of the assets of the Borrower and the Restricted Subsidiaries, taken as a whole, to any “Person” or “group” (within the meaning of Sections 13(d) of the Exchange Act or any successor provision); (ii) any “Person” or “group” (within the meaning of Sections 13(d) of the Exchange Act or any successor provision) becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of all classes of the Voting Stock of the Borrower; (iii) during any period of 12 consecutive months ending after the Effective Date, individuals who at the beginning of such period constituted the Board of Directors (together with any directors whose election or appointment by the Board of Directors or whose nomination f or election by the stockholders of 3 -------------------------------------------------------------------------------- the Borrower was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) ceasing for any reason to constitute a majority of the Board of Directors then in office; or (iv) the occurrence of a “Change of Control” as defined in any indenture or other agreement governing Long-Term Indebtedness of the Borrower.               “Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche A Term Loans or Tranche B Term Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Tranche A Commitment or Tranche B Commitment.               “Code” means the Internal Revenue Code of 1986, as amended from time to time.               “Collateral” means any and all “Collateral”, as defined in any Security Document.               “Collateral Agent” means The Chase Manhattan Bank, in its capacity as collateral agent under the Loan Documents.               “Collateral and Guarantee Requirement” means the requirement that:         (a)  the Collateral Agent shall have received (i) from the Borrower a counterpart of each of the Security Agreement and the Pledge Agreement duly executed and delivered on behalf of the Borrower and (ii) from each Subsidiary Loan Party either (A) a counterpart of the Subsidiary Security Documents duly executed and delivered on behalf of such Loan Party or (B) in the case of any Person that becomes a Subsidiary Loan Party after the Effective Date, a supplement to each Subsidiary Security Document, in the form specified therein, duly executed and delivered on behalf of such Subsidiary Loan Party;         (b)  all outstanding Equity Interests of each Subsidiary owned by or on behalf of any Loan Party shall have been pledged pursuant to the Pledge Agreement (except that the Loan Parties shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary) and the Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank; provided, that the Borrower shall have until the fifteenth day after the Effective Date to deliver to the Agent in New York the certificates required to be received by the Agent pursuant to this clause (b) that represent Equity Interests in Exodus Communications KK (Shinjuki-ku), a corporation organized under the laws of Japan;         (c)  Each promissory note evidencing any Indebtedness of the Borrower or any Subsidiary that is owing to any Loan Party shall have been pledged pursuant to the Pledge Agreement and the Agent shall have received all such promissory notes, together with instruments of transfer with respect thereto endorsed in blank;         (d)  all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;         (e)  the Collateral Agent shall have received (i) counterparts of a Mortgage, if any, with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.03, together with such endorsements, coinsurance and reinsurance as the Collateral Agent or the Required Lenders may reasonably request, and (iii) such surveys, abstracts, appraisals, legal opinions and other documents as the Collateral Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property;         (f)  each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder; provided, that with 4 -------------------------------------------------------------------------------- respect to any Person that becomes a Subsidiary Loan Party after the date hereof, such Person shall have until the 45th day after such Person becomes a Subsidiary Loan Party to obtain any approvals that are required by this clause (f) and that cannot reasonably be obtained at or before the time such Person becomes a Subsidiary Loan Party; and         (g)  The Collateral Agent shall have received a Recognition Agreement with respect to each Leasehold Data Center leased by any Loan Party, duly executed and delivered by the lessor thereof (and by any mortgagee of the real estate comprising all or part of such Leasehold Data Center), and shall have received such mortgages, fixture filings or other instruments, duly executed by the appropriate Loan Party and in form suitable for recordation or filing in real estate records, as may be necessary or desirable in the Collateral Agent’s opinion to grant and perfect a Lien in favor of the Collateral Agent on fixtures owned by any Loan Party and located at such Leasehold Data Center. Notwithstanding the foregoing, in the event the consent of any landlord under any Leasehold Data Center lease (or of any mortgagee of such Leasehold Data Center) is required to permit the grant or perfection of any Lien under the Security Documents or any such landlord (or mortgagee) is required to enter into a Recognition Agreement pursuant to paragraph (g) above, the Borrower and the appropriate Loan Parties will use their commercially reasonable efforts (which will not include the payment of any significant consideration beyond reimbursement of expenses) to obtain such required consent and such entry into a Recognition Agreement as soon as practicable; provided that if such consent or Recognition Agreement cannot be obtained following the use of such commercially reasonable efforts, such Lien need not be granted or perfected, as the case may be, or such Recognition Agreement need not be obtained, and the Collateral and Guarantee Requirement in respect of such Leasehold Data Center shall no t be deemed to be unsatisfied during any period when the Borrower and the Loan Parties are complying with the foregoing or in the event such consent or Recognition Agreement cannot, after the exercise of such efforts, be obtained.               “Committed Currency” means dollars and Euros.               “Commitment” means a Revolving Commitment, Tranche A Commitment or Tranche B Commitment, or any combination thereof (as the context requires).               “Communications Act” means the Communications Act of 1934 and any similar or successor Federal statute and the rules, regulations and published policies of the Federal Communications Commission thereunder, all as amended and as the same may be in effect from time to time.               “Consolidated Cash Interest Expense” means, for any period, the excess of (a) the sum of (i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations) of the Borrower and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of the Borrower or any Restricted Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP, (iii) any cash payments made during such period in respect of obligations referred to in clause (b) below that were amortized or accrued in a previous period, plus (iv) any cash payments, distributions or dividends to holders of New Preferred Stock during such period, minus (b) the sum of (i) to the extent included in such consolidated inter est expense for such period, non-cash amounts attributable to amortization of financing costs paid in a previous period, (ii) to the extent included in such consolidated interest expense for such period, non-cash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period, plus (iii) to the extent included in such consolidated interest expense for such period, up-front cash financing costs or cash financing fees expended during such period.               “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, and (iv) any extraordinary charges for such period, and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any extraordinary gains for such period, all determined on a consolidated basis in accordance with GAAP. For purposes only of the covenants set forth in Sections 6.17 and 6.18 (including the determination of the Leverage Ratio for purposes of Section 6.17), if the Borrower or any Restricted Subsidiary acquires a Restricted Subsidiary or substantially all the asse ts of a going concern, or disposes of a Restricted subsidiary or substantially all of its assets, in each case during any period in respect of which Consolidated EBITDA is to be determined hereunder, such 5 -------------------------------------------------------------------------------- Consolidated EBITDA will be determined on a pro forma basis as if such acquisition or disposition had occurred on the first day of the relevant period.               “Consolidated Net Income” means, for any period, the net income or loss of the Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person (other than the Borrower or any Subsidiary Loan Party) in which any other Person (other than the Borrower or any Restricted Subsidiary or any director holding qualifying shares in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of the Restricted Subsidiaries during such period, and (b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Restricted Subsidiary or the date that such Person’s assets are acquired by the Borro wer or any Restricted Subsidiary.               “Contributed Capital” means, at any date, the sum (without duplication) of (a) $894,600,000, plus (b) Equity Proceeds received by the Borrower subsequent to June 30, 2000, plus (c) the amount of Equity Purchase Consideration received by the Borrower or any Restricted Subsidiary after June 30, 2000, plus (d) the amount of Conversion Proceeds received by the Borrower after June 30, 2000 in respect of convertible securities that were not included in the consolidated stockholders’ equity of the Borrower and the Restricted Subsidiaries as of June 30, 2000.               “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.               “Conversion Proceeds” means an amount deemed for purposes hereof to have been received by the Borrower at the time of conversion of any convertible debt securities or preferred stock (other than Non-Cash Pay Preferred Stock) of the Borrower into common stock or Non-Cash Pay Preferred Stock of the Borrower equal to the principal amount (or Imputed Principal Amount, as applicable) of such debt securities or preferred stock so converted and any accrued and unpaid interest thereon which is forfeited in connection with such conversion.               “Data Center” means any real estate, building, structure, underground facilities or portion thereof that is utilized by the Borrower or any Restricted Subsidiary as a data center for the purpose of conducting any System and Network Management Business.               “Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.               “Designated Equity Proceeds Use” means the application of Equity Proceeds or Conversion Proceeds to any of the following: (i) Restricted Payments pursuant to stock option plans or other benefit plans for management or employees of the Borrower and the Restricted Subsidiaries, (ii) payments of cash consideration in connection with Permitted Business Acquisitions pursuant to Section 6.06(e), (iii) Investments permitted by Section 6.06(d) or 6.06(k) and (iv) Capital Expenditures permitted by Section 6.20.               “Disclosed Matters” means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06.               “dollars” or “$” refers to lawful money of the United States of America.               “Dollar Equivalent” means, on any date of determination, (a) with respect to any amount in dollars, such amount, and (b) with respect to any amount in Euros, the equivalent in dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05(b) using the Exchange Rate at the time in effect under the provisions of such Section.               “Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02) .               “Environmental Laws” means all applicable local, state, federal and foreign laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating to the pollution or protection of the 6 -------------------------------------------------------------------------------- environment, the preservation or reclamation of natural resources, or the generation, use, handling, transportation, storage, treatment, disposal, management or release of any Hazardous Material.               “Environmental Liability” means any liabilities, obligations, claims, actions, suits, judgments, orders, damages, injunctive relief, losses, fines, penalties, fees, expenses or costs (including administrative oversight costs, natural resource damages and remediation costs), whether contingent or otherwise, arising from or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.               “Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, but excluding any New Preferred Stock issued by the Borrower.               “Equity Proceeds” means the cash Net Proceeds received by the Borrower from the issuance and sale of common stock of the Borrower or Non-Cash Pay Preferred Stock of the Borrower.               “Equity Purchase Consideration” means the net fair market value of any assets or properties other than cash transferred to or acquired by the Borrower or any Restricted Subsidiary in consideration of or exchange for the issuance of shares of common stock of the Borrower or Non-Cash Pay Preferred Stock of the Borrower, including in connection with mergers and stock acquisitions (such net fair market value being the fair market value of such common stock or Non-Cash Pay Preferred Stock (as reasonably determined in good faith by the Chief Financial Officer of the Borrower, which determination shall, if applicable, be based on the trading value of such common stock or Non-Cash Pay Preferred Stock on the closing date of the transaction)).               “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.               “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.               “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a tru stee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan of the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.               “Euro” or “EU” means the single currency of the European Union as constituted by the Treaty on European Union.               “Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.               “Euro Revolving Exposure” means, with respect to any Lender at any time, the Dollar Equivalent of the outstanding principal amount of such Lender’s Revolving Loans denominated in Euro at such time.               “Euro Sublimit” means $100,000,000.               “Event of Default” has the meaning assigned to such term in Article VII. 7 --------------------------------------------------------------------------------               “Excess Cash Flow” means, for any fiscal period, the sum (without duplication) of:         (a)  Consolidated Net Income for such fiscal period, adjusted to exclude any gains or losses attributable to Prepayment Events; plus         (b)  depreciation, amortization and other non-cash charges or losses deducted in determining such Consolidated Net Income for such fiscal period; plus         (c)  the sum of (i) the amount, if any, by which Net Working Capital decreased during such fiscal period plus (ii) the net amount, if any, by which the deferred revenues of the Borrower and the Restricted Subsidiaries increased during such fiscal period plus (iii) the amount, if any, by which the deferred cash expenses of the Borrower and the Restricted Subsidiaries decreased during such fiscal period; minus         (d)  the sum of (i) any non-cash gains included in determining such Consolidated Net Income for such fiscal period plus (ii) the amount, if any, by which Net Working Capital increased during such fiscal period plus (iii) the amount, if any, by which the deferred revenues of the Borrower and the Restricted Subsidiaries decreased during such fiscal period plus (iv) the amount, if any, by which the deferred cash expenses of the Borrower and the Restricted Subsidiaries increased during such fiscal period; minus         (e)  the sum of (i) Capital Expenditures paid in cash during such fiscal period (except to the extent attributable to the incurrence of Capital Lease Obligations or otherwise financed by incurring Long-Term Indebtedness and except to the extent paid with Net Proceeds in respect of Prepayment Events or from the issuance of Capital Stock) plus (ii) cash consideration paid during such fiscal period to make Permitted Business Acquisitions or other investments permitted hereunder (other than Permitted Investments and except to the extent financed by incurring Long-Term Indebtedness or issuing Capital Stock or other Equity Interests); minus         (f)  cash payments made during such fiscal period which were not deducted in determining such Consolidated Net Income for such fiscal period that will in a subsequent fiscal period become a non-cash charge deducted in determining Consolidated Net Income for such subsequent fiscal period; minus         (g)  the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by the Borrower and the Restricted Subsidiaries during such fiscal period, excluding (i) Indebtedness in respect of Revolving Loans and Letters of Credit (unless by a corresponding permanent reduction in the Revolving Commitments), (ii) Term Loans prepaid pursuant to Section 2.10(c) or (d), and (iii) repayments or prepayments of Long-Term Indebtedness financed by incurring other Long-Term Indebtedness.               “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.               “Exchange Rate” means on any day, with respect to the Euro, the rate at which the Euro may be exchanged into dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters <NFX=> Page for the Euro. In the event that such rate does not appear on any Reuters <NFX=> Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent or, if the Administrative Agent shall so determine, one of its Affiliates in the market where its foreign currency exchange operations in respect of the Euro are then being conducted, at or about 10:00 a.m., local time, on such date for the purcha se of dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.               “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the 8 -------------------------------------------------------------------------------- case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.18(b)), any withholding tax that (i) is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to any withholding tax pursuant to Section 2.16(a), or (ii) is attributable to such Foreign Lender’s failure to comply with Section 2.16(e).               “Executive Officer” means the chief executive officer, the president, the chief financial officer, the secretary or the treasurer of the Borrower.               “Existing Letter of Credit” means each standby letter of credit previously issued for the account of the Borrower that (i) is outstanding on the Effective Date and (ii) is listed on Schedule 2.04.               “Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.               “Financial Covenants” means the covenants set forth in Sections 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.20 and 6.21.               “Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.               “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.               “Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.               “GAAP” means generally accepted accounting principles in the United States of America.               “Global Acquisition” means the acquisition by the Borrower of all of the outstanding Capital Stock of GlobalCenter Holding Co., a Delaware corporation, pursuant to the Global Merger Agreement.               “Global Closing Date” means the date on which the Global Acquisition is consummated.               “Global Merger Agreement” means the Agreement and Plan of Merger dated September 28, 2000, among the Borrower, Exodus Acquisition Corp., Global Crossing North America, Inc., Global Crossing GlobalCenter Holdings, Inc., GlobalCenter Holding Co. and GlobalCenter Inc.               “Government Securities” means direct obligations of, or obligations fully and unconditionally guaranteed or insured by, the United States of America or any agency or instrumentality thereof.               “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.               “Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity 9 -------------------------------------------------------------------------------- capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.               “Guarantee Agreement” means the Guarantee Agreement between the Subsidiary Loan Parties and the Collateral Agent, substantially in the form of Exhibit E.               “Hazardous Materials” means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.               “Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.               “Imputed Principal Amount” means, with respect to any class of New Preferred Stock, the maximum amount that would be payable upon mandatory redemption or repurchase of all such New Preferred Stock or, if no mandatory redemption or repurchase is applicable, the greater of the issue price or liquidation preference of such New Preferred Stock.               “Incremental Facility Amendment” is defined in Section 2.19.               “Incremental Loans” is defined in Section 2.19.               “Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedne ss of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances (j) all obligations of such Person in respect of New Preferred Stock, (k) all Attributable Debt of such Person and (l) all obligations of such person in respect of Hedging Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. For the avoidance of doubt, “Indebtedness” shall not include cash deposits or pledges paid to or made for the benefit of, or cash de posits or pledges made to support obligations in respect of surety bonds, performance bonds or other obligations of a like nature for the benefit of, lessors (including lessors under Synthetic Leases) of Leasehold Data Centers and other premises that are leased to the Borrower or a Restricted Subsidiary under terms which do not create a Capital Lease Obligation.               “Indemnified Taxes” means Taxes other than Excluded Taxes.               “Indemnity, Subrogation and Contribution Agreement” means the Indemnity, Subrogation and Contribution Agreement substantially in the form of Exhibit F hereto.               “Indentures” means (a) the Indentures dated as of July 6, 2000, between the Borrower and HSBC Bank USA, as Trustee, in respect of $1,000,000,000 11-5/8% Senior Notes due 2010, and EU200,000,000 of 11-3/8% Senior Notes due 2008, (b) the Indenture dated as of December 1, 1999, between the Borrower and HSBC Bank USA, as Trustee, in respect of $375,000,000 and EU125,000,000 of 10-3/4% Senior Notes due 2009, and (c) the Indenture dated as of July 1, 1998, between the Borrower and HSBC Bank USA, as Trustee, in respect of $275,000,000 of 11-1/4% Senior Notes due 2008. 10 --------------------------------------------------------------------------------               “Information Memorandum” means the Confidential Information Memorandum dated August 2000 relating to the Borrower and the Transactions.               “Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.06.               “Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.               “Interest Period” means, with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes her eof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.               “Investment” means purchasing, holding or acquiring (including pursuant to any merger with any Person that was not a Wholly Owned Restricted Subsidiary prior to such merger) any Capital Stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, or making or permitting to exist any loans or advances (other than commercially reasonable extensions of trade credit) to, Guaranteeing any obligations of, or making or permitting to exist any investment in, any other Person, or purchasing or otherwise acquiring (in one transaction or a series of transactions) any assets of any Person constituting a business unit. The amount, as of any date of determination, of any Investment shall be the original cost of such Investment (including any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary tha t is assumed or Guaranteed in connection with such Investment and any Indebtedness assumed in connection with any acquisition of assets), plus the cost of all additions, as of such date, thereto and minus the amount, as of such date, of any portion of such Investment repaid to the investor in cash as a repayment of principal or a return of capital, as the case may be (except to the extent such repaid amount has been included in Consolidated Net Income), but without any other adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. In determining the amount of any Investment involving a transfer of any property other than cash, such property shall be valued at its fair market value at the time of such transfer.               “Issuing Bank” means (i) The Chase Manhattan Bank, in its capacity as the issuer of Letters of Credit (other than the Existing Letters of Credit) hereunder, and its successors in such capacity as provided in Section 2.04(i) and (ii) any other Lender that may become an issuer of Letters of Credit hereunder in such capacity as provided in Section 2.04(i) or 2.04 (k). Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.               “Judgment Currency” is defined in Section 9.16(b).               “LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of Credit.               “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.               “Leasehold Data Center” means any Data Center that is leased, whether pursuant to a Capital Lease Obligation or otherwise, by the Borrower or any Restricted Subsidiary. 11 --------------------------------------------------------------------------------               “Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance or an Incremental Facility Amendment, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance.               “Lender Affiliate” means (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such lender or by an Affiliate of such investment advisor; provided, that no entity shall be a “Lender Affiliate” unless such entity is capable of performing the applicable obligations of a Lender hereunder.               “Letter of Credit” means any letter of credit issued by an Issuing Bank pursuant to this Agreement.               “Leverage Ratio” means, on any date, the ratio of (a) Total Debt as of such date to (b) Annualized Consolidated EBITDA for the fiscal quarter of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date); provided, however, that for purposes of the covenant set forth in Section 6.17, the Leverage Ratio shall be calculated by excluding from Total Debt that portion of Indebtedness of any Restricted Subsidiary that is not a Wholly Owned Subsidiary that is attributable to minority ownership interests of third parties in such Restricted Subsidiary if such Indebtedness is not Guaranteed by the Borrower or any other Restricted Subsidiary that is not also a Subsidiary of such non-Wholly Owned Subsidiary.               “LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in the currency of such Borrowing in the London interbank market), rounded upwards, if necessary, to the nearest 1/100th of a percent, at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in the currency of such Borrowing with a maturity comparable to such Interest Period. In the event that such rate is not available at such tim e for any reason, then the “LIBO Rate” with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 (in the case of a Borrowing denominated in dollars) or Euro deposits of EU5,000,000 (in the case of a Borrowing denominated in Euro) and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.               “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, Capital Lease Obligation or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.               “Loan Documents” means this Agreement and the Security Documents.               “Loan Parties” means the Borrower and the Subsidiary Loan Parties.               “Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.               “Local Time” means (a) with respect to a Revolving Loan or Borrowing denominated in Euro, London time and (b) with respect to a Loan, Borrowing or Letter of Credit denominated in dollars, New York City time.               “London Agent” means Chase Manhattan International Limited.               “Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability. 12 --------------------------------------------------------------------------------               “Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or financial condition of the Borrower and the Restricted Subsidiaries, taken as a whole, (b) the ability of any Loan Party to perform any of its material obligations under any Loan Document or (c) the rights of or benefits available to the Administrative Agent, the Collateral Agent and the Lenders under any Loan Document.               “Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Restricted Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Restricted Subsidiary would be required to pay if such Hedging Agreement were terminated at such time (or is required to pay, if such Hedging Agreement has been terminated).               “Material Subsidiary” means any one or more Restricted Subsidiaries that, as of the last day of the fiscal quarter most recently ended on or prior to the date of determination, accounted for more than 5% of (i) Consolidated EBITDA during such fiscal quarter or the period of four consecutive fiscal quarters ended on such last day if the resulting amount is positive and exceeds $5,000,000, (ii) consolidated revenues of the Borrower and the Restricted Subsidiaries during such fiscal quarter or the period of four consecutive fiscal quarters ended on such last day or (iii) the consolidated assets of the Borrower and the Restricted Subsidiaries as of the last day of such fiscal quarter.               “Moody’s” means Moody’s Investors Service, Inc.               “Mortgage” means a mortgage, deed of trust or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be in the form of Exhibit H or otherwise satisfactory in form and substance to the Collateral Agent.               “Mortgaged Property” means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified as a Mortgaged Property on Schedule 3.05, and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13.               “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.               “Net Proceeds” means, with respect to any event (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower and the Subsidiaries to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made by the Borrower and the Restricted Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such ass et or otherwise subject to mandatory prepayment as a result of such event, and (iii) the amount of all taxes paid (or reasonably estimated to be payable, provided, that such amounts withheld or estimated for tax payments shall, to the extent not utilized for the payment of taxes, be deemed to be Net Proceeds) by the Borrower and the Subsidiaries, and the amount of any reserves established by the Borrower and the Subsidiaries to fund contingent liabilities reasonably estimated to be payable (provided that the amount of any reversal of any such reserve shall be deemed to be Net Proceeds), in each case that are directly attributable to such event (as determined reasonably and in good faith by the Chief Financial Officer of the Borrower).               “Net Working Capital” means, at any date, (a) the consolidated current assets of the Borrower and the Restricted Subsidiaries as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of the Borrower and the Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative. 13 --------------------------------------------------------------------------------               “New Preferred Stock” means any preferred stock (other than Non-Cash Pay Preferred Stock) issued by the Borrower on or after December 31, 1999 that is (a) not secured by any assets of the Borrower or any Restricted Subsidiary and (b) not Guaranteed by any Restricted Subsidiary.               “Non-Cash Pay Preferred Stock” means preferred stock of the Borrower which (i) is not mandatorily redeemable, in whole or part, or required to be repurchased or reacquired, in whole or in part, by the Borrower or any Restricted Subsidiary, and which does not require any payment of cash dividends, in each case, prior to the date that is six months after the Tranche B Maturity Date; provided, however, that any preferred stock which would constitute Non-Cash Pay Preferred Stock but for provisions thereof giving holders thereof the right to require the Borrower to repurchase or redeem such preferred stock upon the occurrence of a change of control occurring prior to the Tranche B Maturity Date shall constitute Non-Cash Pay Preferred Stock if the change of control provisions (other than the purchase price) applicable to such preferred stock are no more favorable to the holders of such preferred stock than the provisions applicable to the Loans contained in this Agreement and such preferred stock specifically provides that the Borrower will not repurchase or redeem any such preferred stock pursuant to such provisions prior to the Borrower’s repayment of the Loans and LC Disbursements and the termination of all Commitments hereunder, (ii) is not secured by any assets of the Borrower or any Restricted Subsidiary, (iii) is not Guaranteed by any Restricted Subsidiary and (iv) is not exchangeable or convertible into Indebtedness of the Borrower or any Restricted Subsidiary or any preferred stock (other than Non-Cash Pay Preferred Stock) of the Borrower or any Subsidiary.               “Obligations” has the meaning assigned to such term in the Security Agreement.               “Other Taxes” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.               “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.               “Perfection Certificate” means a certificate in the form of Annex I to the Security Agreement or any other form approved by the Collateral Agent.               “Permitted Business Acquisition” means any acquisition (by merger or otherwise) by the Borrower or a Subsidiary Loan Party of all or substantially all the assets of, or all the Equity Interests in, a Person or division or line of business of a Person, if (a) immediately after giving effect thereto, no Default has occurred and is continuing or would result therefrom, (b) such acquired Person or business is predominately engaged in one or more System and Network Management Businesses (i) in the United States of America or (ii) outside the United States of America, provided that the aggregate cumulative consideration other than stock for all such acquisitions of Persons or businesses predominantly engaged in Systems and Network Management Businesses outside the United States shall not at any time (A) prior to the Global Closing Date exceed $100,000,000, and (B) at any time thereafter, exceed $150 ,000,000, (c) each Subsidiary resulting from such acquisition (and which survives such acquisition) other than a Foreign Subsidiary resulting from an acquisition made in reliance on clause (b)(ii) of this definition shall be a Subsidiary Loan Party and all the Equity Interests of each such Subsidiary shall be owned directly by the Borrower and/or Subsidiary Loan Parties and shall have been pledged pursuant to the Pledge Agreement, (d) the Collateral and Guarantee Requirement shall have been satisfied with respect to each such Subsidiary, (e) the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisition (without giving effect to operating expense reductions unless approved of in advance by the Administrative Agent), with the Financial Covenants to the extent then applicable, as if such acquisition had occurred on the first day of the relevant period for testing compliance, and (f) the Borrower has delivered to the Agent an officer’s certifica te to the effect set forth in clauses (a), (b), (c), (d) and (e) above, together with all relevant financial information for the Person or assets acquired and reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clause (e) above.               “Permitted Encumbrances” means:         (a)  Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05; 14 --------------------------------------------------------------------------------         (b)  carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05;         (c)  pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;         (d)  cash pledges and deposits to secure the performance of bids, trade contracts, leases, statutory obligations or governmental franchise obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;         (e)  Liens created pursuant to attachment, garnishee orders or similar process and Liens as security for costs, in each case in connection with prejudgment court proceedings;         (f)  Liens consisting of rights of set-off arising by operation of law;         (g)  judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII;         (h)  other liens incidental to the conduct of business or the ownership of property, including easements, rights of way, zoning and similar restrictions, and sub-leases granted to others, which do not in the aggregate materially detract from the value of the Borrower’s and its Restricted Subsidiaries’ property when taken as a whole, or materially impair the use thereof in the operation of their businesses; and         (i)  any interest or title of a lessor in the property subject to any lease other than (A) a Capital Lease Obligation or (B) a lease entered into as part of a Sale and Leaseback transaction subject to Section 6.04; provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.               “Permitted Investments”means:         (a)  Government Securities maturing within one year after the date of acquisition thereof;         (b)  time deposits, certificates of deposit and bankers acceptances, in each case, with maturities of not more than six months from the date of acquisition and overnight bank deposits, in each case of or with any commercial bank organized in the United States having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating or “B” or better;         (c)  fully collateralized repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (a) and (b) above;         (d)  investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating from S&P of A-1 or higher or from Moody’s of P-1 or higher; and         (e)  investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) through (d) above.               “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.               “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA .               “Pledge Agreement” means the Pledge Agreement among the Borrower, the Subsidiary Loan Parties and the Collateral Agent, substantially in the form of Exhibit D.               “Prepayment Event” means: 15 --------------------------------------------------------------------------------         (a)  any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of the Borrower or any Restricted Subsidiary and any issuance of Capital Stock of a Restricted Subsidiary, other than (i) dispositions described in clauses (a), (b), (d), (e) and (f) of Section 6.07 and (ii) other dispositions resulting in aggregate Net Proceeds not exceeding $10,000,000 during any fiscal year of the Borrower; or         (b)  any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Restricted Subsidiary, but only to the extent that the Net Proceeds therefrom have not been applied to repair, restore or replace such property or asset or to purchase other property or assets used or to be used in the System and Network Management Business within twelve months after such event.               “Prime Rate” means the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.               “Recognition Agreement” means an agreement reasonably satisfactory to the Collateral Agent between the Collateral Agent and the lessor and/or mortgagee of a Leasehold Data Center pursuant to which such lessor or mortgagee recognizes and consents to the first priority Lien of the Collateral Agent on the equipment, inventory, personal property, leasehold improvements and other Collateral, including fixtures, owned by the Borrower or a Restricted Subsidiary and located at, incorporated in or attached to the real estate comprising such Leasehold Data Center (subject to exceptions approved by the Collateral Agent for assets integral to the operation of the building in respect of which the Borrower or a Restricted Subsidiary does not have removal rights), and the Collateral Agent and such lessor or mortgagee agree with respect to the exercise of rights and remedies of the Collateral Agent with respe ct to such Collateral (including rights of removal upon an Event of Default or the termination of the lease relating to such Leasehold Data Center).               “Register” has the meaning set forth in Section 9.04.               “Related Fund” means with respect to any Lender that is a fund that invests in bank loans in the ordinary course of business, any other fund that invests in bank loans in the ordinary course of business and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.               “Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, trustees, partners, members, officers, employees, agents and advisors of such Person and such Person’s Affiliates.               “Required Lenders” means, at any time, Lenders having aggregate Revolving Exposures, Term Loans and unused Commitments representing more than 50.0% of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at such time.               “Reset Date” is defined in Section 1.05(a).               “Restricted Indebtedness” means Indebtedness of the Borrower or any Subsidiary, the payment, prepayment, redemption, repurchase or defeasance of which is restricted under Section 6.09(b).               “Restricted Payment” means (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of (i) any Equity Interests in the Borrower or any Restricted Subsidiary or (ii) any option, warrant or other right to acquire any such Equity Interests in the Borrower or any Restricted Subsidiary or (b) any payment under a Synthetic Purchase Agreement.               “Restricted Subsidiary” means (i) each Subsidiary of the Borrower on the date hereof and (ii) each Subsidiary of the Borrower organized or acquired after the date hereof that has not been designated an Unrestricted Subsidiary in accordance with the provisions of Section 6.22.               “Revolving Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments. 16 --------------------------------------------------------------------------------               “Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 or 2.10 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders’ Revolving Commitments is $225,000,000.               “Revolving Exposure” means, with respect to any Lender at any time, the sum of (i) the aggregate Dollar Equivalents of the principal amounts of such Lender’s Revolving Loans outstanding at such time and (ii) its LC Exposure at such time.               “Revolving Lender” means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.               “Revolving Loan” means a Loan made pursuant to clause (c) of Section 2.01.               “Revolving Maturity Date” means October 31, 2005.               “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill Companies.               “Sale and Leaseback Transaction” means any arrangement whereby the Borrower or a Subsidiary shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease property that it intends to use for substantially the same purpose or purposes as the property sold or transferred; provided that any such arrangement entered into within 180 days after the acquisition or construction of the subject property shall not be deemed to be a “Sale and Leaseback Transaction”.               “Security Agreement” means the Security Agreement among the Borrower, the Subsidiary Loan Parties and the Collateral Agent, substantially in the form of Exhibit C.               “Security Documents” means the Security Agreement, the Pledge Agreement, the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations.               “Secured Parties” has the meaning assigned to such term in the Security Agreement.               “Senior Bank Debt Basket Amount” means, on any date, an amount equal to the lesser of (x) the sum of (i) $100,000,000 and (ii) 85% of the Borrower’s consolidated net accounts receivable on such date, and (y) $750,000,000, which amount represents the maximum amount of indebtedness that the Borrower and the Restricted Subsidiaries are permitted by the Indentures, as in effect on the Effective Date, to incur as “Permitted Senior Bank Debt” (as defined in the Indentures) pursuant to the first clause of the second paragraph of the covenant entitled “Limitation on Debt” therein; provided, however, that the Senior Bank Debt Basket Amount shall (upon satisfaction of the conditions set forth in the proviso below) be increased at any time to such greater amount (the “Increased Basket Amount”) that is at such time permitted by the most restrictive provisions of the Inde ntures and any other indentures or agreements governing Indebtedness of the Borrower or any Restricted Subsidiary to be (a) incurred by the Borrower and the Restricted Subsidiaries as “Permitted Senior Bank Debt” (or the full equivalent thereof) and (b) Guaranteed and secured by the Collateral in the manner contemplated by the Loan Documents (without any requirement that any Indebtedness other than the Obligations be Guaranteed or secured as a result thereof), provided that (I) the Indentures have ceased to be in effect or have been duly modified to permit (and no other agreement governing Indebtedness of the Borrower or any Restricted Subsidiary restricts) the incurrence or maintenance of Indebtedness hereunder, guaranteed and secured in the manner contemplated by the Loan Documents (without any requirement that any other Indebtedness be Guaranteed or secured as a result thereof), in the Increased Basket Amount and (II) the Administrative Agent has received a favorable legal opinion satisfactory t o the Administrative Agent from outside counsel to the Borrower satisfactory to the Administrative Agent to the effect of clause (I) of this proviso and shall have received such other documents as it may reasonably request to evidence or demonstrate compliance with the conditions set forth above. 17 --------------------------------------------------------------------------------               “Senior Debt” means, on any date, without duplication, (a) the Loans and all other Indebtedness that would be reflected as a liability on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries prepared as of such date in accordance with GAAP that is either Senior Secured Debt or is Indebtedness that is not subordinated by its terms to the Obligations under the Loan Documents of the issuer or obligor thereof and (b) all Attributable Debt.               “Senior Secured Debt” means, on any date, without duplication, (a) the Loans and all other Indebtedness that would be reflected as a liability on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries prepared as of such date in accordance with GAAP and that is secured by any assets of the Borrower or any Restricted Subsidiary and (b) Attributable Debt; provided, however, that for purposes of the covenant set forth in Section 6.18, Senior Secured Debt shall be calculated by excluding the portion of Senior Secured Debt of any Restricted Subsidiary other than a Wholly Owned Subsidiary which is attributable to the minority ownership interests of third parties in such Restricted Subsidiary if such Senior Secured Debt is not Guaranteed by the Borrower or any other Restricted Subsidiary that is not also a Subsidiary of such non-Wholly Owned Subsidiary.               “Special Investment Basket Amount” means, at any time, the sum of (a) $500,000,000 if at such time the Global Closing Date has not occurred, or $800,000,000 if at such time the Global Closing Date has occurred, (b) Equity Proceeds and Conversion Proceeds received after June 30, 2000 and not applied to any other Designated Equity Proceeds Use, (c) 33% of the Net Proceeds of issuances of unsecured Indebtedness permitted by Section 6.01(a)(ix) received after the date hereof and (d) the amount of any cash received as a return of capital (and not included in Consolidated Net Income) in respect of any Investment made pursuant to clause (ii) of the proviso in Section 6.06(d) or clause (ii) of Section 6.06(k) upon the sale or disposition thereof. For purposes of calculating the Special Investment Basket Amount, Investments by a Restricted Subsidiary made with the proceeds of, or assets received as, In vestments originally made in such Restricted Subsidiary in reliance on this definition shall not count against the Special Investment Basket Amount.               “Statutory Reserve Rate” means, with respect to any currency, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve, liquid asset or similar percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by any Governmental Authority of the United States or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined. Such reserve, liquid asset or similar percentages shall include those imposed pursuant to Regulation D of the Board. Eurocurrency Loans shall be deem ed to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any other applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.               “subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more su bsidiaries of the parent.               “Subsidiary” means any subsidiary of the Borrower.               “Subsidiary Loan Party” means any Restricted Subsidiary that is not a Foreign Subsidiary; provided, that any Restricted Subsidiary formed or acquired after the date hereof that is not a Wholly Owned Subsidiary shall not be a “Subsidiary Loan Party” if the entire amount of the Investment by the Borrower and the Restricted Subsidiaries in such non-Wholly Owned Subsidiary has been designated by the Borrower as made pursuant to Section 6.06(d) or (k).               “Subsidiary Security Documents” means the Guarantee Agreement, the Security Agreement, the Pledge Agreement and the Indemnity, Subrogation and Contribution Agreement. 18 --------------------------------------------------------------------------------               “Synthetic Lease” means a financing document which combines the off-balance sheet characteristics of an operating lease (by satisfying the FASB-13 requirements for an operating lease) with the tax and economic characteristics of conventional debt financing which allows the synthetic lessee to take depreciation on a capital asset for federal income tax purposes as an owner.               “Synthetic Purchase Agreement” means any swap, derivative or other agreement or combination of agreements pursuant to which the Borrower or any Restricted Subsidiary is or may become obligated to make (i) any payment in connection with a purchase by any third party from a Person other than the Borrower or any Restricted Subsidiary of any Equity Interest or Restricted Indebtedness or (ii) any payment (other than on account of a permitted purchase by it of any Equity Interest or any Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no phantom stock or similar plan providing for payments only to current or former directors, officers or employees of the Borrower or any Restricted Subsidiary (or to their heirs or estates) shall be deemed to be a Synthetic Purchase Agreement.               “System and Network Management Business” means: (i) server and other hardware hosting, (ii) connectivity, data networking, telecommunications or content for computer or data networks or systems; (iii) management of computer or data networks or systems; (iv) technology services, equipment sales or leasing or software licensing for computer or data networks or systems (including Internet Protocol and any successor protocol(s) based networks); and (v) businesses reasonably related, complementary or incidental thereto.               “TARGET” means the Trans-European Automated Real-time Gross settlement Express Transfer system.               “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.               “Telecommunications Assets” means (a) any property (other than cash, cash equivalents and securities) to be owned by the Borrower or any Restricted Subsidiary and, directly or indirectly, used in a System and Network Management Business and (b) Capital Stock of a Person that becomes a Wholly Owned Subsidiary as a result of the acquisition of such Capital Stock by the Borrower or a Restricted Subsidiary from any person other than an Affiliate of the Borrower, provided that such Person is predominantly engaged in a System and Network Management Business.               “Term Loans” means Tranche A Term Loans and Tranche B Term Loans.               “Total Capital” means, on any date, the sum of Total Debt and Contributed Capital on such date.               “Total Debt” means, on any date, the sum of (a) all Indebtedness of the Borrower and its Restricted Subsidiaries that would be reflected as a liability on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries prepared as of such date in accordance with GAAP plus (b) the Imputed Principal Amount of any New Preferred Stock outstanding on such date plus (c) all Attributable Debt on such date that is not included in clause (a) of this definition.               “Tranche A Availability Period” means the period commencing with the date hereof and ending on the earlier of (a) the date the Tranche A Commitments are terminated and (b) the date that is two years after the date hereof.               “Tranche A Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche A Term Loan hereunder during the Tranche A Availability Period, expressed as an amount representing the maximum principal amount of the Tranche A Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 or 2.10 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Tranche A Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche A Commitment, as applicable. The initial aggregate amount of the Lenders’ Tranche A Commitments is $225,000,000.               “Tranche A Lender” means a Lender with a Tranche A Commitment or an outstanding Tranche A Term Loan. 19 --------------------------------------------------------------------------------               “Tranche A Maturity Date” means October 31, 2005.               “Tranche A Term Loan” means a Loan made pursuant to clause (a) of Section 2.01.               “Tranche B Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Tranche B Term Loan to be made by such Lender hereunder. The initial amount of each Lender’s Tranche B Commitment is set forth on Schedule 2.01. The aggregate amount of the Lenders’ Tranche B Commitments is $150,000,000.               “Tranche B Lender” means a Lender with a Tranche B Commitment or an outstanding Tranche B Term Loan.               “Tranche B Maturity Date” means October 31, 2007.               “Tranche B Term Loan” means a Loan made pursuant to clause (b) of Section 2.01.               “Transactions” means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.               “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.               “Unrestricted Cash” means, on any date, cash, and cash equivalents (including Permitted Investments) of the Borrower and the Restricted Subsidiaries that would be reflected on a consolidated balance sheet of the Borrower and the Restricted Subsidiaries prepared as of such date, excluding, however, any such cash or cash equivalents that are subject to a Lien (other than under the Loan Documents) securing Indebtedness or other obligations or subject to any escrow or similar arrangement restricting the use or disposition thereof by the Borrower or any Restricted Subsidiary.               “Unrestricted Subsidiary” means any Subsidiary of the Borrower that has been designated as an Unrestricted Subsidiary by the Borrower pursuant to and in compliance with Section 6.22. No Unrestricted Subsidiary may own any Capital Stock of a Restricted Subsidiary.               “Voting Stock” means, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such Person.               “Wholly Owned subsidiary” of any Person shall mean a subsidiary of such Person of which securities or other ownership interests (except for directors’ qualifying shares and other de minimis amounts of outstanding securities or ownership interests) representing 100% of the ordinary voting power and 100% of equity or 100% of the general partnership interests are, at the time any determination is being made, owned, controlled or held 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.               “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.               SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. , a “Revolving Loan”) or by Type (e.g., a “Eurocurrency Loan”) or by Class and Type (e.g., a “Eurocurrency Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g. , a “Eurocurrency Borrowing”) or by Class and Type (e.g., a “Eurocurrency Revolving Borrowing”).               SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same 20 -------------------------------------------------------------------------------- meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to hav e the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.               SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall h ave been withdrawn or such provision amended in accordance herewith.               SECTION 1.05. Exchange Rate. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to the Euro and (ii) give notice thereof to the Revolving Lenders and the Borrower. The Exchange Rate so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a “Reset Date”), shall remain effective until the next succeeding Reset Date, and shall for all purposes of this Agreement (other than Section 9.16 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rate employed in converting any amounts between dollars and Euro.               (b)  Not later than 5:00 p.m., New York City time, on each Reset Date and each date on which Revolving Loans denominated in Euro are made, the Administrative Agent shall (i) determine the aggregate amount of the Dollar Equivalents of the principal amounts of the Revolving Loans denominated in Euro then outstanding (after giving effect to any Revolving Loans denominated in Euro made or repaid on such date) and (ii) notify the Revolving Lenders and the Borrower of the results of such determination. ARTICLE II The Credits               SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make Tranche A Term Loans in dollars to the Borrower from time to time during the Tranche A Availability Period in an aggregate principal amount not exceeding its Tranche A Commitment, (b) to make a Tranche B Term Loan in dollars to the Borrower on the Effective Date in a principal amount not exceeding its Tranche B Commitment and (c) to make Revolving Loans to the Borrower in any Committed Currency from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Revolving Exposure exceeding the excess of such Lender’s Revolving Commitment over such Lender’s Applicable Percentage of the aggregate face amount of all outstanding Existing Letters of Credit or (ii) such Lender’s Euro Revolving Exposure exceeding su ch Lender’s Applicable Percentage of the Euro Sublimit. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid in respect of Term Loans may not be reborrowed.               SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. 21 --------------------------------------------------------------------------------               (b)  Subject to Section 2.13, (i) each Revolving Borrowing denominated in dollars and each Term Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith and (ii) each Revolving Borrowing denominated in Euro shall be comprised entirely of Eurocurrency Loans. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.               (c)  At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that a Eurocurrency Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Commitment applicable to such Borrowing. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e). Borrowings of more than one Type and Class may be outstanding at the same time; p rovided that there shall not at any time be more than a total of 20 Eurocurrency Borrowings outstanding.               (d)  Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date, Tranche A Maturity Date or Tranche B Maturity Date, as applicable.               SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing denominated in dollars, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing, (b) in the case of Eurocurrency Borrowing denominated in Euro, not later than 11:00 a.m. New York City time, four Business Days before the date of the proposed Borrowing and (c) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowin g. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:         (i)  whether the requested Borrowing is to be a Revolving Borrowing, Tranche A Term Borrowing or Tranche B Term Borrowing;         (ii)  the aggregate amount and currency of such Borrowing;         (iii)  the date of such Borrowing, which shall be a Business Day;         (iv)  in the case of a Borrowing denominated in dollars, whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;         (v)  in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “ Interest Period”; and         (vi)  the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no currency is specified with respect to any Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected dollars. If no election as to the Type of Borrowing denominated in dollars is specified, then the requested Borrowing shall be an ABR Borrowing if the applicable notice is given later than the time specified above for requesting a Eurocurrency Borrowing, and a Eurocurrency Borrowing in all other cases. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing. 22 --------------------------------------------------------------------------------               SECTION 2.04. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit denominated in dollars for its own account, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time during the Revolving Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Such terms and conditions of any such application or agreement shall not, in any event, contain any operating covenants or restrictions, provide for any collateral not provided under the Loan Documents or provide for the imposition of fees (other than customary charges); and any such terms and conditions prohibited by this sentence shall be replaced and superseded by the provisions of this Agreement.               (b)  Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed the excess of $125,000,000 over the aggregate face amount of all outstanding Existing Letters of Credit and (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments.               (c)  Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (provided that a Letter of Credit may contain a provision pursuant to which it is deemed to be extended on an annual basis for a period of not more than a year that in any event ends prior to the date referred to in clause (ii) below) and (ii) the date that is five Business Days prior to the Revolving Maturity Date.               (d)  Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, the applicable Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the applicable Issuing Bank, a participation in such Letter of Credit (including each Existing Letter of Credit) equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.               (e)  Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 12:00 noon, New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 12:00 noon, New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received 23 -------------------------------------------------------------------------------- prior to such time on the day of receipt; provided that, if such LC Disbursement is not less than $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with an ABR Revolving Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower in respect of the applicable LC Disbursement, in the same manner as provided in Section 2.05 with r espect to Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse any Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse any Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.               (f)  Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the forego ing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Banks, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any Issuing Bank; provided that the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrowe r to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without resp onsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.               (g)  Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The applicable Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement.               (h)  Interim Interest. If any Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid 24 -------------------------------------------------------------------------------- amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.12(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.               (i)  Replacement of the Issuing Bank. An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of any Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Bank s, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.               (j)  Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of De fault with respect to the Borrower described in clause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement, and the Borrower hereby grants the Lenders a security interest in all funds and investments in such account to secure such obligations. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in readily marketable Permitted Investments maturing in not more than 60 days, which investments shall be made at the direction of the Borrower and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which the y have not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement or the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount, including any interest or profits thereon (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.10(b), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower as and to the extent th at, after giving effect to such return, the Borrower would remain in compliance with Section 2.10(b) and no Default shall have occurred and be continuing.               (k)  Additional Issuing Banks. The Borrower may, at any time and from time to time with the consent of the Agent (which consent shall not be unreasonably withheld) and such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of the Agreement. Any Lender designated as an issuing bank pursuant to this paragraph (k) shall be deemed to be an “Issuing Bank” (in addition to being a Lender) in respect of Letters of Credit issued or to be issued by such Lender, and, with respect to such Letters of Credit, such term shall thereafter apply to the other Issuing Banks and such Lender. 25 --------------------------------------------------------------------------------               SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds in the applicable currency by 11:00 a.m., Local Time, to the account of the Applicable Agent most recently designated by it for such purpose for Loans of such Class and currency by notice to the applicable Lenders. The Applicable Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained by the Applicable Agent or to an account maintained with another financial institution designated by the Borrower (i) in New York City, in the case of Loans denominated in dollars, or (ii) in London in the case of Revolving Loans denominated in Euro; provided that Revolving Loans made to finance the reimbursement of an LC Disbursement shall b e remitted by the Administrative Agent to the applicable Issuing Bank.               (b)  Unless the Applicable Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Applicable Agent such Lender’s share of such Borrowing, the Applicable Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Applicable Agent, then the applicable Lender and the Borrower severally agree to pay to the Applicable Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Applicable Agent, at (i) in the cas e of such Lender, (x) the Federal Funds Effective Rate (in the case of a Borrowing in dollars) and (y) the rate reasonably determined by the Applicable Agent to be the cost to it of funding such amount (in the case of a Borrowing in Euro) or (ii) in the case of the Borrower, the interest rate applicable to the subject Loan. If such Lender pays such amount to the Applicable Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing and the Applicable Agent shall return to the Borrower any amount (including interest) paid by the Borrower to the Applicable Agent pursuant to this paragraph.               SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section; provided that the Borrower may not elect to convert any Borrowing denominated in Euro to an ABR Borrowing. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a s eparate Borrowing.               (b)  To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.               (c)  Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:         (i)  the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);         (ii)  the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;         (iii)  whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and         (iv)  if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”. 26 -------------------------------------------------------------------------------- If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.               (d)  Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.               (e)  If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Eurocurrency Borrowing with an Interest Period of one month’s duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing denominated in Euro may be continued for an Interest Period of more than one month’s duration, (ii) no outstanding Borrowing denominated in dollars may be converted to or continued as a Eurocurrency Borrowing and (iii) unless repaid, each Eurocurrency Borrowing denominated in dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.               SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, (i) the Tranche A Commitments, shall terminate at 5:00 p.m. on the last day of the Tranche A Availability Period, (ii) the Tranche B Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (iii) the Revolving Commitments shall terminate on the Revolving Maturity Date.               (b)  The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10, the sum of the Revolving Exposures would exceed the total Revolving Commitments.               (c)  If any prepayment of Term Borrowings is required pursuant to Section 2.10 but cannot be made because there are no Term Borrowings outstanding, or because the amount of the required prepayment exceeds the outstanding amount of Term Borrowings, then, on the date that such prepayment is required, first, the Tranche A Term Commitments, and, if insufficient, second the Revolving Commitments shall be reduced by an aggregate amount equal to the amount of the required prepayment, or the excess of such amount over the outstanding amount of Term Borrowings, as the case may be.               (d)  The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section, or any required reduction of the Revolving Commitments under paragraph (c) of this Section, at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effec tive date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.               SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date and (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.09.               (b)  Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.               (c)  The Administrative Agent shall maintain accounts in which it shall record (i) the amount and currency of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, 27 -------------------------------------------------------------------------------- (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.               (d)  The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans and LC Disbursements in accordance with the terms of this Agreement.               (e)  Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Borrower and the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).               SECTION 2.09. Amortization of Term Loans. (a) Subject to adjustment pursuant to paragraph (d) of this Section, the Borrower shall repay Tranche A Term Borrowings on each date set forth below in a principal amount equal to the percentage of the aggregate principal amount of Tranche A Term Loans outstanding on the last day of the Tranche A Availability Period set forth opposite such date: Date Amount September 30, 2003    5%   December 31, 2003    5%   March 31, 2004    5%   June 30, 2004    10%   September 30, 2004    10%   December 31, 2004    15%   March 31, 2005    15%   June 30, 2005    15%   Tranche A Maturity Date    20%                 (b)  Subject to adjustment pursuant to paragraph (d) of this Section, the Borrower shall repay Tranche B Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date: Date Amount December 31, 2003   $ 375,000   March 30, 2004   $ 375,000   June 31, 2004   $ 375,000   September 30, 2004   $ 375,000   December 31, 2004   $ 375,000   March 31, 2005   $ 375,000   June 30, 2005   $ 375,000   September 30, 2005   $ 375,000   December 31, 2005   $ 375,000   March 31, 2006   $ 375,000   June 30, 2006   $ 375,000   September 30, 2006   $ 375,000   December 31, 2006   $ 36,375,000   March 31, 2007   $ 36,375,000   June 30, 2007   $ 36,375,000   Tranche B Maturity Date   $ 36,375,000                 (c)  To the extent not previously paid, (i) all Tranche A Term Loans shall be due and payable on the Tranche A Maturity Date and (ii) all Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date. 28 --------------------------------------------------------------------------------               (d)  Any prepayment of a Term Borrowing of either Class shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings of such Class to be made pursuant to this Section ratably. If the initial aggregate amount of the Lenders’ Term Commitments of either Class exceeds the aggregate principal amount of Term Loans of such Class that are outstanding on the last day of the Tranche A Term Availability Period, in the case of Tranche A Term Loans, or made on the Effective Date, in the case of Tranche B Term Loans, then the scheduled repayments of Term Borrowings of such Class to be made pursuant to this Section shall be reduced ratably by an aggregate amount equal to such excess.               (e)  Prior to any repayment of any Term Borrowings of either Class hereunder, the Borrower shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 12:00 noon, New York City time, three Business Days before the scheduled date of such repayment. Each repayment of a Borrowing shall be applied ratably to the Loans included in the repaid Borrowing. Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid.               SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.               (b)  In the event and on each occasion that the sum of the Revolving Exposures exceeds the total Revolving Commitments, the Borrower shall prepay Revolving Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.04(j)) in an aggregate amount equal to such excess. In the event and on each occasion that the sum of the Revolving Exposures and the outstanding Term Loans exceeds the Senior Bank Debt Basket Amount, the Borrower shall prepay Borrowings in an aggregate amount sufficient to eliminate such excess. In the event and on each occasion that the sum of the aggregate Euro Revolving Exposures exceeds 105% of the Euro Sublimit, the Borrower shall repay Revolving Borrowings denominated in Euro in an aggregate amount sufficient to eliminate such excess.               (c)  In the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any Restricted Subsidiary in respect of any Prepayment Event, the Borrower shall, not later than the second Business Day after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to such Net Proceeds; provided that, in the case of any event described in clause (a) of the definition of the term Prepayment Event, if the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Borrower and the Restricted Subsidiaries intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within twelve months after receipt of such Net Proceeds, to acquire Telecommunications Assets to be used in the business of the Borrower and the Restricted Subsidiaries, and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds in respect of such event (or the portion of such Net Proceeds specified in such certificate, if applicable) except to the extent of any such Net Proceeds therefrom that have not been so applied by the end of such twelve-month period, at which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.               (d)  Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2002, the Borrower shall prepay Term Borrowings in an aggregate amount equal to 50% of Excess Cash Flow for such fiscal year. Each prepayment pursuant to this paragraph shall be made on or before the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 90 days after the end of such fiscal year).               (e)  Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (f) of this Section. In the event of any optional or mandatory prepayment of Term Borrowings made at a time when Term Borrowings of both Classes remain outstanding, the Borrower shall select Term Borrowings to be prepaid so that the aggregate amount of such prepayment is allocated between the Tranche A Term Borrowings and Tranche B Term Borrowings pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class; provided that any Tranche B Lender may elect, by notice to the Administrative Agent by telephone (confirmed by telecopy) at least one Business Day prior to the prepayment date, to decline all or any portion of any prepayment of i ts Tranche B Term Loans pursuant to this Section (other than an optional prepayment pursuant to paragraph (a) of this Section, which may not be declined), in which case the 29 -------------------------------------------------------------------------------- aggregate amount of the prepayment that would have been applied to prepay Tranche B Term Loans but was so declined shall be applied to prepay Tranche A Term Borrowings.               (f)  The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.07, then such notice of prepayment may be revo ked if such notice of termination is revoked in accordance with Section 2.07(d). Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12.               SECTION 2.11. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Commitment Fee Rate on the daily unused amount of each Revolving Commitment and Tranche A Commitment of such Lender during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the applicable Commitment terminates, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender.               (b)  The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurocurrency Revolving Loans on the daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to each Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum to be separately agreed upon between the Borrower and such Issuing Bank on the outstanding aggregate stated amount of all Letters of Credit issued by it. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).               (c)  Voluntary and mandatory payments or prepayments of Tranche B Term Loans and repayments of Tranche B Term Loans as a result of acceleration upon an Event of Default, in each case made prior to the second anniversary of the Effective Date, shall be accompanied by payment of a prepayment fee as follows:         (A)  if such prepayment or repayment is made on or before the first anniversary of the Effective Date, a fee equal to 2% of the amount of such prepayment or repayment; and         (B)  if such prepayment or repayment is made thereafter but on or before the second anniversary of the Effective Date, a fee equal to 1% of the amount of such prepayment or repayment .               (d)  The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. 30 --------------------------------------------------------------------------------               (e)  All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.               SECTION 2.12. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate.               (b)  The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.               (c)  Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.               (d)  Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.               (e)  All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.               SECTION 2.13. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency:         (a)  the Administrative Agent determines, in the exercise of its professional judgment (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the LIBO Rate for such Interest Period; or         (b)  the Administrative Agent is advised by the Required Lenders that the LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing denominated in such currency to, or continuation of any Borrowing denominated in such currency as, a Eurocurrency Borrowing shall be ineffective and any Eurocurrency Borrowing denominated in such currency that is requested to be continued (A) if such currency is the dollar, shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto and (B) if such currency is the Euro, shall be repaid on the last day of the Interest Period applicable thereto and (ii) any Borrowing Request for a Eurocurrency Borrowing denominated in such currency (A) if such currency is the dollar, shall be deemed a request for an ABR Borrowing and (B) if such currency is the Euro, shall be ineffective.               SECTION 2.14. Increased Costs. (a) If any Change in Law shall: 31 --------------------------------------------------------------------------------         (i)  impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or an Issuing Bank; or         (ii)  impose on any Lender or an Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.               (b)  If any Lender or an Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction suffered.               (c)  A certificate of a Lender or Issuing Bank setting forth in reasonable detail the basis upon which the claim for compensation is being made and the amount or amounts (and computation thereof) necessary to compensate such Lender or Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.               (d)  Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.               SECTION 2.15. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(f) and is revoked in accordance therewith), or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.18, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to consist of an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of 32 -------------------------------------------------------------------------------- such period, for dollar deposits of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth in reasonable detail any amount or amounts (and the computation thereof) that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.               SECTION 2.16. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.               (b)  In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.               (c)  The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.               (d)  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.               (e)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall, upon written notice from the Borrower advising it of the availability of such exemption or reduction and upon being supplied with all applicable documentation by the Borrower, deliver to the Borrower (with a copy to the Administrative Agent), (1) two copies of either Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, together with any other certificates or statement of exemption required under the Code or the regulations thereunder and provided by the Borrower to such Foreign Lender, to establish that such Foreign Lender is not subject to deduction or withholding, or is subject to a reduced rate of withholding, of United States federal income tax with respect to any payments to such Foreign Lender of principal, interest, fees or other amounts payable under any Loan Document or (2) if such Foreign Lender is not a “bank” or other Person described in Section 881(c)(3) of the Code, a certificate of such Foreign Lender to such effect together with two copies of Internal Revenue Service Form W-8BEN (or any successor form), properly completed and duly executed by such Foreign Lender, together with any other certificate or statement of exemption required under the Code or the regulations thereunder and provided by the Borrower to such Foreign Lender, to establish that such Foreign Lender is not subject to deduction or withholding, or is subject to a reduced rate of such withholding, of United States federal income tax with respect to any payments to such Foreign Lender of interest payable under any Loan Document. Notwithstanding any other provision of this Section 2.16(e), no Foreign Lender shall be required to deliver any form pursuant to this Section 2.16(e) if such Foreign Lender does not have the legal capacity to deliver such form.               (f)  If the Administrative Agent or a Lender determines in its sole discretion (such determination to be made reasonably and in good faith) that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts 33 -------------------------------------------------------------------------------- pursuant to this Section 2.16, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.16 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. Nothing contained herein shall require the Administrative Agent or any Lender to make its tax returns (or any other information relating to its taxes which the Administrative Agent or such Lender deems confidential) available to the Borrower or any other Person.               SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 12:00 noon, Local Time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Applicable Agent at its offices at (i) in the case of any amount de nominated in dollars, 270 Park Avenue, New York, New York, and (ii) in the case of any amount denominated in Euros, Chase Manhattan International Limited, 125 London Wall, London, EC2Y 5AJ, or, in any such case, at such other address as the Applicable Agent shall from time to time specify in a notice delivered to the Borrower; provided that payments to be made directly to the Issuing Bank as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Applicable Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing int erest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made (i) in the case of any payment in respect of the principal or interest on any Loan, in the currency of such Loan, and (ii) in the case of any other payment, in dollars.               (b)  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.               (c)  If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participati ons in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of 34 -------------------------------------------------------------------------------- set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.               (d)  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or an Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrativ e Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.               (e)  If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(d) or (e), 2.05(b), 2.17(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.               SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such de signation or assignment.               (b)  If any Lender requests compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank) , which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will, in the reasonable opinion of the Borrower, result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.               SECTION 2.19. Incremental Facility. At any time prior to the Tranche B Maturity Date, the Borrower may, by notice to the Administrative Agent (which shall promptly deliver a copy to each of the Lenders), request the addition of a new tranche of Term Loans (all such Loans, collectively, the “Incremental Loans”) provided, however, that the addition of a tranche of Incremental Loans under this Agreement and the other Loan Documents shall be subject to the conditions that, both at the time of any such request and upon effectiveness of the Incremental Facility Amendment referred to below, (i) no Default shall exist, (ii) the Borrower shall be in pro forma compliance with the Financial Covenants, to the extent then applicable, and (iii) the Senior Bank Debt Basket Amount shall equal or exceed the sum of the Revolving Commitments, the unused Tranche A Commitments, the outstanding Term Loans and the amount of such tranche of Incremental Loans. The Incremental Loans (i) shall be in an aggregate principal amount of at least $100,000,000 and not in excess of $600,000,000, (ii) shall rank pari passu 35 -------------------------------------------------------------------------------- in right of payment and of security (including under the Security Documents) with the Revolving Loans and the Term Loans, (iii) shall mature no sooner than six months after the Tranche B Maturity Date and shall have a longer average weighted life than the combined weighted average life of the Revolving Loans (assuming the Revolving Commitments were fully drawn) and the Term Loans, and (iv) shall otherwise be treated no more favorably than the Term Loans (in each case, including with respect to mandatory and voluntary prepayments); provided that the terms and conditions applicable to the Incremental Loans may provide for additional or different financial or other covenants applicable only during periods after the Tranche B Maturity Date. Such notice shall set forth the requested amount of Incremental Loans (which amount shall not exceed $600,000,000). The Borrower shall arrange for one or more vendors of telecommunications equipment or banks or other financial institutions (any such ban k, other financial institution or vendor that is not already a Lender, being called an “Additional Lender”) to extend commitments to provide Incremental Loans in an aggregate amount equal to the requested amount of Incremental Loans, provided that each Additional Lender that is not a vendor of telecommunication equipment or an existing Lender shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld). The proceeds of the Incremental Loans will be used to finance the purchase, acquisition or construction of Telecommunications Assets, including real estate, to be owned and utilized by the Borrower and the Restricted Subsidiaries. Commitments in respect of Incremental Loans shall become Commitments under this Agreement pursuant to an amendment (an “Incremental Facility Amendment”)to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender agreeing to provide such Commitment, if any, each Additional Lender, if any, and the Agent. The Incremental Facility Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Agent, to effect the provisions of this Section. The effectiveness of any Incremental Facility Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.02. No Lender shall be obligated to provide any Incremental Loans unless it so agrees. ARTICLE III Representations and Warranties               The Borrower represents and warrants to the Lenders that:               SECTION 3.01. Organization; Powers. Each of the Borrower and the Restricted Subsidiaries (other than Restricted Subsidiaries that are not Loan Parties) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted. Each of the Restricted Subsidiaries that is not a Loan Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to be materially adverse to the rights of the Lenders in any respect. Each of the Borrower and the Restricted Subsidiaries is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.               SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party’s powers and have been duly authorized by all necessary corporate or other action and, if required, stockholder or member action. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of the Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.               SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, or any material agreement or other material instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any 36 -------------------------------------------------------------------------------- payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Restricted Subsidiaries, except Liens created under the Loan Documents.               SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of operations, stockholders’ equity and cash flows (i) as of and for the fiscal year ended December 31, 1999, reported on by KPMG LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2000, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.               (b)  Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum and except for the Disclosed Matters, after giving effect to the Transactions, none of the Borrower or the Restricted Subsidiaries has, as of the Effective Date, any material contingent liabilities, unusual long-term commitments or unrealized losses.               (c)  Since December 31, 1999, there has been no material adverse change in the business, assets, operations or financial condition of the Borrower and its Restricted Subsidiaries, taken as a whole.               SECTION 3.05. Properties. (a) Each of the Borrower and its Restricted Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to the business (including its Mortgaged Properties) of the Borrower and its Restricted Subsidiaries taken as a whole, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.               (b)  Each of the Borrower and its Restricted Subsidiaries owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and the Restricted Subsidiaries does not to the knowledge of the Borrower infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.               (c)  As of the Effective Date, neither the Borrower nor any Restricted Subsidiary owns any real property.               SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of the Restricted Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan Documents or the Transactions.               (b)  Except for the Disclosed Matters, none of the Borrower, the Restricted Subsidiaries or (to the extent that the Borrower or any Restricted Subsidiary could reasonably be expected to incur any liability or cost as a result thereof) the Unrestricted Subsidiaries, (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.               (c)  Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.               SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and the Restricted Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all material agreements, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. 37 --------------------------------------------------------------------------------               SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Restricted Subsidiaries is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.               SECTION 3.09. Taxes. Each of the Borrower, the Restricted Subsidiaries and (to the extent that the Borrower or any Restricted Subsidiary may be liable as a result thereof) the Unrestricted Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.               SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.               SECTION 3.11. Disclosure. As of the Effective Date the Borrower has disclosed to the Lenders all material agreements, material instruments and material corporate or other restrictions to which the Borrower or any of its Restricted Subsidiaries is subject and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information that has been prepared by any Loan Party or on its behalf and furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as of the date thereof as modified or supplemented by other information so furnished when taken as a whole) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projections, estimates of future values or amounts or other expressions of views as to future circumstances, including projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.               SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Borrower in, each Subsidiary of the Borrower and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date.               SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of the Borrower and the Subsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance have been paid to the extent due. The Borrower believes that the insurance maintained by or on behalf of the Borrower and its Restricted Subsidiaries is in such amounts and covers such risks and liabilities as is customary for entities in the same or similar businesses as the Borrower and the Restricted Subsidiaries.               SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or any Restricted Subsidiary pending or, to the knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. All payments due from the Borrower or any Restricted Subsidiary, or for which any claim may be made against the Borrower or any Restricted Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Restricted Subsidiary in accordance with GAAP. The consu mmation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Restricted Subsidiary is bound.               SECTION 3.15. Intellectual Property. Each of the Borrower and the Subsidiaries owns, or is licensed to use, all intellectual property that is necessary for the conduct of its business as currently conducted except for any failure to so own or license intellectual property which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, no claim has been asserted and is pending against the Borrower or any Subsidiary challenging the use of any intellectual property by it or the validity or effectiveness of any intellectual property used by it, except for any claims, which, individually or 38 -------------------------------------------------------------------------------- in the aggregate, could not reasonably be expected to have a Material Adverse Effect. The use of intellectual property by the Borrower or any Subsidiary does not to the knowledge of the Borrower infringe on the rights of any person in any material respect and in any manner which could reasonably be expected to have a Material Adverse Effect.               SECTION 3.16. Security Interests. (a) When executed and delivered, the Pledge Agreement will be effective to create in favor of the Collateral Agent for the ratable benefit of the Secured Parties a valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when the portion of the Collateral constituting certificated securities (as defined in the Uniform Commercial Code) is delivered to the Collateral Agent thereunder together with instruments of transfer duly endorsed in blank, the Pledge Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the pledgors thereunder in such Collateral, prior and superior in right to any other Person.               (b)  The Security Agreement is effective to create in favor of the Collateral Agent for the ratable benefit of the Secured Parties a valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified in the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral, to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, other than the Intellectual Property (as defined in the Security Agreements), in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyr ight Office, as applicable, in each case prior and superior in right to any other Person to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, other than with respect to the rights of Persons pursuant to Permitted Encumbrances.               (c)  When the Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the security interest in favor of the Collateral Agent for the benefit of the Secured Parties created thereunder shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Permitted Encumbrances (it being understood that subsequent recordings in the United States Patent and Tradem ark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the date hereof).               (d)  The Mortgages, if any, are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent for the ratable benefit of the Secured Parties a legal, valid and enforceable Lien on all of the Loan Parties’ right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.15, the Mortgages shall constitute a perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to Permitted Encumbrances.               SECTION 3.17. FCC Matters. The Borrower and the Restricted Subsidiaries are not subject to regulation under the Communications Act of 1934 and do not require any material license to be granted by the Federal Communications Commission thereunder in order to conduct the business of the Borrower and the Restricted Subsidiaries. ARTICLE IV Conditions               SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): 39 --------------------------------------------------------------------------------         (a)  The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.         (b)  The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Fenwick & West LLP, counsel for the Borrower, substantially in the form of Exhibit B-1, (ii) Adam W. Wegner, Senior Vice President, Legal and Corporate Affairs, General Counsel & Secretary of the Borrower, substantially in the form of Exhibit B-2, (iii) Orrick, Herrington & Sutcliffe LLP, special New York counsel for the Borrower, substantially in the form of Exhibit B-3, and (iv) local counsel in each jurisdiction where material fixtures constituting Collateral are located, substantially in the form of Exhibit B-4, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. The Borrower he reby requests such counsel to deliver such opinions.         (c)  The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.         (d)  The Administrative Agent shall have received a certificate, dated the Effective Date and signed by an Executive Officer or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.         (e)  The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document.         (f)  The Collateral and Guarantee Requirement shall have been satisfied and the Administrative Agent shall have received a completed Perfection Certificate dated the Effective Date and signed by an Executive Officer or Financial Officer of the Borrower, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.03 or have been released.         (g)  The Administrative Agent shall have received evidence that the insurance required by Section 5.07 and the Security Documents is in effect.         (h)  The Borrower shall, on a pro forma basis, be in compliance with the Financial Covenants.         (i)  All consents and approvals required to be obtained from any Governmental Authority or other Person in connection with the Transactions shall have been obtained, and all applicable waiting periods and appeal periods shall have expired, in each case without the imposition of any burdensome conditions.         (j)  The Lenders shall have received a pro forma consolidated balance sheet of the Borrower and the Restricted Subsidiaries as of the Effective Date, reflecting all pro forma adjustments as if the Transactions had been consummated on such date, and such pro forma consolidated balance sheet shall be consistent in all material respects with the business plan and other information previously provided to the Lenders. After giving effect to the Transactions on the Effective Date, neither the Borrower nor any of its Subsidiaries shall have outstanding any shares of preferred stock or any Indebtedness, other than (i) Indebtedness incurred under the Loan Documents and (ii) the Indebtedness listed on Schedules 6.01(a) or 6.02 and any preferred stock of the Borrower. 40 --------------------------------------------------------------------------------         (k)  The Agent shall have received evidence reasonably satisfactory to it that all existing bank credit facilities and other secured Indebtedness of the Borrower and the Restricted Subsidiaries has been (or will on the Effective Date be) repaid, all commitments in connection therewith terminated and all Liens securing such credit facilities or Indebtedness released.         (l)  The Administrative Agent shall have received financial projections for the Borrower and the Restricted Subsidiaries covering the period of seven and one-half years after the Effective Date and broken down by fiscal quarter for the initial two years after the Effective Date, which projections shall not be inconsistent in any material respect with the information previously provided to the Lenders and shall otherwise be reasonably satisfactory to the Administrative Agent. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on November 15, 2000 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).               SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (except for a continuation or conversion of a Borrowing that does not increase the principal amount thereof), and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:         (a)  The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable except to the extent that any representation or warranty expressly relates to an earlier date (in which case such representation shall be correct as of such earlier date).         (b)  At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. Each Borrowing (other than the continuation or conversion of a Borrowing that does not increase the principal amount thereof) and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V Affirmative Covenants               Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:               SECTION 5.01. Financial Statements and Other Information.. The Borrower will furnish to the Administrative Agent and sufficient copies for each Lender:         (a)  within 100 days after the end of each fiscal year of the Borrower, an audited consolidated balance sheet of the Borrower and the Restricted Subsidiaries and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; 41 --------------------------------------------------------------------------------         (b)  within 55 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and the Restricted Subsidiaries and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;         (c)  concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with the Financial Covenants, to the extent then applicable, and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the Borrower’s audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;         (d)  concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default resulting from a failure to observe or perform any of the Financial Covenants (which certificate may be limited to the extent required by accounting rules or guidelines);         (e)  concurrently with any delivery of financial statements under clause (a) above in respect of any fiscal year, (i) a consolidated budget for the next following fiscal year (including a projected consolidated income statement, a statement of debt balances and a statement of Capital Expenditures as of the end of and for the four quarters of such fiscal year and setting for the assumptions used for purposes of preparing such budget);         (f)  within 55 days after the end of each fiscal quarter of the Borrower, the number of Data Centers and the gross square footage of all Data Centers;         (g)  promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Restricted Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be (notice of the public availability of any materials required to be delivered pursuant to this paragraph (g) on the Security and Exchange Commission’s internet website shall be deemed to have satisfied the delivery requirement of this paragraph (g) with respect to such materials); and         (h)  within five Business Days following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Restricted Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.               SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:         (a)  the occurrence of any Default;         (b)  the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Restricted Subsidiary thereof as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; and         (c)  the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and 42 --------------------------------------------------------------------------------         (d)  any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other Executive Officer of the Borrower setting forth in reasonable detail the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.               SECTION 5.03. Information Regarding Collateral. (a) The Borrower will furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s corporate name, (ii) in the location of any Loan Party’s chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any new Data Center or such new office or facility), (iii) in any Loan Party’s identity, corporate structure or jurisdiction of incorporation or formation or (iv) in any Loan Party’s Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for t he Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.               (b)  Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer or a legal officer of the Borrower (i) setting forth the information required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governm ental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the applicable Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).               SECTION 5.04. Existence; Conduct of Business. The Borrower will, and will cause each of the Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and its rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.05.               SECTION 5.05. Payment of Obligations. The Borrower will, and will cause each of its Restricted Subsidiaries to, pay its Indebtedness and other obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.               SECTION 5.06. Maintenance of Properties. The Borrower will, and will cause each of the Restricted Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.               SECTION 5.07. Insurance. The Borrower will, and will cause each of its Restricted Subsidiaries to, maintain (or have maintained on its behalf), with financially sound and reputable insurance companies (a) insurance in such amounts (with such retention limits) and against such risks as are, taken as a whole, customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (b) all insurance required to be maintained pursuant to the Security Documents. The Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained.               SECTION 5.08. Casualty and Condemnation. The Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to the Collateral in any 43 -------------------------------------------------------------------------------- material respect or the commencement of any action or proceeding for the taking of any Collateral or part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions hereof and of the Security Documents.               SECTION 5.09. Books and Records; Inspection and Audit Rights. The Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Restricted Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties (whether owned or leased), to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.               SECTION 5.10. Compliance with Laws. The Borrower will, and will cause each of its Restricted Subsidiaries to, comply in all material respects with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.               SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of the Revolving Loans and the issuance of Letter of Credit will be used by the Borrower only (a) to fund the working capital needs of the Borrower and the Restricted Subsidiaries, including Data Center and network buildout requirements and (b) for general corporate purposes of the Borrower and the Restricted Subsidiaries. The proceeds of the Term Loans will be used by the Borrower only to purchase, construct or install Telecommunications Assets used in the business of the Borrower and the Restricted Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X.               SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired (and such Subsidiary has assets in excess of $200,000 or acquires assets in excess of $200,000) after the Effective Date, the Borrower will, within fifteen Business Days after such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary (if it is a Subsidiary Loan Party) and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.               SECTION 5.13. Further Assurances. (a) The Borrower will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties; provided that the Collateral and Guarantee Requirement need not be satisfied with respect to (i) real properties owned by a Loan Party with an individual fair market value (including fixtures and improvements) that is less than $200,000 and (ii) real properties subject to Liens permitted under Section 6.03(v). The Borrowe r also agrees to provide to the Agent, from time to time upon request, evidence reasonably satisfactory to the Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.               (b)  If any material assets (including any real property or improvements thereto or any interest therein) are acquired by the Borrower or any Subsidiary Loan Party after the Effective Date (other than assets constituting Collateral under the Security Documents that become subject to the Lien of the Security Documents upon acquisition thereof), the Borrower will notify the Agent and the Lenders thereof, and the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties; provided that (A) the Collateral and Guarantee Requirement need not be satisfied with respect to (i) real properties owned by a Loan Party w ith an individual fair market value (including fixtures and improvements) that is less than $200,000, and (ii) real properties subject to Liens permitted under Section 6.03(v) and (B) the last sentence of the definition of Collateral and Guarantee Requirement shall apply with respect to any such asset which is a Leasehold Data Center. 44 -------------------------------------------------------------------------------- ARTICLE VI Negative Covenants               Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:               SECTION 6.01. Indebtedness of the Borrower; Certain Equity Securities. (a) The Borrower will not create, incur, assume or permit to exist any Indebtedness, except:         (i)  Indebtedness created under the Loan Documents (including under Section 2.19);         (ii)  Indebtedness existing on the date hereof and set forth in Schedule 6.01(a);         (iii)  Indebtedness of the Borrower to any Restricted Subsidiary;         (iv)  Guarantees by the Borrower of Indebtedness of any Restricted Subsidiary; provided that Guarantees by the Borrower of Indebtedness of any Restricted Subsidiary that is not a Loan Party shall be subject to Section 6.06;         (v)  Indebtedness of the Borrower incurred to finance the acquisition, construction, installation, development or improvement of any fixed or capital assets, including Capital Lease Obligations, Attributable Debt and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided that (A) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction, installation, development or improvement, (B) the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness, with the Financial Covenants, to the extent then applicable and (C) the amount of such Indebtedness shall not exceed the cost of such acquisition, construction, installation, development or improvement;         (vi)  Indebtedness of the Borrower pursuant to Hedging Agreements entered into in the ordinary course of business, provided such transactions are entered into to manage interest rate or foreign currency exposures and not for the purpose of speculation;         (vii)  Indebtedness incurred to refinance any Indebtedness permitted under clauses (ii) and (v) of this Section 6.01; provided that (a) such refinancing Indebtedness (i) shall not have a greater outstanding principal amount (except to the extent necessary to pay fees, expenses, underwriting discounts and prepayment premiums in connection therewith), an earlier maturity date or a decreased weighted average life than the Indebtedness refinanced and (ii) shall be subordinated to the Indebtedness created under the Loan Documents to at least the extent, if any, of, and shall otherwise be issued on terms no less favorable in any material respect to the Lenders than, the Indebtedness refinanced, (b) the proceeds of such Indebtedness shall be used solely to repay the Indebtedness refinanced thereby and fees, expenses, underwriting discounts and prepayment premiums in connection therewith and (c) such refinancing Indebtedness is not Guaranteed by any Restricted Subsidiary (except in the case of refinancing of Indebtedness permitted under clause (ii) of this Section 6.01(a), to the extent that such Indebtedness was originally so Guaranteed and permitted to be so Guaranteed pursuant to Section 6.02);         (viii)  surety, performance and other similar bonds incurred in the ordinary course of business not securing Indebtedness for borrowed money or Capital Lease Obligations;         (ix)  unsecured Indebtedness that does not mature or require any repayment earlier than the date that is 91 days after the later of the Tranche B Maturity Date and the latest date on which the Incremental Loans, if any, mature (or, if earlier, the date that is 91 days after the date that all of the Loans and other Obligations have been indefeasibly paid in full and the Commitments have expired) so long as the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness, with the Financial Covenants, to the extent then applicable;         (x)  Indebtedness as an account party in respect of (A) (I) standby letters of credit incurred in the ordinary course of business to secure obligations of the Borrower and Restricted Subsidiaries in respect 45 --------------------------------------------------------------------------------              of leases of Data Centers and other premises and (II) foreign currency standby letters of credit or analogous foreign currency bank instruments, provided the aggregate amount of Indebtedness outstanding in reliance on this clause (A) does not exceed $84,000,000 at any time, (B) the Existing Letters of Credit (but no renewal or extension thereof) or (C) the foreign currency standby letters of credit or analogous foreign currency bank instruments set forth on Schedule 6.01(a)(x), the obligations in respect of which the Borrower assumes on the Global Closing Date; and         (xi)  other unsecured Indebtedness incurred in the ordinary course of business so long as the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness, with the Financial Covenants, to the extent then applicable. For purposes of determining any particular amount of Indebtedness under this Section 6.01, in the event an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, the Borrower, in its sole discretion, may classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses.               (b)  The Borrower will not, and it will not permit any Restricted Subsidiary to, (i) issue any preferred stock or (ii) be or become liable in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any shares of Capital Stock of the Borrower or any Restricted Subsidiary or any option, warrant or other right to acquire any such shares of Capital Stock; provided, that the Borrower may issue Non-Cash Pay Preferred Stock and New Preferred Stock so long as the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the issuance of such preferred stock, with the Financial Covenants, to the extent then applicable.               SECTION 6.02. Indebtedness of Restricted Subsidiaries. The Borrower will not permit any Restricted Subsidiary to create, incur, assume or permit to exist any Indebtedness, except:         (i)  Indebtedness created under the Loan Documents;         (ii)  Indebtedness existing on the date hereof and set forth in Schedule 6.02.         (iii)  Indebtedness of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that Indebtedness of any Restricted Subsidiary that is not a Loan Party to the Borrower or any Subsidiary Loan Party shall be subject to Section 6.06;         (iv)  Guarantees by any Restricted Subsidiary of Indebtedness of any other Restricted Subsidiary; provided that Guarantees by any Subsidiary Loan Party of Indebtedness of any Subsidiary that is not a Loan Party shall be subject to Section 6.06;         (v)  Indebtedness of any Person (including without limitation Indebtedness in respect of letters of credit) that becomes a Restricted Subsidiary after the date hereof; provided that (A) such Indebtedness exists at the time such Person becomes a Restricted Subsidiary and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary and (B) the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness, with the Financial Covenants, to the extent then applicable; provided further that any such Indebtedness may be permitted by this clause (v) only until such time as such Person merges or consolidates with the Borrower or another Person that is a Restricted Subsidiary on the date hereof;         (vi)  surety, performance and other similar bonds incurred in the ordinary course of business not securing Indebtedness for borrowed money or Capital Lease Obligations;         (vii)  other unsecured Indebtedness in a principal amount at any time outstanding not to exceed the lesser of (A) $50,000,000 and (B) the maximum amount then permitted to be incurred by the Indentures; provided that, in any event, the aggregate principal amount of unsecured Indebtedness of Foreign Subsidiaries outstanding in reliance on this Section 6.02(vii) shall not at any time exceed $20,000,000;         (viii)  Indebtedness of any Restricted Subsidiary incurred to finance the acquisition, construction, installation, development or improvement of any fixed or capital assets, including Capital Lease Obligations, Attributable Debt and any Indebtedness assumed in connection with the acquisition of 46 --------------------------------------------------------------------------------              any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided that (A) such Indebtedness or Attributable Debt is incurred prior to or within 180 days after such acquisition or the completion of such construction, installation, development or improvement, (B) the Borrower and the Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to the incurrence of such Indebtedness, with the Financial Covenants, to the extent then applicable and (C) the amount of such Indebtedness shall not exceed the cost of such acquisition, construction, installation, development or improvement;         (ix)  Indebtedness incurred to refinance any Indebtedness permitted under clauses (ii) and (viii) of this Section 6.02; provided that (a) such refinancing Indebtedness (i) shall not have a greater outstanding principal amount (except to the extent necessary to pay fees, expenses, underwriting discounts and prepayment premiums in connection therewith), an earlier maturity date or a decreased weighted average life than the Indebtedness refinanced and (ii) shall be subordinated to the Indebtedness created under the Loan Documents to at least the extent, if any, of, and shall otherwise be issued on terms no less favorable in any material respect to the Lenders than, the Indebtedness refinanced, (b) the proceeds of such Indebtedness shall be used solely to repay the Indebtedness refinanced thereby and fees, expenses, underwriting discounts and prepayment premiums in connection therewith and (c) such refinancing Indebtedness is not G uaranteed by the Borrower (except, in the case of refinancing of Indebtedness permitted by clause (ii) of this Section 6.02, to the extent that such Indebtedness was originally so Guaranteed and permitted to be so Guaranteed pursuant to Section 6.01); and         (x)  Indebtedness of Foreign Subsidiaries as account parties in respect of foreign currency standby letters of credit incurred to secure obligations of Foreign Subsidiaries, provided that the aggregate amount thereof does not exceed $60,000,000 (including the dollar equivalent of foreign currency obligations) at any time outstanding. For purposes of determining any particular amount of Indebtedness under this Section 6.02, in the event an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, the Borrower, in its sole discretion, may classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses.               SECTION 6.03. Liens. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:         (i)  Liens created under the Loan Documents;         (ii)  Permitted Encumbrances;         (iii)  any Lien on any property or asset of the Borrower or any Restricted Subsidiary existing on the date hereof and set forth in Schedule 6.03; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Restricted Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not (except as permitted by Section 6.01(a)(vii) or Section 6.02(ix)) increase the outstanding principal amount thereof;         (iv)  any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Restricted Subsidiary or existing on any property or asset of any Person that becomes a Restricted Subsidiary after the date hereof prior to the time such Person becomes a Restricted Subsidiary; provided that (A) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Restricted Subsidiary, as the case may be, (B) such Lien shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary and (C) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Restricted Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof (except as permitted by Section 6.01(a)(vii) or Section 6.02(ix));         (v)  Liens (including pursuant to any Capital Lease Obligation) on fixed or capital assets acquired, constructed, developed, installed or improved by the Borrower; provide d that (A) such security 47 --------------------------------------------------------------------------------              interests secure Indebtedness permitted by clause (v) of Section 6.01(a) or clause (viii) of Section 6.02, (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction, development, installation or improvement, (C) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing, developing, installing or improving such fixed or capital assets and (D) such security interests shall not apply to any other property or assets of the Borrower or to assets of any Restricted Subsidiary;         (vi)  Liens securing Indebtedness of the Borrower or any Restricted Subsidiary to any Subsidiary Loan Party;         (vii)  Liens securing Indebtedness permitted by Section 6.01(a)(vii), provided that such Liens extend only to the property or assets of the Borrower that secured the Indebtedness being refinanced pursuant to Section 6.01(a)(vii);         (viii)  Liens securing Indebtedness permitted by Section 6.02(ix), provided that such Liens extend only to the property or assets of the Restricted Subsidiary that secured the Indebtedness being refinanced pursuant to Section 6.02(ix);         (ix)  Liens on cash or cash bank accounts arising as part of the Borrower’s and the Restricted Subsidiaries’ cash management program, provided that such Liens shall apply only to the cash in bank accounts and the bank accounts that are part of such cash management program;         (x)  Liens on cash and Permitted Investments securing Indebtedness permitted by Section 6.01(a)(viii) and (x) and Section 6.02(vi) and (x);         (xi)  Liens on cash and Permitted Investments (A) to secure Indebtedness in respect of letters of credit permitted by Section 6.01(a)(x) or 6.02(x) or (B) arising pursuant to cash deposits or pledges paid to or made for the benefit of, or cash deposits or pledges made to support obligations in respect of surety bonds, performance bonds or other obligations of a like nature for the benefit of, lessors (including lessors under Synthetic Leases) of Leasehold Data Centers and other premises that are leased to the Borrower or a Restricted Subsidiary under terms which do not create a Capital Lease Obligation; and         (xii)  Liens on capital assets subject to a Synthetic Lease created or granted by the synthetic lessee under such Synthetic Lease.               SECTION 6.04. Sale and Lease-Back Transactions. The Borrower will not, nor will it permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction, except to the extent all Capital Lease Obligations, Attributable Debt and Liens associated with such Sale and Leaseback Transaction are permitted by Sections 6.01, 6.02 and 6.03 (treating the property subject thereto as being subject to a Lien securing the related Attributable Debt, in the case of a sale and lease-back not accounted for as a Capital Lease Obligation).               SECTION 6.05. Fundamental Changes. (a) The Borrower will not, nor will it permit any Restricted Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Person may merge into any Restricted Subsidiary in a transaction in which the surviving entity is a Wholly Owned Restricted Subsidiary and (if any party to such merger is a Subsidiary Loan Party) is a Subsidiary Loan Party and (iii) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the rights of the Lenders under the Loan Documents or applicable law; provided that any such merger involving a Person that is not a Wholly Owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.06.               (b)  The Borrower will not, and will not permit any of its Restricted Subsidiaries to, engage to any material extent in any business other than System and Network Management Businesses.               (c)  The Borrower will not permit any Wholly Owned Restricted Subsidiary to merge or consolidate with any other Person other than the Borrower, issue or sell shares of its Capital Stock or take any other action if as a result thereof such Restricted Subsidiary would cease to be a Wholly Owned Restricted Subsidiary of 48 -------------------------------------------------------------------------------- the Borrower, unless such merger or consolidation is designated as an Investment made in such non-Wholly Owned Restricted Subsidiary pursuant to Section 6.06(l).               SECTION 6.06. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, make or permit to exist any Investment in any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:         (a)  Permitted Investments;         (b)  Investments existing on the date hereof or which on the date hereof are obligated to be made and set forth on Schedule 6.06;         (c)  Investments by the Borrower and its Restricted Subsidiaries in the Capital Stock of Restricted Subsidiaries that are Loan Parties; provided that such shares of Capital Stock shall be pledged pursuant to the Pledge Agreement;         (d)  loans or advances made by the Borrower to any Restricted Subsidiary (other than any Foreign Subsidiary) and made by any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary (other than any Foreign Subsidiary); provided that any such loans and advances made by a Loan Party shall, (i) if evidenced by a promissory note, be pledged pursuant to the Pledge Agreement and (ii) the aggregate amount of Investments made by Loan Parties to Subsidiaries that are not Loan Parties (including Investments pursuant to clause (x) of the proviso to clause (e) below and pursuant to clause (k) below) shall not exceed the Special Investment Basket Amount;         (e)  Permitted Business Acquisitions; provided that (A) such acquisitions are effected as stock acquisitions in which the consideration used to make such acquisitions consists of common stock of the Borrower or Non-Cash Pay Preferred Stock of the Borrower and (B) to the extent not effected in accordance with clause (A), the consideration for such Permitted Business Acquisitions is in an aggregate cumulative amount not at any time in excess of the sum of (x) the portion of the Special Investment Basket Amount that is unused pursuant to Section 6.06(d) or 6.06(k) plus(y)(i) prior to the Global Closing Date, $200,000,000 or (ii) at any time thereafter, $300,000,000;         (f)  Guarantees constituting Indebtedness permitted by Sections 6.01 or 6.02 (other than by Section 6.01(a)(iv) or 6.02(iv));         (g)  Investments received in satisfaction of judgments or in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;         (h)  loans, advances or extensions of credit to employees and directors made in the ordinary course of business;         (i)  Investments in Hedging Agreements;         (j)  Investments received as a result of asset sales permitted by Section 6.07;         (k)  other Investments in Unrestricted Subsidiaries, Restricted Subsidiaries that are not Loan Parties or other Persons the consideration for which consists of (i) shares of common stock of the Borrower or Non-Cash Pay Preferred Stock of the Borrower or (ii) cash or other consideration in an aggregate cumulative amount not to exceed (including Investments pursuant to clause (d) above and pursuant to clause (x) of the proviso to clause (e) above) the Special Investment Basket Amount;         (l)  the Global Acquisition; provided that such acquisition is made in accordance with the terms and provisions of the Global Merger Agreement without modification or amendment adverse to the Lenders in a material respect;         (m)  Investments of any Person that becomes a Restricted Subsidiary after the date hereof; provided that such Investment exists at the time such Person becomes a Restricted Subsidiary and is not made in contemplation of or in connection with such Person becoming a Restricted Subsidiary; 49 --------------------------------------------------------------------------------         (n)  Investments in the Asia-Pacific Joint Venture not at any time in excess of $600,000,000; and         (o)  Investments made with the proceeds of payments made to the Borrower by GlobalCrossing North America, Inc. in order to fund Capital Expenditures of Restricted Subsidiaries permitted by clause (iii) of the final sentence of Section 6.20(b).               SECTION 6.07. Asset Sales. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset, including any Capital Stock owned by it, nor will the Borrower permit any of its Restricted Subsidiaries to issue any additional shares of its Capital Stock or other ownership interests in such Restricted Subsidiary, except:         (a)  sales of inventory, obsolete, used or surplus equipment and Permitted Investments in the ordinary course of business and sales of fixtures located at any Leasehold Data Center if required by the lease agreement for such Leasehold Data Center;         (b)  sales, transfers and dispositions to the Borrower or a Restricted Subsidiary or to another Person as an Investment permitted by Section 6.06; provided that any such sales, transfers or dispositions involving a Restricted Subsidiary that is not a Loan Party shall be made in compliance with Section 6.10;         (c)  sales, transfers and other dispositions of assets (including Capital Stock of Unrestricted Subsidiaries, but excluding Capital Stock of Restricted Subsidiaries) that are not permitted by any other clause of this Section; provided that (i) the Net Proceeds therefrom are utilized by the Borrower in accordance with the provisions of Sections 2.10 to acquire Telecommunications Assets or repay Term Loans and (ii) the cumulative aggregate fair market value of the consideration payable for all such sales transfers or dispositions under this clause (c) shall not exceed an amount equal to (x) 15% of the Borrower’s consolidated total assets prior to the Global Closing Date and (y) 7.5% of the Borrower’s consolidated total assets thereafter;         (d)  Sale and Leaseback Transactions permitted by Section 6.04;         (e)  the sale or assignment of overdue accounts receivable in connection with the collection thereof in the ordinary course of business;         (f)  sales, transfers and dispositions by a Restricted Subsidiary that is not a Loan Party to another Restricted Subsidiary that is not a Loan Party; and         (g)  issuances of Capital Stock of Restricted Subsidiaries that are not Loan Parties, provided that (i) such issuances are permitted by the Indentures and (ii) the Net Proceeds therefrom are utilized in accordance with the provisions of Section 2.10 to acquire Telecommunications Assets or repay Term Loans; provided that all sales, transfers, leases and other dispositions permitted hereby (other than sales or transfers among Loan Parties) shall be made for fair market value and (except as specified in clause (d) and (f) above) for consideration consisting of at least 75% cash.               SECTION 6.08. Hedging Agreements. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into by the Borrower in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Restricted Subsidiary is exposed in the conduct of its business or the management of its assets and liabilities.               SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness. (a) The Borrower will not, nor will it permit any Restricted Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except (i) the Borrower may declare and pay dividends with respect to its Capital Stock payable solely in additional shares of its common stock, (ii) Restricted Subsidiaries may declare and pay dividends ratably with respect to their Capital Stock, (iii) the Borrower may make Restricted Payments, pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and the Restricted Subsidiaries, provided that no Default has occurred and is continuing or would result from the making of any such Restricted Payments, (iv) the Restricted 50 -------------------------------------------------------------------------------- Payments set forth on Schedule 6.09, provided that no default has occurred and is continuing or would result from the making of any such Restricted Payment.               (b)  The Borrower will not, nor will it permit any Restricted Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness or New Preferred Stock, except:         (i)  payment of Indebtedness created under the Loan Documents;         (ii)  payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness; and         (iii)  refinancings of Indebtedness to the extent permitted by Section 6.01 or Section 6.02.               (c)  The Borrower will not, nor will it permit any Restricted Subsidiary to, enter into or be party to, or make any payment under, any Synthetic Purchase Agreement unless (i) in the case of any Synthetic Purchase Agreement related to any Equity Interest, the payments required to be made by the Borrower or the Restricted Subsidiaries are limited to amounts permitted to be paid as Restricted Payments under this Section 6.09, (ii) in the case of any Synthetic Purchase Agreement related to any Restricted Indebtedness, the payments required to be made by the Borrower or its Subsidiaries thereunder are limited to the amount permitted under paragraph (b) of this Section 6.09 and (iii) in the case of any Synthetic Purchase Agreement, the obligations of the Borrower and the Restricted Subsidiaries thereunder are subordinated to the Obligations on terms satisfactory to the Administrative Agent.               SECTION 6.10. Transactions with Affiliates. The Borrower will not, nor will it permit any Restricted Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) transactions in the ordinary course of business that are at prices and on terms and conditions not less favorable to the Borrower or such Restricted Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Borrower and the Subsidiary Loan Parties not involving any other Affiliate, (c) transactions between or among Restricted Subsidiaries that are not Loan Parties, (d) any Restricted Payment permitted by Section 6.09, and (e) any agreement or arrangement with respect to the compensation of a director or o fficer of the Borrower or any Restricted Subsidiary approved by a majority of the disinterested members of the board of directors and consistent with industry practice and (f) pursuant to contractual arrangements existing on the date hereof and described in Schedule 6.10.               SECTION 6.11. Restrictive Agreements. The Borrower will not, nor will it permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to any shares of its Capital Stock or to make or repay loans or advances to the Borrower or any other Restricted Subsidiary or to Guarantee Indebtedness of the Borrower or any other Restricted Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or regulation or by any Loan Document or the Indentures, (ii) the foregoing shall not apply to restrictio ns and conditions existing on the date hereof identified on Schedule 6.11 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary pending such sale, provided such restrictions and conditions apply only to the Restricted Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases, rights of way and franchises restricting the assignment thereof.               SECTION 6.12. Amendment of Material Documents. The Borrower will not, nor will it permit any Restricted Subsidiary to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents, (b) any real property lease relating to a Leasehold Data Center, (c) the 51 -------------------------------------------------------------------------------- Indentures or (d) the Global Merger Agreement, in each case in a manner adverse in any material respect to the rights of the Lenders under the Loan Documents or applicable law.               SECTION 6.13. Leasehold Data Centers. The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any lease for a Leasehold Data Center after the date hereof unless the Collateral and Guarantee Requirement with respect to such Leasehold Data Center is satisfied (subject to the proviso at the end of the definition of Collateral and Guarantee Requirement).               SECTION 6.14. Minimum EBITDA. (a) The Borrower will not permit Consolidated EBITDA for any fiscal quarter ending on a date during a period set forth below and prior to the Global Closing Date to be less than the amount set forth opposite such period: Period Minimum Consolidated EBITDA calendar quarter ending December 31, 2000    $25,000,000   calendar quarter ending March 31, 2001    $35,000,000   calendar quarter ending June 30, 2001    $50,000,000   calendar quarter ending September 30, 2001    $75,000,000   calendar quarter ending December 31, 2001    $135,000,000                 (b)  The Borrower will not permit Consolidated EBITDA for any fiscal quarter ending on a date during a period set forth below and during which the Global Closing Date occurs or commencing after the Global Closing Date to be less than the amount set forth below: Period Minimum Consolidated EBITDA calendar quarter ending December 31, 2000    $5,000,000   calendar quarter ending March 31, 2001    $5,000,000   calendar quarter ending June 30, 2001    $35,000,000   calendar quarter ending September 30, 2001    $85,000,000   calendar quarter ending December 31, 2001    $160,000,000                 SECTION 6.15. Senior Secured Debt to Total Capital. (a) The Borrower will not permit the ratio of (x) Senior Secured Debt to (y) Total Capital, as of any date prior to the Global Closing Date and during any period set forth below, to exceed the ratio set forth opposite such period: Period Maximum Ratio calendar quarter ending December 31, 2000    0.175 to 1.00   calendar quarter ending March 31, 2001    0.200 to 1.00   calendar quarter ending June 30, 2001    0.225 to 1.00   calendar quarter ending September 30, 2001    0.250 to 1.00   calendar quarter ending December 31, 2001    0.250 to 1.00                 (b)  The Borrower will not permit the ratio of (x) Senior Secured Debt to (y) Total Capital, as of any date on or after the Global Closing Date and during any period set forth below, to exceed the ratio set forth opposite such period: Period Maximum Ratio calendar quarter ending December 31, 2000    0.150 to 1.00   calendar quarter ending March 31, 2001    0.150 to 1.00   calendar quarter ending June 30, 2001    0.150 to 1.00   calendar quarter ending September 30, 2001    0.150 to 1.00   calendar quarter ending December 31, 2001    0.150 to 1.00                 SECTION 6.16. Senior Debt to Total Capital. The Borrower will not permit the ratio of (a) Senior Debt to (b) Total Capital, (A) as of any date prior to January 1, 2002 and the Global Closing Date, to exceed 0.75 to 1.00 and (B) as of any date on or after the Global Closing Date and prior to January 1, 2002, to exceed 0.45 to 1.00. 52 --------------------------------------------------------------------------------               SECTION 6.17. Leverage Ratio. The Borrower will not permit the Leverage Ratio as of any date during any period set forth below to exceed the ratio set forth opposite such period: Period Maximum Ratio calendar quarter ending March 31, 2002    5.75 to 1.00   calendar quarter ending June 30, 2002    5.00 to 1.00   calendar quarter ending September 30, 2002    4.50 to 1.00   calendar quarter ending December 31, 2002    4.50 to 1.00   calendar year ending December 31, 2003    4.00 to 1.00   Thereafter    3.00 to 1.00                 SECTION 6.18. Senior Secured Debt to Annualized Consolidated EBITDA. The Borrower will not, on any date after December 31, 2001, permit the ratio of (a) Senior Secured Debt on such date to (b) Annualized Consolidated EBITDA for the fiscal quarter most recently ended on or prior to such date to exceed 2.00 to 1.00.               SECTION 6.19. Interest Expense Coverage Ratio. The Borrower will not permit the ratio of (a) Annualized Consolidated EBITDA for any Fiscal quarter ending on a date during a period set forth below to (b) Consolidated Cash Interest Expense for any period of four consecutive fiscal quarters ending on a date during a period set forth below, to be less than the ratio set forth opposite such period: Period Maximum Ratio calendar quarter ending March 31, 2002    2.00 to 1.00   calendar quarter ending June 30, 2002    2.00 to 1.00   calendar quarter ending September 30, 2002    2.25 to 1.00   calendar quarter ending December 31, 2002    2.50 to 1.00   calendar year ending December 31, 2003    2.50 to 1.00   Thereafter    3.00 to 1.00                 SECTION 6.20. Capital Expenditures. (a) The Borrower will not permit Capital Expenditures of the Borrower and the Restricted Subsidiaries during any fiscal year ending prior to the Global Closing Date to exceed the amount set forth below opposite such fiscal year: Fiscal Year Ending Maximum Capital Expenditures December 31, 2000    $1,650,000,000   December 31, 2001    $1,050,000,000   December 31, 2002    $  850,000,000   December 31, 2003    $1,100,000,000   December 31, 2004    $1,250,000,000   December 31, 2005    $1,400,000,000   December 31, 2006    $1,600,000,000   December 31, 2007    $1,900,000,000   For purposes of the foregoing, (i) any portion of the amount of Capital Expenditures permitted in respect of a fiscal year that is not expended in such fiscal year may be carried forward and utilized in one or more subsequent fiscal years and (ii) Capital Expenditures that are made with (x) Equity Proceeds or Conversion Proceeds received after June 30, 2000 and not applied to any other Designated Equity Proceeds Use or (y) the proceeds of unsecured Indebtedness of the Borrower incurred after the date hereof pursuant to Section 6.01(a)(ix), shall not be taken into account in determining compliance with the limitations set forth in this Section 6.20(a). 53 --------------------------------------------------------------------------------               (b)  The Borrower will not permit Capital Expenditures of the Borrower and the Restricted Subsidiaries during any fiscal year during which the Global Closing Date occurs or commencing after the Global Closing Date occurs to exceed the amount set forth below opposite such Fiscal year: Fiscal Year Ending Maximum Capital Expenditures December 31, 2000    $1,650,000,000   December 31, 2001    $1,750,000,000   December 31, 2002    $1,400,000,000   December 31, 2003    $1,750,000,000   December 31, 2004    $1,850,000,000   December 31, 2005    $2,000,000,000   December 31, 2006    $2,250,000,000   December 31, 2007    $2,500,000,000   For purposes of the foregoing, (i) any portion of the amount of Capital Expenditures permitted in respect of a fiscal year that is not expended in such fiscal year may be carried forward and utilized in one or more subsequent fiscal years, (ii) Capital Expenditures that are made with (x) Equity Proceeds or Conversion Proceeds received after June 30, 2000 and not applied to any other Designated Equity Proceeds Use or (y) the proceeds of unsecured Indebtedness of the Borrower incurred after the date hereof pursuant to Section 6.01(a)(ix), shall not be taken into account in determining compliance with the limitations set forth in this Section 6.20 (b) and (iii) Capital Expenditures not in excess of $100,000,000 made with the proceeds of any payments received by the Borrower pursuant to the Global Merger Agreement in respect of Capital Expenditures not made by GlobalCenter Holding Co. prior to the Global Closing Date shall not be taken into account in determining compliance with the limitations s et forth in this Section 6.20(b).               SECTION 6.21. Unrestricted Cash. The Borrower will not permit Unrestricted Cash to be less than $100,000,000 on any date on which the Leverage Ratio is greater than 4.0 to 1.0.               SECTION 6.22. Designation of Unrestricted Subsidiaries. (a) The Borrower may not designate any Restricted Subsidiary as an Unrestricted Subsidiary and may hereafter designate any other Subsidiary as an Unrestricted Subsidiary under this Agreement (a “Designation”) only if:         (i)  such Subsidiary does not own any Capital Stock of any Restricted Subsidiary;         (ii)  no Event of Default shall have occurred and be continuing at the time of or after giving effect to such Designation;         (iii)  after giving effect to such Designation and any related Investment to be made in such designated Subsidiary by the Borrower or any Restricted Subsidiary (which shall in any event include the existing Investment in such Subsidiary at the time it is designated as an Unrestricted Subsidiary), (A) any such existing Investment and related Investment would comply with Section 6.06 and (B) the Borrower would be in compliance with each of the Financial Covenants calculated on a pro forma basis as if such Designation and Investment had occurred immediately prior to the first day of the period of four consecutive fiscal quarters most recently ended in respect of which financial statements have been delivered by the Borrower pursuant to Section 5.01(a) or (b); and         (iv)  the Borrower has delivered to the Administrative Agent (x) written notice of such Designation and (y) a certificate, dated the effective date of such Designation, of a Financial Officer stating that no Event of Default has occurred and is continuing and setting forth reasonably detailed calculations demonstrating pro forma compliance with the Financial Covenants in accordance with paragraph (iii) above.               (b)  The Borrower may designate any Unrestricted Subsidiary as a Restricted Subsidiary under this Agreement (an “RS Designation” ) only if:         (i)  such Subsidiary is predominantly engaged in one or more System and Network Management Businesses; 54 --------------------------------------------------------------------------------         (ii)  no Event of Default shall have occurred and be continuing at the time of or after giving effect to such RS Designation, and after giving effect thereto, the Borrower would be in compliance with each of the Financial Covenants, calculated on a pro forma basis as if such RS Designation had occurred immediately prior to the first day of the period of four consecutive fiscal quarters most recently ended in respect of which financial statements have been delivered by the Borrower pursuant to Section 5.01(a) or (b); and         (iii)  all Liens on assets of such Unrestricted Subsidiary and all Indebtedness of such Unrestricted Subsidiary outstanding immediately following the RS Designation would, if initially incurred at such time, have been permitted to be incurred pursuant to Sections 6.02 and 6.03 without reliance on Section 6.02(v) or Section 6.03(iv).               Upon any such RS Designation with respect to an Unrestricted Subsidiary (i) the Borrower and the Restricted Subsidiaries shall be deemed to have received a return of their Investment in such Unrestricted Subsidiary equal to the lesser of (x) the amount of such Investment immediately prior to such RS Designation and (y) the fair market value (as reasonably determined by the Borrower) of the net assets of such Subsidiary at the time of such RS Designation and (ii) the Borrower and the Restricted Subsidiaries shall be deemed to have a permanent Investment in an Unrestricted Subsidiary equal to the excess, if positive, of the amount referred to in clause (i)(x) above over the amount referred to in clause (i)(y) above.               (c)  Neither the Borrower nor any Restricted Subsidiary shall at any time (x) provide a Guarantee of any Indebtedness of any Unrestricted Subsidiary, (y) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly liable for any other Indebtedness which provides that the holder thereof may (upon notice, lapse of time or both) declare a default thereon (or cause such Indebtedness or the payment thereof to be accelerated, payable or subject to repurchase prior to its final scheduled maturity) upon the occurrence of a default with respect to any other Indebtedness that is Indebtedness of an Unrestricted Subsidiary, except in the case of clause (x) or (y) to the extent permitted under Section 6.01 and Section 6.06 hereof. Except as provided in clause (b) above, each Designation shall be irrevocable, and no Unrestricted Subsidiary may become a Rest ricted Subsidiary, be merged with or into the Borrower or a Restricted Subsidiary or liquidate into or transfer substantially all its assets to the Borrower or a Restricted Subsidiary. ARTICLE VII Events of Default               If any of the following events (“Events of Default”) shall occur:         (a)  the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;         (b)  the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days;         (c)  any representation or warranty made or deemed made by or on behalf of the Borrower or any Restricted Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;         (d)  the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the existence of the Borrower) or 5.11 or in Article VI;         (e)  any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 20 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); 55 --------------------------------------------------------------------------------         (f)  the Borrower or any Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any period of grace specified in the instrument governing such Material Indebtedness);         (g)  any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;         (h)  an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Material Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;         (i)  the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;         (j)  the Borrower or any Material Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;         (k)  one or more judgments (other than to the extent covered by insurance as to which the insurance company has acknowledged coverage) for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Material Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Restricted Subsidiary to enforce any such judgment;         (l)  an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;         (m)  any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral (other than immaterial portions of the Collateral), with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Agent’s failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Pledge Agreements; or the Guarantee Agreement or any other Loan Document shall cease to be, or shall be asserted by any Loan Party not to be, valid and enforceable; or         (n)  a Change of Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the 56 -------------------------------------------------------------------------------- same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and paya ble, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Administrative Agent               Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Agent as its agent and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.               The bank serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Agent hereunder.               The Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries th at is communicated to or obtained by the bank serving as Agent or any of its Affiliates in any capacity. The Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Agent by the Borrower or a Lender, and the Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the va lidity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Agent.               The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.               The Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such 57 -------------------------------------------------------------------------------- sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.               Subject to the appointment and acceptance of a successor Agent as provided in this paragraph, the Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the prior written consent of the Borrower so long as no Default or Event of Default shall have occurred and be continuing (such consent not to be unreasonably withheld or delayed), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Agent hereunder by a successor, su ch successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent.               Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.               None of the Lenders or their Affiliates identified on the facing page of, or elsewhere in, this Agreement or in any other Loan Document or in the Information Memorandum as a “syndication agent” or a “co-documentation agent”, shall have any right, power, obligation, liability, responsibility or duty under this Agreement or the other Loan Documents other than, in the case of Lenders, those applicable to all of the Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. ARTICLE IX Miscellaneous               SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:         (a)  if to the Borrower, to it at Exodus Communications, Inc., 2831 Mission college Blvd., Santa Clara, CA 95054, Attention of Corporate Treasurer, (Telecopy No. 408-346-2060);         (b)  if to the Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Gloria Javier and Winslow Ogbourne (Telecopy No. 212-552-5700), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Tracey Ewing (Telecopy No.212-270-4164); and         (c)  if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.               SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver 58 -------------------------------------------------------------------------------- thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.               (b)  Except as provided in Section 2.19 with respect to an Incremental Facility Amendment, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment or extend the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Term Loan under Section 2.09, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the percentage set forth in the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release any Subsidiary Loan Party from its Guarantee under the Guarantee Agreement (except as expressly provided in Section 9.15), or limit its liability in respect of such Guarantee, without the written consent of each Lender, (vii) release all or substantially all of the Collateral from the Liens of the Security Documents, without the written consent of each Lender, (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class or (ix) change the rights of the Tranche B Lenders to decline mandatory prepayments as provided in Section 2.10, without the written consent of Tranche B Lenders holding a majorit y of the outstanding Tranche B Loans; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank without the prior written consent of the Administrative Agent or the Issuing Bank, as the case may be, (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Tranche A Lenders and Tranche B Lenders), the Tranche A Lenders (but not the Revolving Lenders and Tranche B Lenders) or the Tranche B Lenders (but not the Revolving Lenders and Tranche A Lenders) may be effected by an agreement or agreements in writing entered into by the Borrower and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time and (C) any amendment to Section 9.14 is subject to Section 9.14 (e). Notwithstanding the foregoing, (I) any provision of this Agreement may be amended by an agreement in writing entered into by the Borrower, the Required Lenders and the Administrative Agent (and, if its rights or obligations are affected thereby, the Issuing Bank) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement and (II) in the event the Borrower seeks a waiver of the provisions of Section 6.06 in order to permit the acquisition of a Person that will become a Restricted Subsidiary and requests such waiver pursuant to a written request in a form approved by the Administrative Agent which describes such acquisition in reas onable detail and which the Borrower delivers or causes to be delivered to each Lender (by hand delivery or telecopy transmission) prior to 5:00 p.m., New York time, on any Business Day, 59 -------------------------------------------------------------------------------- then each Lender shall use its reasonable best efforts to give written notice to the Administrative Agent and the Borrower of its approval or disapproval thereof (as the case may be) by 5:00 p.m., New York time, on the tenth following Business Day.               SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the reasonable fees, charges and disbursements of counsel, for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.               (b)  The Borrower shall indemnify the Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.               (c)  To the extent that the Borrower fails to pay any amount required to be paid by it to the Agent or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Agent or the Issuing Bank, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent or the Issuing Bank in its capacity as such. For purposes hereof, a Lender’s “pro rata share” (i) with respect to an unreimbursed expense of, or an indemnity payment sought by, the Agent, shall be determined based upon its share of the sum of the total Revolving Exposures, outstanding Term Loans and unused C ommitments at the time and (ii) with respect to an unreimbursed expense of, or an indemnity payment sought by, the Issuing Bank, shall be determined based upon its share of the total Revolving Exposures and unused Revolving Commitments at the time.               (d)  To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.               (e)  All amounts due under this Section shall be payable not later than 10 days after written demand therefor. 60 --------------------------------------------------------------------------------               SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.               (b)  Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or a Related Fund of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender’s obligations in respect of its LC Exposure, the Issuing Bank) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or a Related Fund of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or L oans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (or less than $1,000,000, in the case of an assignment of Tranche B Term Loans) unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (with one such fee payable in connection with simultaneous assignments to Related Funds) , and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.               (c)  The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.               (d)  Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No 61 -------------------------------------------------------------------------------- assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.               (e)  Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17(c) as though it were a Lender.               (f)  A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as though it were a Lender.               (g)  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.               SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under th is Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.               SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and 62 -------------------------------------------------------------------------------- their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.               SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.               SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.               SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.               (b)  The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. N othing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.               (c)  The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.               (d)  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.               SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 63 --------------------------------------------------------------------------------               SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.               SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or required by applicable laws or regulations, (c) to the extent required to comply with any subpoena or similar legal process (in which case the Borrower shall be given prompt notice thereof), (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action o r proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section (in the case of the following clauses (i) and (ii)), (i) to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 9.12) or (iii) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, (g) with the consent of the Borro wer or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Inform ation as such Person would accord to its own confidential information. Notwithstanding the foregoing, each of the Administrative Agent, the Issuing Bank and the Lenders and their Affiliates shall have the right to (i) list the Borrower’s name and logo, as provided by the Borrower from time to time, and describe the transaction that is the subject of this Agreement in their marketing materials for such transaction and (ii) post such information, including, without limitation, a customary “ tombstone,” on their website.               SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in r espect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.               SECTION 9.14. Special Funding Option. (a) Notwithstanding anything to the contrary contained herein, any Lender (for the purposes of this Section 9.14, a “Granting Lender”) may grant to a special purpose funding vehicle (for the purposes of this Section 9.14, an “SPC”) the option to make, on behalf of such Granting Lender, all or a portion of the Loans which such Granting Lender is obligated to make (a “Funding Obligation”) under its Revolving Commitment, such option to be exercisable in the sole discretion of the SPC, provided, however, that         (i)  such Granting Lender’s obligations under this Agreement and the Loan Documents shall remain unchanged, including without limitation the indemnification obligations of the Granting Lender pursuant to Section 9.03 hereof; 64 --------------------------------------------------------------------------------         (ii)  such Granting Lender shall remain solely responsible to the other parties hereto for the performance of all Funding Obligations;         (iii)  the Borrower and the Lenders shall continue to deal solely and directly with such Granting Lender in connection with such Granting Lender’s rights and obligations under this Agreement; the Agent shall continue to deal directly with the Granting Lender as agent for the SPC with respect to distribution of payment of principal; interest and fees, notices of Conversion and Continuation and all other matters;         (iv)  such Granting Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and to approve any amendment, modification, or waiver of any provisions of this Agreement, each of which may, if so agreed in writing between the Granting Lender and the SPC, require the prior consent of any such SPC which has exercised the option to undertake the Funding Obligation in connection with such Granting Lender’s Commitments and Obligations owing thereto before the Granting Lender approves any such amendment, modification or waiver;         (v)  the granting of such option shall not constitute an assignment to or participation of such SPC of or in the Granting Lender’s Commitments and Obligations owing thereto;         (vi)  such SPC shall not become a Lender hereunder as a result of the granting of such option;         (vii)  such SPC shall not become obligated or committed to make Loans as a result of the granting of such option;         (viii)  if such SPC elects not to exercise such option or otherwise fails to make all or any part of a Loan, the Granting Lender shall retain its Funding Obligation and be obligated to make the entire Loan or any portion of such Loan not made by such SPC; and         (ix)  any SPC may, with notice to, but without the prior written consent of, the Borrowers and the Agent and without paying any processing fee therefor, assign all or a portion of its interests as a participant or subparticipant in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans.               (b)  Loans made by an SPC hereunder shall be deemed to satisfy the Funding Obligation and utilize the Revolving Commitment of the Granting Lender as if, and to the same extent, such Loans were made by such Granting Lender.               (c)  Each party hereto agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Granting Lender would otherwise be liable so long as, and to the extent that, the Granting Lender provides such indemnity or makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior Indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof arising out of or relating to transactions under this Agreement or the other Loan Documents.               (d)  Notwithstanding anything to the contrary contained in this Agreement, an SPC may disclose on a confidential basis any nonpublic information relating to Loans made by such SPC hereunder to any rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC.               (e)  This Section 9.14 may not be amended without the prior written consent of the Granting Lenders on behalf of which each SPC has made all or any part of its Loans which remain outstanding at the time of such amendment.               SECTION 9.15. Release of Subsidiaries. (a) If (i) the Agent receives a certificate from the chief executive officer, the chief financial officer or treasurer of the Borrower certifying as of the date of that certificate that, after the consummation of the transaction or series of transactions described in reasonable detail satisfactory to the Administrative Agent in such certificate on such date, the Subsidiary Loan Party identified in such certificate will no longer be a Subsidiary of the Borrower and (ii) such transactions are consummated on such date in 65 -------------------------------------------------------------------------------- accordance with and without violating the provisions of this Agreement or any other Loan Document, then, upon consummation of such transaction, such Subsidiary’s Guarantee shall automatically terminate and such Subsidiary shall cease to be a party to any Loan Document.               (b)  No such termination or cessation shall release, reduce, or otherwise adversely affect the obligations of any other Loan Party under this Agreement, any other Guarantee, or any other Loan Document, all of which obligations continue to remain in full force and effect.               (c)  The Agent shall, at the Borrower’s expense, execute such documents as the Borrower may reasonably request to evidence such termination or cessation, as the case may be.               SECTION 9.16. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.               (b)  The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the “ Applicable Creditor”) shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than the currency in which such sum is stated to be due hereunder (the “Agreement Currency”), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwiths tanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section 9.16 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. 66 --------------------------------------------------------------------------------               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.      EXODUS COMMUNICATIONS, INC.,   By:   /s/ R. Marshall Case      --------------------------------------------------------------------------------      Name: R. Marshall Case Title: Executive Vice President,           Finance and Chief Financial Officer      THE CHASE MANHATTAN BANK, individually and as Agent,   By:   /s/ Thomas H. Kozlark      --------------------------------------------------------------------------------      Name: Thomas H. Kozlark Title: Vice President      CHASE MANHATTAN INTERNATIONAL LIMITED, as London Agent,   By:   /s/ Steve Hurford      --------------------------------------------------------------------------------      Name: Steve Hurford Title: Vice President        By:   /s/ C. Walsh      --------------------------------------------------------------------------------      Name: C. Walsh Title: Vice President      GOLDMAN SACHS CREDIT PARTNERS L.P., individually and as Joint Lead Arranger and Co-Documentation Agent,   By:   /s/ Robert Wagner      --------------------------------------------------------------------------------      Name: Robert Wagner Title: Managing Director      MERRILL LYNCH CAPITAL CORPORATION, individually and as Syndication Agent,   By:   /s/ Carol J.E. Feeley      --------------------------------------------------------------------------------      Name: Carol J.E. Feeley Title: Vice President      MORGAN STANLEY SENIOR FUNDING, INC., individually and as Co-Documentation Agent,   By:   /s/ Lucy K. Galbraith      --------------------------------------------------------------------------------      Name: Lucy K. Galbraith Title: Principal 67 --------------------------------------------------------------------------------      THE BANK OF NOVA SCOTIA,   By:   /s/ Ed Kofman      --------------------------------------------------------------------------------      Name: Ed Kofman Title: Director      CREDIT LYONNAIS NEW YORK BRANCH,   By:   /s/ John P. Judge      --------------------------------------------------------------------------------      Name: John P. Judge Title: Vice President      DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES,   By:   /s/ William E. Lambert      --------------------------------------------------------------------------------      Name: William E. Lambert Title: Vice President        By:   /s/ Michael S. Greenberg      --------------------------------------------------------------------------------      Name: Michael S. Greenberg Title: Assistant Vice President      ING (U.S.) CAPITAL LLC,   By:   /s/ Ken Bravo      --------------------------------------------------------------------------------      Name: Ken Bravo Title: Director      BARCLAYS BANK PLC,   By:   /s/ Douglas Bernegger      --------------------------------------------------------------------------------      Name: Douglas Bernegger Title: Director      GENERAL ELECTRIC CAPITAL CORPORATION,   By:   /s/ Molly S. Ferguson      --------------------------------------------------------------------------------      Name: Molly S. Ferguson Title: Manager, Operations      TRANSAMERICA BUSINESS CREDIT CORPORATION,   By:   /s/ Stephen K. Goetshius      --------------------------------------------------------------------------------      Name: Stephen K. Goetshius Title: Senior Vice President 68 --------------------------------------------------------------------------------      IBM CREDIT CORPORATION,   By:   /s/ Thomas S. Curcio      --------------------------------------------------------------------------------      Name: Thomas S. Curcio Title: Manager of Commercial & Specialty Financing      WELLS FARGO BANK, N.A.,   By:   /s/ Eric C. Houser      --------------------------------------------------------------------------------      Name: Eric C. Houser Title: Vice President      PILGRIM PRIME RATE TRUST, By: Pilgrim Investments, Inc. as its investment manager,   By:   /s/ Jason Groom      --------------------------------------------------------------------------------      Name: Jason Groom Title: Vice President      THOROUGHBRED LIMITED PARTNERSHIP I, By: Appaloosa Management L.P., its general partner, By: Appaloosa Partners Inc., its general partner,   By:   /s/ James E. Bolin      --------------------------------------------------------------------------------      Name James E. Bolin Title: Vice President      FLEET NATIONAL BANK AS TRUST ADMINISTRATOR FOR LONG LANE MASTER TRUST IV,   By:   /s/ Kevin Kerns      --------------------------------------------------------------------------------      Name: Kevin Kerns Title: Managing Director      HCM OFFSHORE TRUST,   By:   /s/ Michael E. Lewitt      --------------------------------------------------------------------------------      Name: Micahel E. Lewitt Title: Authorized Signatory      HELLER FINANCIAL, INC.,   By:   /s/ Scott Ziemke      --------------------------------------------------------------------------------      Name: Scott Ziemke Title: Vice President 69 --------------------------------------------------------------------------------      KEMPER FLOATING RATE FUND,   By:   /s/ Kelly D. Babson      --------------------------------------------------------------------------------      Name: Kelly D. Babson Title: Managing Director      NUVEEN FLOATING RATE FUND, By: Nuveen Senior Loan Asset Management, Inc.,   By:   /s/ Todd Abramson      --------------------------------------------------------------------------------      Name: Todd Abramson Title: Vice President      OPPENHEIMER SENIOR FLOATING RATE FUND,   By:   /s/ Robert Bishop      --------------------------------------------------------------------------------      Name: Robert Bishop Title: Vice President      PPM SPYGLASS TRADING TRUST,   By:   /s/ Ann E. Morris      --------------------------------------------------------------------------------      Name: Ann E. Morris Title: Authorized Agent      SRF 2000 LLC,   By:   /s/ Ann E. Morris      --------------------------------------------------------------------------------      Name: Ann E. Morris Title: Assistant Vice President      STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY,   By:   /s/ James R. Fellows      --------------------------------------------------------------------------------      Name: James R. Fellows Title: Senior Vice President          Stein Roe & Farnham Incorporated, as           Advisor to the Stein Roe Floating Rate          Limited Liability Company      KZH CYPRESSTREE-1 LLC,   By:   /s/ Susan Lee      --------------------------------------------------------------------------------      Name: Susan Lee Title: Authorized Agent
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.5 THIS INSTRUMENT WAS PREPARED BY, AND WHEN RECORDED SHOULD BE RETURNED TO: Dorsey & Whitney LLP (RMH) Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402-1498 AMENDED, RESTATED, AND CONSOLIDATED MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FINANCING STATEMENT     THIS AMENDED, RESTATED, AND CONSOLIDATED MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FINANCING STATEMENT (this "Mortgage") is made as of October 10, 2000, by REUTER MANUFACTURING, INC., a corporation organized under the laws of the State of Minnesota ("Borrower"), having its principal offices at Hopkins, Minnesota, in favor of U.S. BANK NATIONAL ASSOCIATION, a national banking association ("Lender"), having an office at St. Paul, Minnesota. RECITALS     A.  As of the date hereof, the Lender has made the following loans to the Borrower:     (a)  First Loan.  A $2,400,000 loan (the "First Loan"), evidenced and secured by: (i) a Financing Agreement dated December 3, 1997 (the "Financing Agreement"); (ii) a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated December 3, 1997, and file December 12, 1997, as Document No. 2869161 in the office of the Registrar of Titles, Hennepin County, Minnesota (the "Original Mortgage"), (iii) a Promissory Note dated December 3, 1997, in the stated principal amount of $2,400,000, in favor of U.S. Bank National Association; and (iv) all other Loan Documents (as defined in the Financing Agreement) collateral thereto.     (b)  Second Loan.  A $970,000 loan (the "Second Loan"), evidenced and secured by (i) the Financing Agreement; (ii) a Second Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated April 20, 2000, filed May 8, 2000, as Document No. 3277844 in the office of the Registrar of Titles, Hennepin County, Minnesota (the "Second Mortgage"); (iii) a Borrower's Overline Note dated April 20, 2000, in the stated principal amount of $500,000, in favor of Lender; (iv) a Term Note dated April 20, 2000, in the stated principal amount of $200,000; (v) a Promissory Note dated December 3, 1997, in the stated principal amount of $270,000; and (vi) all other Loan Documents (as defined in the Financing Agreement) collateral thereto.     (c)  Third Loan.  A $2,325,000 loan (the "Third Loan") evidenced and secured by: (i) the Financing Agreement; (ii) a Third Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated July 21, 2000, and filed July 21, 2000, in the office of the Registrar of Titles, Hennepin County, Minnesota, as Document No. 3298708 (the "Third Mortgage"); (iii) a Borrower's Demand Note in the stated principal amount of $325,000, in favor of Lender; (iv) the sum of $2,000,000 which was previously advanced to Borrower under the terms of the Financing Agreement; and (v) all other Loan Documents (as defined in the Financing Agreement) collateral thereto. THIS IS A MORTGAGE AMENDMENT AS DEFINED IN MINNESOTA STATUTES, SECTION 287.01, SUBDIVISION 2, AND AS SUCH, IT DOES NOT SECURE A NEW OR INCREASED AMOUNT OF DEBT. --------------------------------------------------------------------------------     The Lender and the Borrower have agreed to amend, restate, and consolidate the First Loan, the Second Loan, and the Third Loan (collectively, the "Loan") pursuant to the Credit Agreement (as defined below).     B.  The Loan shall be repaid with interest thereon, as evidenced by that certain Amended and Restated Note of even date herewith payable to the order of Lender (the "Note", which term shall include any amendment, modification, supplement, extension, renewal, replacement, or restatement thereof) and is the subject of an Amended and Restated Credit Agreement of even date herewith between Borrower and Lender (the "Credit Agreement," which term shall include any amendment, modification, supplement, extension, renewal, replacement, or restatement thereof). The Note, the Credit Agreement, and any other Loan Document (as defined in the Credit Agreement) are each dated the same date as this Mortgage, are hereby incorporated by reference, and, together with this Mortgage, as any of the same may be amended, modified, supplemented, extended, renewed, replaced, or restated, are sometimes collectively referred to as the "Loan Documents."     C.  The obligations secured by this Mortgage (the "Obligations") are as follows:      (i) the principal amount of $5,695,000; plus     (ii) interest on the amount advanced and unrepaid, at the interest rate or rates provided in the Notes; plus     (iii) all other amounts payable by Borrower and all other agreements of Borrower under the Loan Documents as the same now exist or may hereafter be amended.     D.  The Obligations shall mature on or before October 1, 2005 (the "Maturity Date").     E.  The maximum principal indebtedness secured hereby is $5,695,000 plus amounts which may be advanced by Lender in protection of the Mortgaged Property or this Mortgage.     F.  Lender and Borrower have agreed to consolidate and coordinate the liens of the Original Mortgage, Second Mortgage and Third Mortgage so that they shall together constitute a single first lien of $5,695,000, with interest, to spread said lien over all of Borrower's right, title and interest, now or hereafter acquired, in the Mortgaged Property (as that term is hereinafter defined) and to modify and restate in their entirety the Original Mortgage, Second Mortgage and Third Mortgage as if one mortgage covering the Mortgaged Property had been executed and delivered by Borrower to Lender to secure the Obligations, all as set forth herein.     NOW, THEREFORE, it is hereby agreed that (a) the lien of the Original Mortgage, the Second Mortgage and the Third Mortgage be and hereby is spread over all of the Borrower's right, title and interest, now or hereafter acquired, in the Mortgaged Property so that same shall and now does constitute a valid first mortgage thereon, and (b) all terms and conditions of the Original Mortgage, the Second Mortgage and the Third Mortgage shall be superseded by, and deemed to have been amended and restated in their entirety by, the terms and conditions set forth in this Mortgage, and (c) the Original Mortgage, the Second Mortgage and the Third Mortgage are hereby combined and consolidated and made equal and coordinate in lien without priority of the one over the other so that together they shall hereafter constitute in law but one mortgage, a single first lien on all of Borrower's right, title and interest, now or hereafter acquired, in the Mortgaged Property, in the principal sum of the Obligations securing the Note with the same intent and with like effect as if one mortgage covering the Mortgaged Property had been executed and delivered by Borrower to Lender to secure said Obligations, which shall be payable as provided in the Note, and (d) Borrower, in consideration of Lender making and amending the Loan, and to secure the Loan and payment and performance of the Obligations, hereby grants, bargains, sells, conveys, and mortgages to Lender, its successors and assigns, forever, with power of sale, and grants to 2 -------------------------------------------------------------------------------- Lender, its successors and assigns, a security interest in the following, all of which is called the "Mortgaged Property": A. LAND AND IMPROVEMENTS     The land described in Exhibit A attached hereto and all mineral rights, hereditaments, easements and appurtenances thereto (collectively the "Land"), and all improvements and structures thereon (the "Improvements"); and B. FIXTURES AND PERSONAL PROPERTY     All fixtures (the "Fixtures"), and all machinery, equipment and personal property (collectively the "Personal Property") now or hereafter located on, in or under the Land and the Improvements, and necessary or useful in connection with the functioning of the Land or the Improvements for their general intended purposes (but not to the extent primarily used in the operation of Borrower's specific business), and which are owned by Borrower or in which Borrower has an interest, including any construction and building materials stored on and to be included in the Improvements, and also including those specific items, if any, described in Exhibit B attached hereto, plus any repairs, replacements and betterments to any of the foregoing and the proceeds and products thereof; and C. LEASES AND RENTS     All rights of Borrower with respect to tenants or occupants now or hereafter occupying any part of the Land or the Improvements, if any, including all leases and licenses and rights in connection therewith, whether oral or written (collectively the "Leases"), and all rents, income, both from services and occupation, royalties, revenues and payments, including prepayments and security deposits (collectively the "Rents"), which are now or hereafter due or to be paid in connection with the Land, the Improvements, the Fixtures or the Personal Property; and D. GENERAL INTANGIBLES     All general intangibles of Borrower which relate to any of the Land, the Improvements, the Fixtures, the Personal Property, the Leases or the Rents, including proceeds of insurance and condemnation or conveyance of the Land and the Improvements, accounts, trade names, contract rights, accounts receivable and bank accounts; and E. AFTER ACQUIRED PROPERTY AND PROCEEDS     All after acquired property similar to the property herein described and conveyed which may be subsequently acquired by Borrower and used in connection with the Land, the Improvements, the Fixtures, the Personal Property and other property; and all cash and non-cash proceeds and products of all of the foregoing property.     TO HAVE AND TO HOLD the same, and all estate therein, together with all the rights, privileges and appurtenances thereunto belonging, to the use and benefit of Lender, its successors and assigns, forever.     PROVIDED NEVERTHELESS, should Borrower pay and perform all the Obligations, then these presents will be of no further force and effect, and this Mortgage shall be satisfied by Lender, at the expense of Borrower.     This Mortgage constitutes an assignment of rents and profits within the meaning of Minnesota Statutes, §§ 559.17 and 576.01, and is intended to comply fully with the provisions thereof, and to afford Lender, to the fullest extent allowed by law, the rights and remedies of a mortgage lender or secured lender pursuant thereto. 3 --------------------------------------------------------------------------------     This Mortgage also constitutes a security agreement within the meaning of the Uniform Commercial Code as in effect in the State of Minnesota (the "UCC"), with respect to all property described herein as to which a security interest may be granted and/or perfected pursuant to the UCC, and is intended to afford Lender, to the fullest extent allowed by law, the rights and remedies of a secured party under the UCC.     BORROWER FURTHER agrees as follows: ARTICLE I AGREEMENTS     Section 1.1  Performance of Obligations; Incorporation by Reference.  Borrower shall pay and perform the Obligations. Time is of the essence hereof. All of the covenants, obligations, agreements, warranties and representations of Borrower contained in the Note and the other Loan Documents and all of the terms and provisions thereof, are hereby incorporated herein and made a part hereof by reference as if fully set forth herein.     Section 1.2  Further Assurances.  If Lender requests, Borrower shall sign and deliver and cause to be recorded as Lender shall direct any further mortgages, instruments of further assurance, certificates and other documents as Lender reasonably may consider necessary or desirable in order to perfect, continue and preserve the Obligations and Lender's rights, title, estate, liens and interests under the Loan Documents. Borrower further agrees to pay to Lender, upon demand, all costs and expenses incurred by Lender in connection with the preparation, execution, recording, filing and refiling of any such documents, including attorneys' fees and title insurance costs.     Section 1.3  Sale, Transfer, Encumbrance.  If Borrower sells, conveys, transfers or otherwise disposes of, or encumbers, any part of its interest in the Mortgaged Property, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Lender, Lender shall have the option to declare the Obligations immediately due and payable without notice. Included within the foregoing actions requiring prior written consent of Lender are: (a) sale by deed or contract for deed; (b) mortgaging or granting a lien on the Mortgaged Property; and (c) a transfer which changes the persons in control of Borrower or which transfers more than 25% of the beneficial interest in Borrower, except for transfers to related or affiliated entities. Borrower shall give notice of any proposed action to Lender at least thirty (30) days prior to taking such action. Borrower shall pay all costs and expenses incurred by Lender in evaluating any such action. Lender may condition such consent upon modification of the Loan Documents or payment of fees. No such action shall relieve Borrower from liability for the Obligations. The consent by Lender to any action shall not constitute a waiver of the necessity of such consent to any subsequent action.     Section 1.4  Insurance.  Borrower shall obtain, maintain and keep in full force and effect (and upon request of Lender shall furnish to Lender copies of) policies of insurance as described in, and meeting the requirements set forth in, Exhibit C attached hereto, and upon request of Lender shall furnish to Lender proof of payment of all premiums for such insurance. At least ten (10) days prior to the termination of any such coverage, Borrower shall provide Lender with evidence satisfactory to Lender that such coverage will be renewed or replaced upon termination with insurance that complies with the provisions of this Section. Borrower, at its sole cost and expense, from time to time when Lender shall so request, will provide Lender with evidence, in a form acceptable to Lender, of the full insurable replacement cost of the Mortgaged Property. All property (including boiler and machinery) and liability insurance policies maintained by Borrower pursuant to this Section shall (i) include effective waivers by the insurer of all claims for insurance premiums against Lender, and (ii) provide that any losses shall be payable notwithstanding (a) any act of negligence by Borrower or Lender, (b) any foreclosure or other proceedings or notice of foreclosure sale relating to the Mortgaged Property, or (c) any release from liability or waiver of subrogation rights granted by the insured. All insurance policies maintained by Borrower pursuant to the foregoing provisions shall respond on a primary basis relative to any other insurance carried by Lender in 4 -------------------------------------------------------------------------------- the event of loss. Insurance terms not otherwise defined herein shall be interpreted consistent with insurance industry usage.     Section 1.5  Taxes, Liens and Claims, Utilities.  Borrower, at least five (5) days before any penalty attaches thereto, shall pay and discharge, or cause to be paid and discharged, all taxes, assessments and governmental charges and levies (collectively "Impositions") imposed upon or against the Mortgaged Property or the Rents, or upon or against the Obligations, or upon or against the interest of Lender in the Mortgaged Property or the Obligations, except Impositions measured by the income of Lender. Borrower shall provide evidence of such payment at Lender's request. Borrower shall keep the Mortgaged Property free and clear of all liens, encumbrances, easements, covenants, conditions, restrictions and reservations (collectively "Liens") except those listed on Exhibit A attached hereto (the "Permitted Encumbrances"). Borrower shall pay or cause to be paid when due all charges or fees for utilities and services supplied to the Mortgaged Property. Notwithstanding anything to the contrary contained in this Section, Borrower shall not be required to pay or discharge any Imposition or Lien so long as Borrower shall in good faith, and after giving notice to Lender, contest the same by appropriate legal proceedings. If Borrower contests any Imposition or Lien against the Mortgaged Property, Borrower shall provide such security to Lender as Lender shall reasonably require against loss or impairment of Borrower's ownership of or Lender's lien on the Mortgaged Property and shall in any event pay such Imposition or Lien before loss or impairment occurs.     Section 1.6  Escrow Payments.  If requested by Lender, Borrower shall deposit with Lender monthly on the same date as payments are due under the Note the amount reasonably estimated by Lender to be necessary to enable Lender to pay, at least five (5) days before they become due, all Impositions against the Mortgaged Property and the premiums upon all insurance required hereby to be maintained with respect to the Mortgaged Property, provided, however, that Lender shall not request such escrow deposits until after an Event of Default hereunder. All funds so deposited shall secure the Obligations. Such deposits shall be held by Lender, or its nominee, in a non-interest bearing account and may be commingled with other funds. Such deposits shall be used to pay such Impositions and insurance premiums when due. Any excess sums so deposited shall be retained by Lender and shall be applied to pay said items in the future, unless the Obligations have been paid and performed in full, in which case all excess sums so paid shall be refunded to Borrower. Upon the occurrence of an Event of Default, Lender may apply any funds in said account against the Obligations in such order as Lender may determine.     Section 1.7  Maintenance and Repair; Compliance with Laws.  Borrower shall cause the Mortgaged Property to be operated, maintained and repaired in safe and good repair, working order and condition, reasonable wear and tear excepted; shall not commit or permit waste thereof; except as provided in any Loan Document, shall not remove, demolish or substantially alter the design or structural character of any Improvements without the prior written consent of Lender; shall complete or cause to be completed forthwith any Improvements which are now or may hereafter be under construction upon the Land; shall comply or cause compliance with all laws, statutes, ordinances and codes, and governmental rules, regulations and requirements, applicable to the Mortgaged Property or the manner of using or operating the same, and with any covenants, conditions, restrictions and reservations affecting the title to the Mortgaged Property, and with the terms of all insurance policies relating to the Mortgaged Property; and shall obtain and maintain in full force and effect all consents, permits and licenses necessary for the use and operation of the Mortgaged Property.     Section 1.8  Leases.       (a) Borrower shall not enter into or amend any Lease without Lender's prior written consent, and shall furnish to Lender, upon execution, a complete and fully executed copy of each Lease. Borrower shall provide Lender with a copy of each proposed Lease requiring the consent of Lender and with any information requested by Lender regarding the proposed Tenant thereunder. Lender may declare each Lease to be prior or subordinate to this Mortgage, at Lender's option. 5 --------------------------------------------------------------------------------     (b) Borrower shall, at its cost and expense, perform each obligation to be performed by the landlord under each Lease; not borrow against, pledge or further assign any rents or other payments due thereunder; not permit the prepayment of any rents or other payments due for more than thirty (30) days in advance; and not permit any Tenant to assign its Lease or sublet the premises covered by its Lease, unless required to do so by the terms thereof and then only if such assignment does not work to relieve the Tenant of any liability for performance of its obligations thereunder.     (c) If any Tenant shall default under its Lease, Borrower shall, in the ordinary course of business, exercise sound business judgment with respect to such default, but may discount, compromise, forgive or waive claims or discharge the Tenant from its obligations under the Lease or terminate or accept a surrender of the Lease.     (d) If Borrower fails to perform any obligations of Borrower under any Lease or if Lender becomes aware of or is notified by any Tenant of a failure on the part of Borrower to so perform, Lender may, but shall not be obligated to, without waiving or releasing Borrower from any obligation in this Agreement or any of the other Loan Documents, remedy such failure, and Borrower agrees to repay upon demand all sums incurred by Lender in remedying any such failure, together with interest thereon from the date incurred at the Default Rate (as defined in the Note).     (e) For purposes of this Mortgage, the following terms shall have the following meanings:      (i) "Lease":  Any lease or other document or agreement, written or oral, permitting any Person to use or occupy any part of the Mortgaged Property.     (ii) "Person":  Any natural person, corporation, partnership, limited partnership, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in an individual, fiduciary or other capacity.     (iii) "Tenant":  Any person or party using or occupying any part of the Mortgaged Property pursuant to a Lease.     Section 1.9  Indemnity.  Borrower shall indemnify Lender and its directors, officers, agents and employees (collectively the "Indemnified Parties") against, and hold the Indemnified Parties harmless from, all losses, damages, suits, claims, judgments, penalties, fines, liabilities, costs and expenses (collectively a "Loss") by reason of, or on account of, or in connection with the construction, reconstruction or alteration of the Mortgaged Property, or any accident, injury, death or damage to any person or property occurring in, on or about the Mortgaged Property or any street, drive, sidewalk, curb or passageway adjacent thereto, provided such Loss is not caused by the gross negligence or willful misconduct of the Indemnified Parties. The indemnity contained in this Section shall include costs of defense of any such claim asserted against an Indemnified Party, including reasonable attorneys' fees. The indemnity contained in this Section shall survive payment and performance of the Obligations and satisfaction and release of this Mortgage and any foreclosure thereof or acquisition of title by deed in lieu of foreclosure.     Section 1.10  Appraisals.  Lender shall have the right from time to time, but not more often than once during any twelve (12)-month period, to obtain an appraisal of the Mortgaged Property in form and substance satisfactory to Lender and prepared by an independent MAI appraiser selected by Lender. Borrower shall reimburse Lender for the cost incurred for any such appraisal within ten (10) days following demand therefor by Lender, if Lender has reason to believe that the value of the Mortgaged Property has declined materially, and such appraisal determines that the then current principal amount of the Note exceeds 75% of the value of the Mortgaged Property. 6 -------------------------------------------------------------------------------- ARTICLE II REPRESENTATIONS AND WARRANTIES     Borrower makes the following representations and warranties:     Section 2.1  Ownership, Liens, Compliance with Laws.  Borrower owns the Mortgaged Property free from all Liens, except the Permitted Encumbrances. All applicable zoning, environmental, land use, subdivision, building, fire, safety and health laws, statutes, ordinances, codes, rules, regulations and requirements affecting the Mortgaged Property permit the current use and occupancy thereof, and Borrower has obtained all consents, permits and licenses required for such use. Borrower has examined and is familiar with all applicable covenants, conditions, restrictions and reservations, and with all applicable laws, statutes, ordinances, codes and governmental rules, regulations and requirements affecting the Mortgaged Property, and the Mortgaged Property complies with all of the foregoing.     Section 2.2  Use.  The Mortgaged Property is not homestead property nor is it agricultural property or in agricultural use.     Section 2.3  Utilities; Services.  The Mortgaged Property is serviced by all necessary public utilities, and all such utilities are operational and have sufficient capacity. There is no contract or agreement providing for services to or maintenance of the Mortgaged Property which cannot be cancelled upon 30 days' or less notice. ARTICLE III CASUALTY; CONDEMNATION     Section 3.1  Casualty, Repair, Proof of Loss.  If any portion of the Mortgaged Property shall be damaged or destroyed by any cause (a "Casualty"), Borrower shall:     (a) give immediate notice to the Lender; and     (b) promptly commence and diligently pursue to completion (in accordance with plans and specifications approved by Lender) the restoration, repair and rebuilding of the Mortgaged Property as nearly as possible to its value, condition and character immediately prior to the Casualty; and     (c) if the Casualty is covered by insurance, immediately make proof of loss and collect all insurance proceeds, all such proceeds to be payable to Lender or as Lender shall direct. If an Event of Default shall be in existence, or if Borrower shall fail to provide notice to Lender of filing proof of loss, or if Borrower shall not be diligently proceeding, in Lender's reasonable opinion, to collect such insurance proceeds, then Lender may, but is not obligated to, make proof of loss, and is authorized, but is not obligated, to settle any claim with respect thereto, and to collect the proceeds thereof. Borrower shall not accept any settlement of an insurance claim, the result of which shall be a payment which is $10,000 or more less than the full amount of the claim, without the prior written consent of Lender.     Section 3.2  Use of Insurance Proceeds.  Lender shall make the net insurance proceeds received by it (after reimbursement of Lender's out-of pocket costs of collecting and disbursing the same) available to Borrower to pay the cost of restoration, repair and rebuilding of the Mortgaged Property, subject to the following conditions:     (a) There shall be no Event of Default in existence at the time of any disbursement of the insurance proceeds.     (b) Lender shall have determined, in its reasonable discretion, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of insurance proceeds and other funds deposited by Borrower with Lender. 7 --------------------------------------------------------------------------------     (c) Lender shall have determined, in its reasonable discretion, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Lender (such approval not to be unreasonably withheld), in accordance with codes and ordinances and in accordance with the terms, and within the time requirements in order to prevent termination, of any Lease, and in any event not less than six (6) months prior to the Maturity Date.     (d) All funds shall be disbursed, at Lender's option, in accordance with Lender's customary disbursement procedures for construction loans.     (e) The Casualty shall have occurred more than twelve (12) months prior to the Maturity Date. If any of these conditions shall not be satisfied, then Lender shall have the right to use the insurance proceeds to prepay the Loan in accordance with the Note, and if the Loan is prepaid in full, Borrower shall not be required to perform under Section 3.1(b) of this Mortgage. If any insurance proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be disbursed to Borrower, or at the Lender's discretion, used to prepay the Loan in accordance with the Note.     Section 3.3  Condemnation.  If any portion of the Mortgaged Property shall be taken, condemned or acquired pursuant to exercise of the power of eminent domain or threat thereof (a "Condemnation"), Borrower shall:     (a) give immediate notice thereof to Lender, and send a copy of each document received by Borrower in connection with the Condemnation to Lender promptly after receipt; and     (b) diligently pursue any negotiation and prosecute any proceeding in connection with the Condemnation at Borrower's expense. If an Event of Default shall be in existence, or if Borrower, in Lender's reasonable opinion, shall not be diligently negotiating or prosecuting the claim, Lender is authorized, but not required, to negotiate and prosecute the claim and appear at any hearing for itself and on behalf of Borrower and to compromise or settle all compensation for the Condemnation. Lender shall not be liable to Borrower for any failure by Lender to collect or to exercise diligence in collecting any such compensation. Borrower shall not compromise or settle any claim resulting from the Condemnation if such settlement shall result in payment of $10,000 or more less than Lender's reasonable estimate of the damages therefrom. All awards shall be paid to Lender.     Section 3.4  Use of Condemnation Proceeds.  Lender shall make the net proceeds of any Condemnation received by it (after reimbursement of Lender's out-of-pocket costs of collecting and disbursing the same) available to Borrower for restoration, repair and rebuilding of the Mortgaged Property, subject to the following conditions:     (a) There shall be no Event of Default in existence at the time of any disbursement of the condemnation proceeds.     (b) Lender shall determined, in its reasonable discretion, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of condemnation proceeds and other funds deposited by Borrower with Lender.     (c) Lender shall have determined, in its reasonable discretion, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Lender (such approval not to be unreasonably withheld), in accordance with codes and ordinances and in accordance with the terms, and within the time requirements in order to prevent termination, of any Lease, and in any event not less than six (6) months prior to the Maturity Date.     (d) All funds shall be disbursed, at Lender's option, in accordance with Lender's customary disbursement procedures for construction loans.     (e) The Condemnation shall have occurred more than twelve (12) months prior to the Maturity Date. 8 -------------------------------------------------------------------------------- If any of these conditions shall not be satisfied, then Lender shall have the right to use the condemnation proceeds to prepay the Loan in accordance with the Note. If any condemnation proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be disbursed to Borrower, or at Lender's discretion, used to prepay the Loan in accordance with the Note. ARTICLE IV DEFAULTS AND REMEDIES     Section 4.1  Events of Default.  The occurrence of any one or more of the following events shall constitute an Event of Default:   4.1(a) Borrower shall fail to make when due, whether by acceleration or otherwise, any payment of principal of or interest on the Note or any other obligations of the Borrower to the Lender pursuant to this Mortgage or any of the other Loan Documents.   4.1(b) Any representation or warranty made by or on behalf of Borrower in this Mortgage or any of the other Loan Documents or by or on behalf of Borrower in any certificate, statement, report or document herewith or hereafter furnished to the Lender pursuant to this Mortgage or any of the other Loan Documents shall prove to have been false or misleading in any material respect on the date as of which the facts set forth are stated or certified.   4.1(c) A sale, transfer, conveyance or encumbrance of the Mortgaged Property or any part thereof or of all or any part of Borrower's interest therein in violation of Section 1.3 of this Mortgage shall occur.   4.1(d) Borrower shall fail to comply with any other agreement, covenant, condition, provision or term contained in this Mortgage or any of the other Loan Documents (other than those hereinabove set forth in this Section 4.1) and such failure to comply shall continue for thirty (30) calendar days after the date Lender gives notice of such failure to the Borrower.   4.1(e) Borrower shall generally not pay its debts as they mature or shall apply for, shall consent to, or shall acquiesce in the appointment of a custodian, trustee or receiver of itself or for a substantial part of its property, or, in the absence of such application, consent or acquiescence, a custodian, trustee or receiver shall be appointed for Borrower or for a substantial part of the property thereof and shall not be discharged within sixty (60) days, or Borrower shall make an assignment for the benefit of creditors.   4.1(f) Any bankruptcy, reorganization, debt arrangement or other proceedings under any bankruptcy or insolvency law shall be instituted by or against Borrower and, if instituted against Borrower, shall have been consented to or acquiesced in by Borrower or shall remain undismissed for sixty (60) days, or an order for relief shall have been entered against Borrower.   4.1(g) Any dissolution or liquidation proceeding shall be instituted by or against Borrower and, if instituted against Borrower, shall be consented to or acquiesced in by Borrower or shall remain for sixty (60) days undismissed.   4.1(h) A judgment or judgments for the payment of money in excess of the sum of $75,000 in the aggregate shall be rendered against Borrower and either (i) the judgment creditor executes on such judgment or (ii) such judgment remains unpaid or undischarged for more than sixty (60) days from the date of entry thereof or such longer period during which execution of such judgment shall be stayed during an appeal from such judgment.   4.1(i) A default shall occur, and continue beyond any applicable grace or cure period, under any note or other evidence of indebtedness or credit or loan agreement, or other document or instruments executed in connection therewith, including without limitation the Security Agreement and Financing Agreement both of even date herewith and all other documents or instruments executed in connection 9 -------------------------------------------------------------------------------- therewith, all now or hereafter entered into between Lender and Borrower, as any of the same may be amended, modified, supplemented, extended, renewed or replaced.   4.1(j) The maturity of any material indebtedness of Borrower (other than the Loan and any indebtedness referred to in the immediately preceding subsection) shall be accelerated, or Borrower shall fail to pay any such material indebtedness when due (after the lapse of any applicable grace period) or any event shall occur or condition shall exist and shall continue for more than the period of grace, if any, applicable thereto and shall have the effect of causing, or permitting the holder of any such indebtedness to cause, such material indebtedness to become due prior to its stated maturity or to realize upon any collateral given as security therefor. For purposes of this Section, indebtedness shall be deemed "material" if it exceeds $50,000 as to any item of indebtedness or in the aggregate for all items of indebtedness with respect to which any of the events described in this Section has occurred.   4.1(k) Any execution or attachment shall be issued whereby any substantial part of the property of Borrower shall be taken or attempted to be taken and the same shall not have been vacated or stayed within sixty (60) days after the issuance thereof.   4.1(l) Any default shall occur under any other Loan Document, and shall continue beyond any grace or cure period provided therein with respect to such default.     Section 4.2  Remedies.  Upon and during the occurrence of an Event of Default described in Sections 4.1(e), (f) or (g) of this Mortgage, all of the Obligations shall be accelerated and become immediately due and payable without notice or declaration to Borrower. Upon the occurrence of one or more other Events of Default, all of the Obligations, at the option of Lender, shall be accelerated and become immediately due and payable upon notice to Borrower. In either event, the Obligations shall be due and payable without presentment, demand or further notice of any kind. Lender shall have the right to proceed to protect and enforce its rights by one or more of the following remedies:     (a) LENDER SHALL HAVE THE RIGHT TO BRING SUIT either for damages, for specific performance of any agreement contained in any Loan Document, for the foreclosure of this Mortgage, or for the enforcement of any other appropriate legal or equitable remedy.     (b) LENDER SHALL HAVE THE RIGHT TO SELL THE MORTGAGED PROPERTY AT PUBLIC AUCTION AND CONVEY THE SAME TO THE PURCHASER IN FEE SIMPLE, as provided by law, Borrower to remain liable for any deficiency. Said sale may be as one tract or otherwise, at the sole option of Lender. In the event of any sale of the Mortgaged Property pursuant to any judgment or decree of any court or at public auction or otherwise in connection with the enforcement of any of the terms of this Mortgage, Lender, its successors or assigns, may become the purchaser, and for the purpose of making settlement for or payment of the purchase price, shall be entitled to deliver over and use the Note and any claims for interest accrued and unpaid thereon, together with all other sums, with interest, advanced or secured hereby and unpaid hereunder, in order that there may be credited as paid on the purchase price the total amount of the Obligations then due, including principal and interest on the Note and all other sums, with interest, advanced or secured hereby and unpaid hereunder or under any of the other Loan Documents.     (c) LENDER SHALL HAVE THE RIGHT TO OBTAIN THE APPOINTMENT OF A RECEIVER at any time after the occurrence of an Event of Default. Lender may apply for the appointment of a receiver to the district court for the county where the Mortgaged Property 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). Lender shall be entitled to the appointment of a receiver without 10 -------------------------------------------------------------------------------- regard to waste, adequacy of the security or solvency of Borrower. The receiver, who shall be an experienced property manager, shall collect (until the Obligations are fully paid and satisfied and, in the case of a foreclosure sale, during the entire redemption period) the Rents, and shall manage the Mortgaged Property, execute Leases within or beyond the period of the receivership if approved by the court and apply all rents, profits and other income collected by him in the following order:      (i) to the payment of all reasonable fees of the receiver, if any, approved by the court;     (ii) to the repayment of tenant security deposits, with interest thereon, as required by Minnesota Statutes, Section 504.20;     (iii) to the payment when due of delinquent or current real estate taxes or special assessments with respect to the Mortgaged Property, or the periodic escrow for the payment of the same;     (iv) to the payment when due of premiums for insurance of the type required by this Mortgage, or the periodic escrow for the payment of the same;     (v) to the payment for the keeping of the covenants required of a lessor or licensor pursuant to Minnesota Statutes, Section 504.18, subdivision 1;     (vi) to the payment of all expenses for normal maintenance of the Mortgaged Property; and    (vii) the balance to Lender (a) if received prior to the commencement of a foreclosure, to be applied to the Obligations, in such order as Lender 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 Minnesota Statutes, Sections 580.30, 580.23 and 581.10, with any excess to be paid to Borrower. Provided, that if this Mortgage is not reinstated nor the Mortgaged Property redeemed as provided by said Sections 580.30, 580.23 or 581.10, the entire amount paid to Lender pursuant hereto shall be the property of Lender together with all or any part of the Mortgaged Property acquired through foreclosure.     Lender shall have the right, at any time and without limitation, as provided in Minnesota Statutes, Section 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 Mortgaged Property and sums so advanced, with interest at the Default Rate set forth in the Note, 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.     (d) LENDER SHALL HAVE THE RIGHT TO COLLECT THE RENTS from the Mortgaged Property and apply the same in the manner hereinbefore provided with respect to a receiver. For that purpose, Lender may enter and take possession of the Mortgaged Property and manage and operate the same and take any action which, in Lender's judgment, is necessary or proper to collect the Rents and to conserve the value of the Mortgaged Property. Lender 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, costs and agent's compensation) incurred pursuant to the powers herein contained shall be secured by this Mortgage. Lender shall not be liable to account to Borrower for any action taken pursuant hereto other than to account for any Rents actually received by Lender. Enforcement hereof shall not cause Lender to be deemed a mortgagee in possession unless Lender elects in writing to be a mortgagee in possession.     (e) LENDER SHALL HAVE THE RIGHT TO ENTER AND TAKE POSSESSION of the Mortgaged Property and manage and operate the same in conformity with all applicable laws and take any action which, in Lender's judgment, is necessary or proper to conserve the value of the Mortgaged Property. 11 --------------------------------------------------------------------------------     (f)  LENDER SHALL HAVE ALL OF THE RIGHTS AND REMEDIES PROVIDED IN THE UNIFORM COMMERCIAL CODE including 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 Mortgaged Property, or to proceed as to all of the Mortgaged Property in accordance with its rights and remedies in respect of said real estate. If Lender should elect to proceed separately as to such Personal Property, Borrower agrees to make such Personal Property available to Lender at a place or places acceptable to Lender, and if any notification of intended disposition of any of such Personal Property is required by law, such notification shall be deemed reasonably and properly given if given at least ten (10) days before such disposition in the manner hereinafter provided.     (g) LENDER 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 Borrower, its creditors or its property, for the entire amount due and payable by Borrower 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 Borrower 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 Lender 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. Lender 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.     Section 4.3  Expenses of Exercising Rights Powers and Remedies.  The reasonable expenses (including any reasonable 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, Torrens duplicate certificates of title, UCC and chattel lien searches, and similar data and assurances with respect to title as Lender 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 Mortgaged Property, and agent's compensation) incurred by Lender after and during 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 Borrower, with interest thereon from the date incurred at the Default Rate set forth in the Note, and shall be added to the indebtedness secured by this Mortgage.     Section 4.4  Restoration of Position.  In case Lender shall have proceeded to enforce any right under this Mortgage by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, and in every such case, Borrower and Lender shall be restored to their former positions and rights hereunder with respect to the Mortgaged Property subject to the lien hereof.     Section 4.5  Marshalling.  Borrower, for itself and on behalf of all Persons which may claim under Borrower, hereby waives all requirements of law relating to the marshalling of assets, if any, which would be applicable in connection with the enforcement by Lender of its remedies for an Event of Default hereunder, absent this waiver. Lender shall not be required to sell or realize upon any portion of the Mortgaged Property before selling or realizing upon any other portion thereof.     Section 4.6  Waivers.  No waiver of any provision hereof shall be implied from the conduct of the parties. Any such waiver must be in writing and must be signed by the party against which such waiver is 12 -------------------------------------------------------------------------------- sought to be enforced. The waiver or release of any breach of the provisions set forth herein to be kept and performed shall not be a waiver or release of any preceding or subsequent breach of the same or any other provision. No receipt of partial payment after acceleration of any of the Obligations shall waive the acceleration. No payment by Borrower or receipt by Lender of a lesser amount than the full amount secured hereby shall be deemed to be other than on account of the sums due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Lender may accept any check or payment without prejudice to Lender's right to recover the balance of such sums or to pursue any other remedy provided in this Mortgage. The consent by Lender to any matter or event requiring such consent shall not constitute a waiver of the necessity for such consent to any subsequent matter or event.     Section 4.7  Lender's Right to Cure Defaults.  If Borrower shall fail to comply with any of the terms of the Loan Documents with respect to the procuring of insurance, the payment of taxes, assessments and other charges, the keeping of the Mortgaged Property in repair, or any other term contained herein or in any of the other Loan Documents, Lender may make advances to perform the same without releasing Borrower from any of the Obligations. Borrower agrees to repay upon demand all sums so advanced and all sums expended by Lender in connection with such performance, including without limitation attorneys' fees, with interest at the Default Rate set forth in the Note from the dates such advances are made, and all sums so advanced and/or expenses incurred, with interest, shall be secured hereby, but no such advance and/or incurring of expense by Lender, shall be deemed to relieve Borrower from any default hereunder or under any of the other Loan Documents, or to release Borrower from any of the Obligations.     Section 4.8  Suits and Proceedings.  Lender shall have the power and authority, upon prior notice to Borrower, to institute and maintain any suits and proceedings as Lender may deem advisable to (i) prevent any impairment of the Mortgaged Property by any act which may be unlawful or by any violation of this Mortgage, (ii) preserve or protect its interest in the Mortgaged Property, or (iii) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if, in the sole opinion of Lender, the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Lender's interest. ARTICLE V MISCELLANEOUS     Section 5.1  Binding Effect; Survival; Number; Gender.  This Mortgage shall be binding on and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns. All agreements, representations and warranties contained herein or otherwise heretofore made by Borrower to Lender shall survive the execution, delivery and foreclosure hereof. The singular of all terms used herein shall include the plural, the plural shall include the singular, and the use of any gender herein shall include all other genders, where the context so requires or permits.     Section 5.2  Severability.  The unenforceability or invalidity of any provision of this Mortgage as to any person or circumstance shall not render that provision unenforceable or invalid as to any other person or circumstance.     Section 5.3  Notices.  Any notice or other communication to any party in connection with this Mortgage shall be in writing and shall be sent by manual delivery, telegram, telex, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified below, or at such other address as such party shall have specified to the other party hereto in writing. All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by telegram, telex or facsimile transmission, from the first Business Day (as defined in the Loan Agreement) after the date of sending if sent by overnight courier, or from four days 13 -------------------------------------------------------------------------------- after the date of mailing if mailed. Notices shall be given to or made upon the respective parties hereto at their respective addresses set forth below: If to Borrower:   REUTER MANUFACTURING, INC. 410 - 11th Avenue South Hopkins, Minnesota 55343   If to Lender:       U.S. Bank National Association U.S. Bank Place Minneapolis, Minnesota 55402 Either party may change its address for notices by a notice given not less than five (5) Business Days prior to the effective date of the change.     Section 5.4  Applicable Law.  This Mortgage and the other Loan Documents shall be construed and enforceable in accordance with, and be governed by, the laws of the State of Minnesota, without giving effect to conflict of laws or principles thereof, but giving effect to federal laws of the United States applicable to national banks. Whenever possible, each provision of this Mortgage and any other statement, instrument or transaction contemplated hereby or relating hereto, shall be interpreted in such manner as to be effective and valid under such applicable law, but, if any provision of this Mortgage or any other statement, instrument or transaction contemplated hereby or relating hereto shall be held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Mortgage or any other statement, instrument or transaction contemplated hereby or relating hereto.     Section 5.5  Waiver of Jury Trial.  Borrower and Lender each irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to this Mortgage or any of the other Loan Documents or the transactions contemplated hereby or thereby.     Section 5.6  Effect.  This Mortgage is in addition and not in substitution for any other guarantees, covenants, obligations or other rights now or hereafter held by Lender from any other person or entity in connection with the Obligations.     Section 5.7  Assignability.  Lender shall have the right to assign this Mortgage, in whole or in part, or sell participation interests herein, to any person obtaining an interest in the Obligations.     Section 5.8  Headings.  Headings of the Sections of this Mortgage are inserted for convenience only and shall not be deemed to constitute a part hereof. 14 --------------------------------------------------------------------------------     Section 5.9  Fixture Filing.  This instrument shall be deemed to be a Fixture Filing within the meaning of the Minnesota Uniform Commercial Code, and for such purpose, the following information is given: (a)   Name and address of Debtor:   REUTER MANUFACTURING, INC. 410 - 11th Avenue South Hopkins, Minnesota 55343 Federal Tax I.D. No.: 41-0780999   (b)       Name and address of Secured Party:       U.S. BANK NATIONAL ASSOCIATION U.S. Bank Place Minneapolis, Minnesota 55402   (c)       Description of the types (or items) of property covered by this Fixture Filing:       See granting clause on pages 2 and 3 hereof.   (d)       Description of real estate to which the collateral is attached or upon which it is or will be located:       See Exhibit A hereto.                     Some of the above-described collateral is or is to become fixtures upon the above-described real estate, and this Fixture Filing is to be filed for record in the public real estate records. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] 15 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, Borrower has executed this Mortgage as of the date first written above.     REUTER MANUFACTURING, INC.           By:       /s/ Michael J. Tate --------------------------------------------------------------------------------           Name:       Michael J. Tate --------------------------------------------------------------------------------           Title:       President --------------------------------------------------------------------------------                     STATE OF MINNESOTA   )         )   ss. COUNTY OF HENNEPIN   )         The foregoing instrument was acknowledged before me this 10th day of October, 2000, by Michael J. Tate, the President of REUTER MANUFACTURING, INC., a corporation organized under the laws of the State of Minnesota, on behalf of the corporation.     /s/ Pamela H. Voss -------------------------------------------------------------------------------- Notary Public 16 -------------------------------------------------------------------------------- EXHIBIT A Legal Description (Granting Clause A)     Lot 3, Auditor's Subdivision Number 195, Hennepin County, Minnesota, together with all that part of vacated 31/2 Street South lying between the Easterly and Westerly boundary lines of said Lot 3 extended Northerly. Permitted Encumbrances (Section 2.1) 1.Unpaid 1999 real estate taxes and installments of special assessments, plus penalty and interest. 2.Real estate taxes and installments of special assessments for 2000 not yet due and payable. 3.Drainage Ditch Easement recorded as Torrens Document No. 1396934. 4.Underground Utility Easement recorded as Torrens Document No. 890732. 5.Roadway and Utility Easement recorded with the County Recorder as Document No. 6730545. 6.Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement in the original principal amount of $2,400,000 recorded as Document No. 2869161. 7.Financing Statement by and between Hydro Engineering International Inc., as debtor, and R. A. Marsteller, as Collateral Agent, as secured party, recorded as Document No. 3260211. 8.Second Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement in the original principal amount of $970,000.00 recorded as Document No. 3277844. 9.Third Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement in the original principal amount of $2,325,000.00 recorded as Document No. 3298708. A-1 -------------------------------------------------------------------------------- EXHIBIT B List of Personal Property (Granting Clause B)     All fixtures, machinery, equipment and personal property now or hereafter located on, in or under the land, hereafter described ("Land") and the improvements constructed thereon ("Improvements") or which are necessary or useful in connection with the functioning of the Land or Improvements for their general intended purposes (but not to the extent primarily used in the operation of Borrower's specific business) and which are owned by Borrower including any construction and building materials stored on and to be included in the Improvements plus any repairs, replacements, and betterments thereto and proceeds and products thereof (the "Fixtures and Personal Property"); and all rights of the Borrower with respect to tenants or occupants now or hereafter occupying any part of the Land or Improvements, if any, whether oral or written, including all leases and licenses and rights in connection therewith (the "Leases"), and all rents, income, both from services and occupation, royalties, revenues and payments, including prepayments and security deposits (collectively, the "Rents"), which are now or hereafter due or to be paid in connection with the Land, Improvements, Fixtures, or Personalty; and all general intangibles of Borrower which relate to any of the Land, Improvements, Fixtures, Personal Property or Leases as related to the functioning of the Land or Improvements for their general intended purposes (but not to the extent primarily used in the operation of Borrower's specific business), including proceeds of insurance and condemnation or conveyance of the Land and Improvements, accounts, trade names, contract rights, accounts receivable, and bank accounts as related to the functioning of the Land or Improvements for their general intended purposes (but not to the extent primarily used in the operation of Borrower's specific business); and all after acquired property similar to the property herein described and conveyed which may be subsequently acquired by Borrower and used in connection with the Land, Improvements, Fixtures, Personal Property, Leases or Rents as related to the functioning of the Land or Improvements for their general intended purposes (but not to the extent primarily used in the operation of Borrower's specific business); and all cash and noncash proceeds and products of all of the foregoing property ("Proceeds"). B-1 -------------------------------------------------------------------------------- EXHIBIT C (Insurance Requirements) I.  PROPERTY INSURANCE As to Improvements while under construction:     An ORIGINAL (or evidence acceptable to Lender of) Builder's Risk "All-Risk", Completed Value (Non-Reporting) Form POLICY naming Borrower as an insured, and covering the interests of all contractors (of all tiers) in the Mortgaged Property, reflecting coverage of 100% of the insurable replacement cost, and written by a carrier approved by Lender with a current A.M. Best Company rating of at least A:VII (which is authorized to do business in the State of Minnesota), that includes: •Lender's Loss Payable Endorsement naming U.S. Bank National Association as Mortgagee •30-day notice to Lender in the event of cancellation or non-renewal by either party or material adverse change •Replacement Cost Measure of Recovery •Stipulated Value/Agreed Amount Endorsement (No Coinsurance) •Coverage for Foundations, Off-site (Unscheduled and Temporary Locations), Transit, Testing, Flood, Earthquake, Collapse, and Boiler and Machinery/ Mechanical and Electrical Breakdown, in such amounts as Lender and Borrower mutually agree is appropriate •Coverage for indirect loss exposures (customarily referred to as "soft cost" exposures), "Contingent Liability from Operation of Building Laws" coverage, "Demolition Costs" coverage, "Increased Cost of Construction" coverage, and "Increased Time to Rebuild" coverage, with such additional limits for such coverages as Lender may reasonably require •Policy to permit partial occupancy •No insurer subrogation action or recovery against any party whose interests are covered under the policy •Deductible not to exceed $5,000 •Coverage to become effective upon the date of the Notice to Proceed, the date of site mobilization, or the start of any shipment of materials, machinery or equipment to the site, whichever is earlier, and to remain in effect until replaced by the permanent All Risk Property Insurance described below, or until such other time as may be mutually agreed upon by Lender and Borrower As to completed Improvements:     An ORIGINAL (or evidence acceptable to Lender of) Special Form (or so-called All Risk) Hazard Insurance POLICY naming Borrower as an insured, reflecting coverage of 100% of the replacement cost, and written by a carrier approved by Lender with a current A.M. Best Company rating of at least A:VII (which is authorized to do business in the State of Minnesota), that includes: •Lender's Loss Payable Endorsement naming U.S. Bank National Association as Mortgagee •30-day notice to Lender in the event of cancellation or non-renewal by either party or material adverse change •Replacement Cost Measure of Recovery •Stipulated Value/Agreed Amount Endorsement (No Coinsurance) •Boiler and Machinery Coverage (including business income, extra expense coverage) C-1 -------------------------------------------------------------------------------- •Flood Insurance •One (1) year's business interruption, leasehold interest and/or rent loss insurance in an amount acceptable to Lender •Extra expense coverage in an amount acceptable to Lender •"Contingent Liability from Operation of Building Laws" coverage, "Demolition Costs" coverage, "Increased Cost of Construction" coverage, and "Increased Time to Rebuild" Coverage, with such additional limits for such coverages as Lender may reasonably require •No exclusion for "Collapse" •Deductible not to exceed $5,000 II.  LIABILITY INSURANCE     An ORIGINAL (or evidence acceptable to Lender of) Commercial General Liability Insurance POLICY (Insurance Services Offices policy form title) naming Borrower as an insured, providing coverage on an "occurrence" rather than a "claims made" basis, and written by a carrier approved by Lender with a current A.M. Best Company rating of at least A:VII (which is authorized to do business in the State of Minnesota), that includes: •Combined general liability policy limit of at least $2,000,000.00 each occurrence, applying to liability for Bodily Injury, Personal Injury and Property Damage, which combined limit may be satisfied by the limit afforded under the Commercial General Liability Policy, or by such Policy in combination with the limits afforded by an Umbrella or Excess Liability Policy (or policies); provided, that the coverage afforded under any such Umbrella or Excess Liability Policy is at least as broad in all material respects as that afforded by the underlying Commercial General Liability Policy •Coverage for Bodily Injury, Property Damage, Personal Injury, Contractual Liability, Independent Contractors and Products-Completed Operations Liability •Automobile Liability insurance covering liability for Bodily Injury and Property Damage arising out of the ownership, use, maintenance or operation of all owned, nonowned and hired automobiles and other motor vehicles utilized by Borrower in connection with the Mortgaged Property, which coverage may be provided under a separate policy •Dram shop coverage if liquor is sold or served at or in the Mortgaged Property, which coverage may be provided under a separate policy •Deductible not to exceed $5,000 •Additional Insured Endorsement naming U.S. Bank National Association and a Severability of Interest provision •30-day notice to Lender in the event of cancellation or non-renewal by either party or material adverse change III. WORKER'S COMPENSATION     An ORIGINAL CERTIFICATE of Worker's Compensation coverage in the statutory amount, naming Borrower as an insured, written by a carrier approved by Lender. C-2 -------------------------------------------------------------------------------- QUICKLINKS THIS INSTRUMENT WAS PREPARED BY, AND WHEN RECORDED SHOULD BE RETURNED TO: Dorsey & Whitney LLP (RMH) Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402-1498 AMENDED, RESTATED, AND CONSOLIDATED MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FINANCING STATEMENT A. LAND AND IMPROVEMENTS B. FIXTURES AND PERSONAL PROPERTY C. LEASES AND RENTS D. GENERAL INTANGIBLES E. AFTER ACQUIRED PROPERTY AND PROCEEDS ARTICLE I AGREEMENTS ARTICLE II REPRESENTATIONS AND WARRANTIES ARTICLE III CASUALTY; CONDEMNATION ARTICLE IV DEFAULTS AND REMEDIES ARTICLE V MISCELLANEOUS EXHIBIT A Legal Description (Granting Clause A) Permitted Encumbrances (Section 2.1) EXHIBIT B List of Personal Property (Granting Clause B) EXHIBIT C (Insurance Requirements)
GENERAL TERMS AGREEMENT NO. 6 13616 Table of Contents Agreement ARTICLE I PRODUCTS ARTICLE II PRICES ARTICLE III ORDER PLACEMENT ARTICLE IV DELIVERY ARTICLE V PAYMENT ARTICLE VI TAXES ARTICLE VII CFM56 PRODUCT SUPPORT PLAN ARTICLE VIII EXCUSABLE DELAY ARTICLE IX PATENTS ARTICLE X INFORMATION AND DATA ARTICLE XI FAA AND DGAC CERTIFICATION REQUIREMENTS ARTICLE XII TERMINATION FOR INSOLVENCY ARTICLE XIII LIMITATION OF LIABILITY ARTICLE XIV EXPORT SHIPMENT ARTICLE XV GOVERNMENTAL AUTHORIZATION ARTICLE XVI NOTICES ARTICLE XVII MISCELLANEOUS o Exhibit A Products o Exhibit B CFM56 Product Support Plan SECTION I DEFINITIONS SECTION II WARRANTIES SECTION III SPARE PARTS PROVISIONING SECTION IV TECHNICAL DATA SECTION V TECHNICAL TRAINING SECTION VI CUSTOMER FACTORY AND FIELD SUPPORT SECTION VII PRODUCT SUPPORT ENGINEERING SECTION VIII OPERATIONS ENGINEERING SECTION IX GROUND SUPPORT EQUIPMENT SECTION X GENERAL CONDITIONS CFM56 PRODUCT SUPPORT PLAN o Exhibit C Escalation o Exhibit D Payment o Exhibit E Technical Data A 1 c:\temp\cfm agreement redact1.doc THIS GENERAL TERMS AGREEMENT NO. 6 13616 (hereinafter referred to as this Agreement) dated as of the 30th day of June , 2000, by and between CFM International, Inc. (hereinafter referred to as CFMI), a Delaware corporation jointly owned by General Electric Company (hereinafter referred to as "GE"), a New York corporation and Societe Nationale D'Etude et de Construction de Moteurs d'Aviation (hereinafter referred to as "SNECMA"), a French Company, and Frontier Airlines, Inc., a corporation organized under the law of Colorado (hereinafter referred to as "Airline"). Capitalized terms not defined herein are used as defined in Exhibit B hereto. = WITNESSETH WHEREAS, Airline has agreed to lease and purchase certain aircraft equipped with CFM installed Engines, and WHEREAS, the parties hereto desire to enter into this Agreement for the support by CFMI of the installed Engines and the purchase by Airline from CFMI and the sale and support by CFMI of spare Engines, related equipment and spare Parts therefor. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I PRODUCTS CFMI shall sell and Airline shall purchase, under the terms and subject to the conditions hereinafter set forth, the Engines, Modules, spare Parts and other products and equipment identified in the attached Exhibit A, and hereinafter referred to as "Product(s)." Products purchased hereunder for installation on Airline's type A319 aircraft shall conform to the specifications for Products installed by the manufacturer on new type A319 aircraft purchased or leased by Airline and shall be interchangeable with, and of the same quality as, such Products. ARTICLE II PRICES The selling prices of Products, including certain spare Parts, shall be the prices as quoted by CFMI and as set forth in each Airline purchase order accepted by CFMI. A. The selling prices of Engines and related equipment therefor shall be quoted by CFMI as base prices subject to an adjustment for escalation. The escalation provisions currently in effect are set forth in attached Exhibit C and CFMI will advise Airline in writing ninety (90) days in advance of any change thereto. B. The selling price of spare Parts, except for those which may be quoted by CFMI to Airline, shall be those prices set forth in CFMI's then current CFM56 Engine Spare Parts Price Catalog ("Spare Parts Catalog") or in procurement data issued by CFMI in accordance with Airline Transport Association of America (ATA) Specification (Spec) 200. The price of a new spare Part which is first listed by CFMI in procurement data, may be changed by CFMI in subsequent procurement data revisions until such time as the Part is included in CFMI's Spare Parts Catalog as from time to time revised by CFMI. C. CFMI will advise Airline in writing * days in advance of any changes in prices in CFMI's Spare Parts Catalog. During such * day period, CFMI shall not be obligated to accept Airline purchase orders for quantities of spare Parts in excess of up to * normal usage beyond the effective date of the announced price change. D. The selling prices of all Products shall be expressed in U.S. Dollars. ARTICLE III ORDER PLACEMENT A. In the event of any conflict between this Agreement and the printed terms and conditions appearing on Airline's purchase orders, this Agreement shall govern, except that the description of Products, price, quantity, delivery dates and shipping instructions shall be as set forth on each purchase order accepted by CFMI. B. Airline shall place purchase orders for Products quoted by CFMI, in accordance with CFMI's quotation for said Products. C. Airline may place purchase orders for spare Parts using one of the following methods: telephone, telegram, facsimile transmission, ARINC or SITA utilizing ATA Spec 200 (Chapter 6 format) or Spec 2000 (Chapter 3 format) or Airline purchase order as prescribed in the Spare Parts Catalog or CFMI's quotation. D. Airline shall place purchase orders for initial provisioning quantities of spare Parts as provided in Section III of the attached Exhibit B within one hundred eighty (180) days following receipt from CFMI of initial provisioning data relating thereto. E. CFMI's acknowledgment of each purchase order shall constitute acceptance thereof. If CFMI fails to acknowledge any purchase order within ten (10) business days after receipt thereof, such purchase order shall be deemed to have been accepted by CFMI in accordance with its terms. In the case of emergency, shipment of spare Parts by CFMI in accordance with Section III G.2 of Exhibit B shall constitute acceptance of the purchase order for such spare Parts. ARTICLE IV DELIVERY A. Except as otherwise provided under Section III.G. of Exhibit B herein, CFMI shall deliver Products under each purchase order placed by Airline and accepted by CFMI, on a mutually agreed upon schedule consistent with CFMI's lead times and as set forth in each such purchase order. Delivery dates are subject to (1) prompt receipt by CFMI of all information necessary to permit CFMI to proceed with work immediately and without interruption, and (2) Airline's compliance with the payment terms set forth herein. B. Title to and risk of loss of all Products shall pass to Airline upon delivery to the common carrier designated by Airline, Ex Works, at the point of manufacture, or (2) to storage, in the event shipment cannot be made for reasons set forth in Paragraph C of this Article IV. Wherever transportation rates and the carrier's liability for damage depend upon the declared value of the shipment, CFMI will declare such value as will entitle Airline to ship Products at the lowest permissible rates, unless otherwise instructed in writing by Airline. C. If any Product cannot be delivered when ready due to any acts, or failure to act of Airline , CFMI shall place such Product in storage. In such event, (1) all expenses incurred by CFMI for activities such as, but not limited to, preparation for and placement into storage and handling, storage, inspection, preservation and insurance shall be paid by Airline upon presentation of CFMI's invoices, and (2) CFMI shall assist and cooperate with Airline in any reasonable manner with respect to the removal of any such Product from storage. D. Unless otherwise instructed by Airline, CFMI shall deliver each Product, except for spare Parts, packaged in accordance with CFMI's normal standards for domestic shipment or export shipment. Any special boxing or preparation for shipment specified by Airline shall be for Airline's account and responsibility. The cost of any re usable shipping stand or container is not included in the price of Engines or of equipment and will be paid by Airline within ten (10) days of presentation of CFMI's invoice if such stand or container is not returned by Airline, ex works the original point of shipment, in the condition in which it was received by Airline within ninety (90) days after shipment. CFMI may, at its option, use non reusable shipping stands or containers at no charge to Airline. E. CFMI shall deliver spare Parts packaged and labeled in accordance with ATA Spec 300, Revision No. 4, or to a revision mutually agreed in writing between CFMI and Airline. CFMI shall notify Airline, when applicable, that certain spare Parts are packed in unit package quantities (UPQ's), or multiples thereof. ARTICLE V PAYMENT Airline shall pay CFMI with respect to Products purchased hereunder as set forth in the attached Exhibit D. ARTICLE VI TAXES 1. The selling prices include and CFMI shall be responsible for the payment of any imposts, duties, fees, taxes, dues or any charges whatsoever imposed or levied in connection with Products prior to their delivery. If claim is made against Airline for any such duties, fees, charges, or assessments, Airline shall immediately notify CFMI and, if requested by CFMI, Airline shall not pay except under protest, and if payment be made, shall use all reasonable effort to obtain a refund thereof. If all or any part of any such taxes, duties, fees, charges or assessments be refunded, Airline shall repay to CFMI such part thereof as CFMI shall have paid, together with any interest received by Airline with respect thereto. CFMI shall pay to Airline, upon demand, all expenses (including penalties and interest, other than any such penalties or interest resulting from the failure of Airline seasonably to pay any such taxes, duties, fees, charges or assessments which it has reason to believe are applicable, unless such nonpayment is directed by CFMI) incurred by Airline in protesting payment and in endeavoring to obtain such refund, in each case at CFMI's request. 2. Upon delivery, Airline shall be responsible for the payment of all other imposts, duties, taxes, dues or any other charges whatsoever (including without limitation, sales, use, excise, turnover or value added tax but excluding any taxes in the nature of income taxes) imposed or levied in connection with such Products from and after their delivery and Airline shall pay to CFMI, upon demand, or furnish to CFMI evidence of exemption therefrom, any such items legally assessed or levied by any governmental authority against CFMI or its employees, its subsidiaries or their employees. If claim is made against CFMI for any such duties, fees, charges, or assessments, CFMI shall immediately notify Airline and, if requested by Airline, CFMI shall not pay except under protest, and if payment be made, shall use all reasonable effort to obtain a refund thereof. If all or any part of any such taxes, duties, fees, charges or assessments be refunded, CFMI shall repay to Airline such part thereof as Airline shall have paid, together with any interest === received by CFMI with respect thereto. Airline shall pay to CFMI, upon demand, all expenses (including penalties and interest other than any such penalties or interest resulting from the failure of CFMI seasonably to pay any such taxes, duties, fees, charges or assessments which it has reason to believe are applicable, unless such nonpayment is directed by Airline) incurred by CFMI in protesting payment and in endeavoring to obtain such refund, in each case at Airline's request. ARTICLE VII CFM56 PRODUCT SUPPORT PLAN The CFM56 Product Support Plan for Products, either purchased by Airline from CFMI or installed on Airline's Aircraft as original equipment, and Airline's operation thereof, is set forth in the attached Exhibit B. = ARTICLE VIII EXCUSABLE DELAY CFMI shall not be liable for delays in delivery or failure to deliver due to (1) causes beyond its reasonable control, or (2) acts of God, acts of Airline, acts of civil or military authority, fires, strikes, floods, epidemics, war, civil disorder, riot, delays in transportation, or (3) inability due to causes beyond its reasonable control to obtain necessary labor, material, or components. As used herein, the term "CFMI" shall be deemed to mean CFMI, GE and SNECMA. In the event of any such delay, the date of delivery shall be extended for a period equal to the time lost by reason of the delay. This provision shall not, however, relieve CFMI from using reasonable efforts to continue performance whenever such causes are removed. The final invoice price at the time of delivery following any delay referred to in this Article VIII (other than any such delay caused by Airline) shall be the invoice price at the originally scheduled delivery date set forth in the applicable purchase order. CFMI shall promptly notify Airline when delays occur or impending delays are likely to occur and shall continue to advise it of new shipping schedules and/or changes thereto. In the event an excusable delay continues, or CFMI advises Airline that such a delay is likely to continue for a period of six (6) months or more beyond the scheduled delivery date, Airline may, upon thirty days written notice to CFMI, cancel all or any part of any purchase order so delayed. In the event an excusable delay continues, or CFMI advises Airline that such a delay is likely to continue for a period of twelve (12) months or more beyond the scheduled delivery date, Airline or CFMI may, upon thirty days written notice to the other, cancel all or any part of any purchase order so delayed. Upon any cancellation pursuant to this Article VIII, CFMI shall return to Airline all payments relative to the canceled part of the order. Airline shall pay CFMI its reasonable cancellation charges if the delay arises due to acts of Airline. ARTICLE IX PATENTS A. CFMI hereby indemnifies and agrees to hold Airline harmless from and against, and shall handle all claims and defend any suit or proceeding brought against Airline insofar as based on, any claim that without further combination, any Product furnished under this Agreement constitutes an infringement of any patent of the United States or of any patent of any other country that is signatory to Article 27 of the Convention on International Civil Aviation signed by the United States at Chicago on December 7, 1944, in which Airline is authorized to operate or in which another airline pursuant to lawful interchange, lease or similar arrangement, operates aircraft of Airline. This paragraph shall apply only to any Product manufactured to CFMI's design. B. CFMI's liability hereunder is conditioned upon Airline promptly notifying CFMI in writing and giving CFMI authority, information and assistance (at CFMI's expense) for the defense of any suit or proceeding. In case such Product is held in such suit or proceeding to constitute infringement and/or the use of said Product is enjoined or otherwise prohibited, CFMI shall expeditiously, at its own expense and at its option, either (1) procure for Airline the right to continue using said Product; (2) replace same with satisfactory and noninfringing Product; or (3) modify same so it becomes satisfactory and noninfringing. CFMI shall not be responsible to Airline or to any other airline, for incidental or consequential damages, including, but not limited to, costs, expenses, liabilities and/or loss of profits resulting from loss of use under this Article IX. The foregoing shall constitute the sole remedy of Airline and the sole liability of CFMI for patent infringement. ARTICLE X INFORMATION AND DATA A. All technical information and data (including, but not limited to, designs, drawings, blueprints, tracings, plans, models, layouts, specifications, and memoranda) which may be furnished or made available to Airline directly or indirectly as the result of this Agreement shall remain the property of CFMI, GE or SNECMA as the case may be. This information and data is proprietary to CFMI and shall neither be used by = Airline nor furnished by Airline to any other person, firm or corporation for the design or manufacture of any Product nor permitted out of Airline's possession nor divulged to any other person, firm or corporation, except as required by law or court order (provided Airline shall first give CFMI prompt written notice of any such law or court orders and such notice affords CFMI a reasonable opportunity to object to such disclosure or otherwise seek an appropriate protective order) or as otherwise provided herein or agreed in writing. Nothing in this Agreement shall preclude Airline from using such information and data for modification, overhaul, or maintenance work performed by Airline on Airline's Products; except that all repairs or repair processes that require substantiation (including, but not limited to, high technology repairs) will be the subject of a separate license and substantiated repair agreement between CFMI and Airline. As an alternative to CFMI engine maintenance centers and Airline's own maintenance facilities, CFMI will negotiate in good faith with a third party engine maintenance facility for CFM56 engine overhaul subject to acceptance of CFMI's licensing terms by such third party engine maintenance facility. Airline shall take all steps reasonably necessary to insure compliance by its employees, and agents with this Article X. The instrument by which Airline transfers any Product may permit the use of such information and data by its transferees, subject to the same limitations set forth above. B. Nothing in this Agreement shall convey to Airline the right to reproduce or cause the reproduction of any Product of a design identical or similar to that of the Product purchased hereunder or give to Airline a license under any patents or rights owned or controlled by CFMI, GE or SNECMA. C. If computer software is provided by CFMI to Airline under this Agreement, it is understood that only CFMI owns and/or has the right to license such software product(s) and that Airline shall have no rights in such software; except, as may be explicitly set forth in a separate written agreement between CFMI and Airline. ARTICLE XI FAA AND DGAC CERTIFICATION REQUIREMENTS A. All Products shall, at time of delivery: 1. Conform to a Type Certificate issued by the FAA and DGAC , if applicable; 2. Conform to applicable regulations issued by the FAA and DGAC; and 3. Be delivered with an export certificate of airworthiness , if applicable, for export to the United States. B. If, subsequent to the date of acceptance of the purchase order for such Products but prior to their delivery by CFMI to Airline, the FAA and/or DGAC issue changes in regulations covering Products sold under this Agreement then CFMI will make any modifications necessary to cause such Products to comply with such regulations and all costs associated with such modifications, if any, required as a result thereof, will be shared equally by CFMI and Airline; provided however, that costs associated with any modifications to the airframe required by such Product modifications shall not be borne by CFM. C. Any delay occasioned by complying with such regulations set forth in Paragraph B above shall be deemed an Excusable Delay under Article VIII hereof, and, in addition, appropriate adjustments shall be made in the specifications to reflect the effect of compliance with such regulations. ARTICLE XII TERMINATION FOR INSOLVENCY A. Upon the commencement of any bankruptcy or reorganization proceeding by or against either party hereto (the "Defaulting Party"), the other party hereto may, upon written notice to the Defaulting Party, cease to perform any and all of its obligations under this Agreement and the purchase orders hereunder (including, without limitation, continuing work in progress and making deliveries or progress payments or downpayments) unless the Defaulting Party shall provide adequate assurance, in the opinion of the other party hereto, that the Defaulting Party will continue to perform all of its obligations under this Agreement and the purchase orders hereunder in accordance with the terms hereof, and will promptly compensate the other party hereto for any actual pecuniary loss resulting from the Defaulting Party being unable to perform in full its obligations hereunder and under the purchase orders. If the Defaulting Party or the trustee thereof shall fail to promptly provide such adequate assurance, upon notice to the Defaulting Party by the other party hereto, this Agreement and all purchase orders hereunder shall be canceled, any deposits shall be === promptly returned, and neither party shall have any further obligation to the other hereunder, except such obligations which have accrued prior to such cancellation. B. Either party, at its option, may cancel this Agreement or any purchase order hereunder with respect to any or all of the Products to be furnished hereunder which are undelivered or not furnished on the effective date of such cancellation by giving the other party written notice, as hereinafter provided, at any time after a receiver of the other's assets is appointed on account of insolvency, or the other makes a general assignment for the benefit of its creditors and such appointment of a receiver shall remain in force undismissed, unvacated or unstayed for a period of sixty (60) days thereafter. Such notice of cancellation shall be given thirty (30) days prior to the effective date of cancellation, except that, in the case of a voluntary general assignment for the benefit of creditors, such notice need not precede the effective date of cancellation. ARTICLE XIII WARRANTIES; LIMITATION OF LIABILITY A. CFMI's warranties with respect to Products, either purchased by Airline from CFMI or installed on Airline's Aircraft as original equipment, are set forth in Section II of Exhibit B. B. CFMI warrants to Airline that it will convey good title to any Products sold hereunder, free and clear of any liens, claims or encumbrances whatsoever; provided that CFMI's liability and Airline's remedy under the foregoing warranty are limited to removal of any title defect or, at CFMI's option, replacement of the Product or part thereof having such defect; provided further that Airline's rights and remedies with respect to patent infringement are as set forth in Article IX hereof. C. Except as provided in this Article XIII and in Article IX hereof, the liability of CFMI to Airline arising out of, connected with, or resulting from the manufacture, sale, possession, use or handling of any Product (including Engines installed on Airline's aircraft as original equipment) whether in contract, tort (including negligence) or otherwise, shall be as set forth in the Product Support Plan included in Exhibit B hereof, and shall not in any event exceed *. The foregoing shall constitute the sole remedy of Airline and the sole liability of CFMI. In no event shall CFMI or Airline be liable for special or consequential damages. As used herein, the term "CFMI" shall be deemed to include GE, SNECMA and CFMI. THE WARRANTIES AND GUARANTEES SET FORTH IN THE PRODUCT SUPPORT PLAN ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES WHETHER WRITTEN, STATUTORY, ORAL, OR IMPLIED (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE). ARTICLE XIV EXPORT SHIPMENT If CFMI agrees in writing upon Airline's written request, to assist Airline to arrange for export shipment of Products, Airline shall pay CFMI for all fees and expenses including, but not limited to, those covering preparation of consular invoices, freight, storage, and Warehouse to Warehouse (including war risk) insurance, upon submission of CFMI's invoices. In such event, CFMI will assist Airline in applying for any required export license and in preparing consular documents according to Airline's instructions or in the absence thereof, according to its best judgment but without liability for error or incorrect declarations including, but not limited to, liability for fines or other charges. ARTICLE XV GOVERNMENTAL AUTHORIZATION CFMI shall be responsible for obtaining any Export Certificate of Airworthiness and any export license required in respect of Products when delivered new to Airline for export to the United States. Airline shall be responsible for obtaining any other required authorization such as any other export license, import license, exchange permit or any other required governmental authorization. Airline shall restrict disclosure of all information and data furnished thereto under this Agreement and shall ship the direct product of such information and data to only those destinations which are authorized by the U.S. and/or French Governments. At the request of Airline, CFMI will provide Airline with a list of such authorized destinations. CFMI shall not be liable if any authorization is delayed, denied, revoked, restricted or not renewed and Airline shall not be relieved of its obligation to pay CFMI. ARTICLE XVI NOTICES Any notices under this Agreement shall become effective upon receipt and shall be in writing and be delivered or sent by mail or electronic transmission to the respective parties at the following addresses, which may be changed by written notice: To: Frontier Airlines, Inc. To: CFM International, Inc. 12015 East 46th Avenue P. O. Box 15514 Suite 200 Cincinnati, Ohio 45215 0514 Denver, CO 80239 3116 Attention: Director, Commercial Contracts Attention: ARTICLE XVII MISCELLANEOUS A. This Agreement may not be assigned, in whole or in part, by either party without the prior written consent of the other party, except that (i) CFMI's consent shall not be required for (a) the substitution of an affiliate of Airline in place of Airline, (b) the assignment by Airline of its rights and obligations hereunder to the surviving or acquiring entity in any merger, consolidation or sale of all or substantially all of its assets, if, immediately following such merger, consolidation or sale, the surviving or acquiring entity is in a financial condition at least equal to that of the Airline at the time immediately prior to such merger, consolidation or sale, and such entity executes an assumption agreement, in form and substance reasonably acceptable to CFMI, agreeing to assume all of Airline's obligations hereunder, or (c) the assignment by Airline of its rights under Section II of Exhibit B hereto to a lender or financier as security for Airline's obligations in connection with any financing of an Engine or an aircraft on which an Engine is installed, and (ii) Airline's consent shall not be required for the substitution of any other company jointly owned by GE and SNECMA in place of CFMI as the contracting party and the recipient of any or all payments and/or for the assignment of CFMI's payment rights to CFMI's suppliers. No assignment by either party shall increase any cost or liability of the other hereunder, or modify in any way such other party's contract rights hereunder, and each party agrees that notwithstanding any such assignment it remains fully and solely responsible in accordance with the terms and obligations of this Agreement for all of its obligations and liabilities hereunder. B. The rights herein granted and this Agreement are for the benefit of the parties hereto and are not for the benefit of any third person, firm or corporation, except as expressly provided herein with respect to GE and SNECMA, and nothing herein contained shall be construed to create any rights in any third parties under, as the result of, or in connection with this Agreement. C. This Agreement contains information specifically for Airline and CFMI and, except as permitted pursuant to Article X hereof, nothing herein contained shall be divulged by Airline or CFMI to any third person, firm or corporation, without the prior written consent of the other party which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Airline may disclose this Agreement (i) to its == agents and professional advisors, (ii) to prospective lenders or financiers with respect to the Engines or an aircraft on which an Engine is installed, (iii) to prospective transferees or operators of the Engines or such aircraft, and (iv) as otherwise required by law (including any governmental agency) or by court order, and all of the persons and entities set forth in (i), (ii) and (iii) above shall agree in writing not to divulge to others without the prior written consent of CFMI. If Airline is required to disclose pursuant to sub paragraph (iv) above, Airline shall first give CFMI written notice of any such law or court order, and such notice shall afford CFMI a reasonable opportunity to object to such disclosure or otherwise seek an appropriate protective order. Airline and CFMI shall also work together to provide to the S.E.C. an agreed to redacted version of the Agreement. D. This Agreement shall be construed, interpreted and applied in accordance with the law of the State of New York. Each of CFMI and Airline (i) hereby irrevocably submits itself to the nonexclusive jurisdiction of the courts of the state of New York, New York County, and of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, the subject matter hereof or any of the transactions contemplated hereby brought by any party or parties hereto, and (ii) hereby waives, and agrees not to assert, by way of motion, as a defense or otherwise, in any such suit, action or proceeding, to the extent permitted by applicable law, any defense based on sovereign or other immunity or that the suit , action or proceeding which is referred to in clause (i) above is brought in an inconvenient forum, that the venue of such suit, action or proceeding is improper, or that this Agreement or the subject matter hereof or any of the transactions contemplated hereby may not be enforced in or by these courts. Each party hereby generally consents to service of process by registered mail, return receipt requested, at its address for notice under this Agreement. The United Nations Conference on contracts for the International Sale of Goods shall not apply to this Agreement. E. This Agreement and all Letter Agreements relating hereto contain the entire and only agreement between the parties, and supersede all pre existing agreements between such parties, respecting the subject matter hereof; including General Terms Agreement No. 6 13328, dated November 13, 1995 and any representation, promise or condition in connection therewith not incorporated herein shall not be binding upon either party. No modification, renewal, extension, waiver, or termination by mutual consent of this Agreement or any of the provisions herein contained shall be binding unless it is made in writing and signed on behalf of CFMI and Airline by duly authorized executives. F. Any provision in this Agreement to the contrary notwithstanding (including, in particular the provisions of Exhibit B hereto), the maintenance, removal, repair or replacement of Products, the order and storage thereof, as well as manuals, training and tooling in support thereof shall be controlled by and subject to any applicable law, rule or regulation and to the conditions set forth in any applicable governmental authorization. G. The provisions of Articles IX Patents, X Information and Data, XIII Warranties; Limitation of Liability and XV Governmental Authorization and Paragraph C of Article XVII shall survive any expiration or termination of this Agreement. H. This Agreement shall remain in full force and effect until (1) Airline ceases to operate at least one Aircraft powered by Products set forth herein, (2) less than five aircraft powered by such Products are in commercial airline service, (3) this Agreement is terminated in whole or in part under either the provisions of Article VIII Excusable Delay or Article XII Termination for Insolvency herein, or (4) by mutual consent of the parties, whichever occurs first. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and the year first above written. FRONTIER AIRLINES, INC. CFM INTERNATIONAL, INC. By: By: Typed Name: Typed Name: Title: Title: Date: Date: EXHIBIT A CFM56 SERIES PRODUCTS APPLICABLE TO AIRLINE'S TYPE A319 AND 737 AIRCRAFT I. Model CFM56 5B5/P, CFM56 3 B1, CFM56 3C1 and CFM56 3B2 Turbofan Engines as certified by the U.S. Federal Aviation Administration ("FAA") and French Direction Generale De L'Aviation Civile ("DGAC"). II. Related Optional Equipment for the above Engines. III. Engine Modules A. Fan B. Low Pressure Turbine ("LPT") C Accessory Gearbox D. Core Engine IV. spare Parts. V. Special Tools and Test Equipment including Ground Support Equipment. VI. Other CFM56 products as may be offered for sale by CFMI from time to time. EXHIBIT B CFM56 PRODUCT SUPPORT PLAN SECTION I DEFINITIONS These definitions shall apply for all purposes of this Agreement unless the context otherwise requires. 1. "Aircraft" means each of the aircraft on which an Engine is installed. 2. "Agreement" means the General Terms Agreement No. 6 13616 between CFMI and Airline, to which this Exhibit B is attached. 3. "Engine(s)" means the Engine(s) described in Exhibit A. 4. "Expendable Parts" means those parts which must routinely be replaced during Inspection, repair, or maintenance, whether or not such parts have been damaged, and other parts which are customarily replaced at each such Inspection and maintenance period such as filter inserts and other short lived items which are not dependent on wear out but replaced at predetermined intervals. 5. "Failed Parts" means 6. "Failure" means 7. "Flight Cycle" means the complete running of an Engine from start through any condition of flight and ending at Engine shutdown. A "touch and go landing" used during pilot training shall be considered as a "Flight Cycle." 8. "Flight Hours" means the cumulative number of airborne hours in operation of each Engine computed from the time an aircraft leaves the ground until it touches the ground at the end of a flight. 9. "Foreign Object Damage" means any damage to the Engine caused by objects which are not part of the Engine or engine optional equipment. 10. "Inspection" means the observation of an Engine or Parts thereof, through disassembly or other means, for the purpose of determining serviceability. 11. "Labor Allowance" 12. "Module" means each of the Engine Modules described in Exhibit A. 13. "Part(s)" means only those Engine and Engine Module Parts which have been sold originally to Airline by CFMI for commercial use. The term excludes parts which were furnished on new Engines and Modules but are procured directly from vendors. Such parts are covered by the Vendor Warranty and the CFMI "Vendor Warranty Back Up." Also excluded are Expendable Parts and customary short lived items such as igniters and filter inserts. 14. "Parts Credit Allowance" 15. "Part Cycles" means the total number of Flight Cycles accumulated by a Part. 16. "Parts Repair" means the CFMI recommended rework or restoration of Failed Parts to a serviceable condition, excluding repair of normal wear and tear and deterioration. 17. "Part Time" means the total number of Flight Hours flown by a Part. 18. "Scheduled Inspection" means the inspection of an Engine conducted when an Engine has approximately completed a planned operating interval. 19. "Scrapped Parts" means those Parts determined to be unserviceable and not repairable by virtue of reliability, performance or repair costs. Such Parts shall be considered as scrapped if they bear a scrap tag duly countersigned by a CFMI representative. Such Parts shall be disposed of by Airline unless requested by CFMI for engineering analysis, in which event any handling and shipping shall be at CFMI's expense. 20. "Ultimate Life" of a Part means the approved limitation on use of a Part, in cumulative Flight Hours or Flight Cycles, which either CFMI or a U.S. and/or French Government authority establish as the maximum period of allowed operational time for such Parts in Airline service, with periodic repair and restoration. The term does not include individual Failure from wear and tear or other cause not related to the total usage capability of all such Parts in Airline service. SECTION II WARRANTIES A. New Engine Warranty 1. CFMI warrants each new Engine and Module against Failure for the initial * Flight Hours as follows: * 2. As an alternative to the above allowances, CFMI shall, upon request of Airline: * B. New Parts Warranty * C. Ultimate Life Warranty * D. Campaign Change Warranty * E. Warranty Pass On If requested by Airline and consented to by CFMI in writing which consent will not be unreasonably withheld, CFMI will extend warranty support for Engines sold by Airline to commercial Airline operators, or to other aircraft operators. Such warranty support will be limited to the unexpired portion of the New Engine Warranty, New Parts Warranty, Ultimate Life Warranty and Campaign Change Warranty and will require such operator(s) to agree, in writing, to be bound by, and comply with, all the terms and conditions, including the limitations, applicable to such warranties as set forth in this Agreement. If Airline acquires Products from another Airline or operator of Products, and such Airline or operator has an agreement with CFMI, CFMI will agree to extend the CFMI warranty support, if any, remaining in respect of such Products as extended by CFMI to such Airline or operator. F. Vendor Warranty Back Up 1. CFMI controls and accessories vendors provide a warranty on their products used on CFMI Engines. This warranty applies to controls and accessories sold to CFMI for delivery on installed or spare Engines, and controls and accessories sold by the vendor to the Airlines on a direct purchase basis. In the event the controls and accessories suffer a failure during the vendors warranty period, the Airline will submit a claim directly to the vendor in accordance with the terms and conditions of the vendors warranty. 2. In the event a controls and accessories vendor fails to provide a warranty at least as favorable as the CFMI New Engine Warranty (for complete controls and accessories) or New Parts Warranty (for components thereof), or if provided, rejects a proper claim from the Airline, CFMI will intercede on behalf of the Airline to resolve the claim with the vendor. In the event CFMI is unable to resolve a proper claim with the vendor, CFMI will honor a claim from the Airline under the provisions and limitations of CFMI's New Engine or New Parts Warranty, as applicable. Settlements under this vendor back up warranty will exclude credits for resultant damage to or from controls and accessories procured directly by Airline from vendors. G. Vendor Interface warranty Should any CFMI control or accessory, for which CFMI is responsible, develop a problem due to its environment or interface with other controls and accessories or with the Engine, reverser, or equipment supplied by the aircraft manufacturer, CFMI will be responsible for initiating corrective action. If the vendor disclaims warranty responsibility for parts requiring replacement, CFMI will apply the provisions of its New Parts Warranty to such part whether it was purchased originally from CFMI or directly from the vendor. H. Condition Monitoring Warranty 1. CFMI warrants CFM56 condition monitoring equipment, installed on new Engines, in accordance with the provisions of its New Engine Warranty as heretofore set forth, except that no Labor Allowance will be granted for disassembly and reassembly of any new Engine component due to inoperative or malfunctioning condition monitoring equipment. 2. CFMI warrants CFM56 condition monitoring equipment, purchased as spare Parts, in accordance with = the provisions of its New Parts Warranty as heretofore set forth. I. Special Tools and Test Equipment Warranty 1. CFMI warrants to Airline that special tools and test equipment sold hereunder will, at the time of delivery, be free from defects in material, workmanship, and title. J. Special Guarantees The following special guarantees apply to all of Airline's new CFM56 5B5/P powered A319 Aircraft. The basis and conditions for application of these guarantees are described in Attachment A hereto. 1. In flight shut down ("IFSD") Rate Guarantee * 2. Delay and Cancellation Rate Guarantee * 3. Remote Site Removal Rate Guarantee * 4. Extended New Engine Warranty * THE WARRANTIES AND GUARANTEES SET FORTH IN THIS PRODUCT SUPPORT PLAN ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES AND GUARANTEES, WHETHER WRITTEN, STATUTORY, ORAL, OR IMPLIED (INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE). SECTION III SPARE PARTS PROVISIONING A. Provisioning Data 1. In connection with Airline's initial provisioning of spare Parts, CFMI shall furnish Airline with data in accordance with ATA 2000 Specification using a revision mutually agreed to in writing by CFMI and Airline. 2. It is the intention of the parties hereto to comply with the requirements of the ATA 2000 Specification and any future changes thereto, except that neither party shall deny the other the right to negotiate reasonable changes in the procedures or requirements of the Specification which procedures or requirements, if complied with exactly, would result in an undue operating burden or unnecessary economic penalty. The data to be provided by CFMI to Airline shall encompass all Parts listed in CFMI's Illustrated Parts Catalogs. CFMI further agrees to become total supplier of Initial Provisioning Data for all vendor spare Parts in accordance with Paragraph 1. above. 3. Beginning on a date no no later than twelve (12) months prior to delivery of Airline's first Aircraft, or as mutually agreed, CFMI shall provide to Airline a complete set of Initial Provisioning Data and shall progressively revise this data until ninety (90) days after delivery of the last spare Engine specified in its initial purchase order or as mutually agreed. A status report will be issued periodically. Provisioning data will be reinstituted for subsequent spare Engines reflecting the latest modification status. CFMI will make available a list of major suppliers as requested by Airline. CFMI will provide, or cause to be provided on behalf of its vendors, the same service detailed in this clause. B. Pre Provisioning Conference A pre provisioning conference, attended by CFMI and Airline personnel directly responsible for initial provisioning of spare Parts hereunder, will be held at a mutually agreed time and place prior to the placing by Airline of initial provisioning purchase orders. The purpose of this conference is to discuss systems, procedures and documents available to the Airline for the initial provisioning cycle of the Products. C. Changes CFMI shall have the right to make corrections and changes in the Initial Provisioning Data in accordance with Chapter 2 (Initial Provisioning) of Chapter 1 of ATA 2000 Specification using a revision mutually agreed to in writing by CFMI and Airline. So long as Airline operates one (1) aircraft powered by CFM56 Engines and there are five (5) such aircraft powered by CFM56 Engines in commercial Airline service, CFMI will, at no cost to Airline, progressively revise Airline's Procurement Data tape in accordance with Chapter 3 (Order Administration) of Chapter 2 of ATA 2000 Specification entitled "Integrated Data Processing Supply" using a revision mutually agreed to in writing by CFMI and Airline. D. Return Of Parts Airline shall have the right to return to CFMI, at CFMI's expense, any new or unused Part which has been shipped in excess of the quantity ordered or which is not the part number ordered or which is in a discrepant condition except for damage in transit. E. Parts Buy Back CFMI will agree to repurchase within the first * after delivery of the first Aircraft to Airline, and at the invoiced price, any new and unused initially provisioned spare Parts purchased from CFMI which CFMI recommended that Airline purchase, in the event Airline finds such Parts to be surplus to Airline's needs. Parts which become surplus to Airline's needs by reason of Airline's decision to upgrade or dispose of Products or resulting from a change in the fleet operating conditions supplied by Airline, upon which the CFMI initial provisioning recommendation was established, are excluded from this provision. Shipping costs for parts returned will be paid by Airline. F. Parts of Modified Design 1. CFMI shall have the right to make modifications to design or changes in the spare Parts sold to Airline hereunder. 2. CFMI will from time to time inform Airline in accordance with the means set forth in ATA 2000 Specification, when such spare Parts of modified design become available for shipment hereunder. 3. spare Parts of the modified design will be supplied unless Airline advises CFMI in writing of its contrary desire within ninety (90) days of the issuance of the Service Bulletin specifying the change to the modified Parts. In such event, Airline may negotiate for the continued supply of spare Parts of the premodified design at a rate of delivery and price to be agreed upon. G. Spare Parts Availability 1. CFMI will ship reasonable quantities (defined as three (3) months normal usage) of spare Parts which are included in CFMI's Engine Spare Parts Catalog within a thirty (30) day lead time following receipt of an acceptable purchase order from Airline. Spare Parts and other CFMI furnished material which are not included in the CFM56 Engine Spare Parts Price Catalog and for which lead time has not been quoted will be shipped as quoted by CFMI. 2. CFMI will maintain a stock of spare Parts to cover Airline's emergency needs. For purposes of this Paragraph, emergency is understood by CFMI and Airline to mean the occurrence of any one of the following conditions: AOG Aircraft on Ground Critical Imminent AOG or Work Stoppage Expedite Less than Normal Lead Time Airline will order spare Parts according to lead time as provided in Paragraph 1. above, but should Airline's spare Parts requirements arise as a result of an emergency, Airline can draw such spare Parts from CFMI's stock. A 24 hour telephone service is available to Airline for this purpose. If an emergency does exist, CFMI will ship required spare Part(s) within the time period set forth below following receipt of an acceptable purchase order from Airline. AOG * Critical * Expedite * SECTION IV TECHNICAL DATA A. CFMI shall make available to Airline the technical data, including revisions thereof, at no charge, in the quantities as specified in Exhibit E and at a time and to a location as mutually agreed. Such technical data shall be prepared by CFMI in accordance with the applicable provisions of ATA 100 or 2100 Specification (including necessary deviations) as the same may be revised from time to time. If Airline requires CFMI to furnish the technical data in a form different from that normally furnished by CFMI pursuant to ATA 100 or 2100 Specification, or in quantities greater than those specified in Exhibit E, CFMI will, upon written request from Airline, furnish Airline with a written quotation for furnishing such technical data. Revisions to the above technical data shall be furnished by CFMI to Airline at no charge for quantities equivalent to the quantities specified in Exhibit E for as long as Airline operates one (1) CFM56 powered Aircraft and there is a total of five (5) CFM56 powered aircraft in commercial airline service. Such quantities of revisions may be mutually modified in order to reflect any change in Airline's CFM56 operation. CFMI shall incorporate in the Engine Illustrated Parts Catalog and the Engine Manual all appropriate CFMI Service Bulletins for as long as Airline receives revisions to technical information or data. Premodified and postmodified configurations shall be included by CFMI unless Airline informs CFMI that a configuration is no longer required. B. CFMI will require each vendor to furnish technical data consisting of copies of a component maintenance manual and service bulletins. Such vendor publications shall be furnished by CFMI to Airline in accordance with and subject to the same provisions as those set forth in Paragraph A. above. C. CFMI will also require its ground support equipment vendors, where appropriate, to furnish to Airline, at no charge, technical data determined by CFMI to be necessary for Airline to maintain, overhaul and calibrate special tools and test equipment. Such vendor furnished technical data shall be furnished in accordance with and subject to the same provisions as those set forth in Paragraph A. above, except that the technical data shall be prepared in accordance with the applicable provisions of ATA 101 Specification, as the same may be revised from time to time. D. The following technical data, not covered by ATA Specifications, shall be furnished by CFMI to Airline in the quantities and at a time and to a location as mutually agreed: o Installation Manual (if required) o General Facility Study o Parts serialization records E. Where applicable, technical data as described in the above Paragraphs A., B. and D., furnished by CFMI or by CFMI vendors to Airline hereunder, shall be printed in the simplified English language as defined by AECMA (Association Europeenne des Constructeurs de Material Aerospatial). F. In addition to the above technical data to be furnished by CFMI to Airline, CFMI will have available with its resident representatives, where appropriate, one set of 35MM aperature cards or equivalent of each part and/or assembly drawing. CFM will also supply, on request, in 35MM aperature card format, one (1) copy of each special tool and equipment drawing. G. All technical data furnished herein by CFMI to Airline shall be subject to the provisions of Article X, "Information and Data", of this Agreement. SECTION V TECHNICAL TRAINING 1. General This part describes the current maintenance training to be provided by CFMI at CFMI's training facility in Springdale, Ohio. CFMI will provide at no charge to Airline, except as otherwise provided herein, a number of student days* for maintenance training as defined hereunder: * student days* for the first aircraft ordered * additional student days* for any additional aircraft These days will be selected from the list given in (3), "Standard Maintenance Training" below. Any additional training beyond this threshold shall be at Airline's cost. It is necessary for Airline to use the maintenance training days prior to delivery of the first aircraft, unless the parties have otherwise agreed in writing. All instruction, examinations and materials shall be prepared and presented in the English language and in the units of measure used by CFMI. Airline will provide interpreters, if required, for Airline's personnel. Airline will be responsible for the living and medical expenses of Airline's personnel during maintenance training. For maintenance training provided at Springdale, Ohio, CFMI will assist Airline's personnel in making arrangements for hotels and transportation between selected lodging and the training facility. 2. Maintenance Training Conference No later than twelve months prior to delivery of Airline's first aircraft, CFMI and Airline will conduct a maintenance training conference call in order to schedule and discuss the maintenance training or, Airline is welcome to visit CFMI's training facilities and discuss training. During the maintenance training conference call or visit, Airline will indicate the courses selected and arrange a mutually acceptable schedule. * Student days = # of students X # of class days 3. Standard Maintenance Training Standard Maintenance Training will consist of computer based training or classroom presentations supported by training materials and, when applicable, hands on practice. Training material will be based on ATA104 guidelines. ATA104 Level I General Familiarization ATA104 Level II Ramp and Transit ATA104 Level III Line and Base Maintenance ATA104 Level IV Specialized Training Major Module Replacement Module Replacement Fan Trim Balance Borescope Inspection 4. Optional Maintenance Training Non standard maintenance training courses are described in the current CFMI Training Course Syllabus and CFMI will provide a quote upon request. 5. Training at a Facility Other Than CFMI's If requested prior to the conclusion of the maintenance training planning conference call or visit, CFMI will conduct the classroom training described in (3), "Standard Maintenance Training" at a mutually acceptable alternate training site, subject to the following conditions. 5.1 Airline will be responsible for providing acceptable classroom space and training equipment required to present the CFMI courseware. 5.2 Airline will pay CFMI's travel and living charges for each CFMI instructor for each day, or fraction thereof, such instructor is away from Springdale, Ohio, including travel time. 5.3 Airline will reimburse CFMI for round trip transportation for CFMI's instructors and training materials between Springdale, Ohio and such alternate training site. 5.4 Those portions of the training that require the use of CFMI's training devices shall be conducted at CFMI designated facilities. 6. Supplier Training The standard maintenance training includes sufficient information on the location, operation and servicing of engine equipment, accessories and parts provided by suppliers to support line maintenance functions. If Airline requires additional maintenance training with respect to any supplier provided equipment, accessories or parts, Airline will schedule such training directly with the supplier. 7. Student Training Material 7.1 Manuals When required, CFMI will provide, at the beginning of each maintenance training course, one set of training manuals, or equivalent, for each student attending such course. 7.2 Other Training Material CFMI will provide one set of the following training material, per course, as applicable. Video Tapes CFMI will lend a set of video tapes on3/4inch U matic or1/2inch VHS cassettes in NTSC, PAL or SECAM standard, as selected by Airline. SECTION VI CUSTOMER SERVICE A. CFMI shall assign to Airline at no charge, a Customer Support Manager located at CFMI's factory to provide and coordinate appropriate liaison between the Airline and CFMI's factory personnel. B. CFMI shall also make available to Airline on an as required basis, at no charge, a Field Service Representative as CFMI's representative at Airline's maintenance base plus a Shop Specialist to be assigned by CFMI to the engine shop facility selected by Airline. These specialists will assist Airline in areas of unscheduled maintenance action and scrap approval and will provide rapid communication between Airline's maintenance base and CFMI's factory personnel. SECTION VII PRODUCT SUPPORT ENGINEERING Factory based engineers who are specialized in powerplant engineering problems are available, at no charge to Airline, to make visits to Airline as mutually agreed when problems are encountered. These engineers will coordinate with the CFM56 design engineers and Airline's powerplant engineering group. Where specific design problems require a better understanding of Airline's experience, design engineers will work directly with Airline's powerplant engineering personnel to solve the problem. SECTION VIII OPERATIONS ENGINEERING Operations Engineering survey teams are available, at no charge to Airline, to make surveys of Airline maintenance and operating procedures as mutually agreed by Airline and CFMI. These survey teams will be able to provide service to all Airlines operating CFM56 Engines. This group will include experienced operations engineers who will be available for flying jump seat on CFM56 powered aircraft, and discussing operating procedures with the crews. SECTION IX GROUND SUPPORT EQUIPMENT CFMI will provide to Airline, without charge, maintenance and repair tooling and fixture drawings it has designed for the Engines. Engine maintenance tooling, lifting devices, transportation devices, and accessory or component stands will be offered for sale to Airline by CFMI, and can also be procured from vendors. SECTION X GENERAL CONDITIONS CFM56 PRODUCT SUPPORT PLAN A. Airline will maintain adequate operational and maintenance records and make these available for CFMI inspection. B. The warranty and guarantee provisions of this CFM56 Product Support Plan will not apply to any Product if it has been reasonably determined the Engine or any Parts thereof: o Has not been properly installed or maintained; or o Has been operated contrary to applicable CFMI recommendations as contained in its Manual, Bulletins, or other written instructions delivered to Airline; or o Has been repaired or altered outside of CFMI facilities in such a way as to impair its safety of operation or efficiency; or o Has been subjected to misuse, neglect or accident; or o Has been subjected to Foreign Object Damage; or o Has been subjected to any other defect or cause not within the control of CFMI; or o Has been subjected to the control or use of another engine manufacturer; or o Has not been sold originally by CFMI to Airline for commercial use or installed in aircraft sold by the aircraft manufacturer to Airline. C. The express provisions of this CFM56 Product Support Plan set forth the maximum liability of CFMI with respect to claims of any kind, including negligence, arising out of manufacture, sale, possession, use or handling of the Products or Parts thereof or therefor, and in no case shall CFMI's liability to Airline *. In no event shall CFMI or Airline be liable for incidental or consequential damages. As used herein the term "CFMI" shall be deemed to include GE, SNECMA and CFMI. D. Except as provided in the Vendor Warranty Back up provisions in Paragraph F. of Section II hereof, no Parts Credit Allowance will be granted and no claim for loss or liability will be recognized by CFMI for Parts of the Engine whether original, repair, replacement, or otherwise, unless sold originally by CFMI to Airline for commercial use or installed in aircraft sold by the aircraft manufacturer to Airline. E. Airline shall apprise CFMI of any Failure subject to the conditions of this CFM56 Product Support Plan within sixty (60) days after Airline's discovery of such Failure. Any Part for which a Parts Credit Allowance is requested by Airline shall be returned to CFMI upon specific request by CFMI. Upon return to CFMI, such Part shall become the property of CFMI unless CFMI directs otherwise. Transportation expenses shall be borne by CFMI. F. The warranty applicable to a replacement Part provided under the terms of the New Engine Warranty or New Parts Warranty shall be the same as the warranty on the original Part. The unexpired portion of the applicable warranty will apply to Parts repaired under the terms of such warranty; = G. Airline will cooperate with CFMI in the development of Engine operating practices, repair procedures, and the like with the objective of improving Engine operating costs. H. Except as provided in the Warranty Pass On provisions in Paragraph E. of Section II hereof, this Product Support Plan applies only to the original purchaser of the CFM56 Engine, except that (i) installed Engines supplied to Airline through the aircraft manufacturer shall be considered as original Airline purchases covered by this Product Support Plan, and (ii) the provisions of Section II.J (Special Guarantees) and Section V (Technical Training) shall also apply to Airline's new leased Aircraft; provided that the lessor with respect to such Aircraft agrees to waive any rights it may have to receive similar product support with respect to such Aircraft. I. Airline will provide CFMI a report identifying serialized rotating parts which have been scrapped by Airline. Format and frequency of reporting will be mutually agreed to by Airline and CFMI. ATTACHMENT A BASIS AND CONDITIONS FOR SPECIAL GUARANTEES A. General Conditions The Guarantees offered herein have been developed specifically for Airline's new installed and spare CFM56 5B5/P engines (hereinafter referred to as the "Engine(s)"), whether leased or purchased. They are offered to Airline contingent upon: * B. Exclusions * C. Administration * D. Miscellaneous The General Conditions described in Exhibit B (Product Support Plan) of the General Terms Agreement between CFMI and Airline apply to the guarantees. ATTACHMENT B DEFINITIONS FOR DELAY AND CANCELLATION RATE GUARANTEE * EXHIBIT C ESCALATION * EXHIBIT D PAYMENT TERMS * EXHIBIT E TECHNICAL DATA *
EXHIBIT 10.1 AMENDMENT NO. 3 TO THE RARE HOSPITALITY INTERNATIONAL, INC. 1997 LONG-TERM INCENTIVE PLAN THIS AMENDMENT NO. 3 (this "Amendment") to the RARE Hospitality International, Inc. 1997 Long-term Incentive Plan, as previously amended (the "Plan") is made this 10th day of February 2000. The Board of Directors of RARE Hospitality International, Inc. (the “Corporation”) has determined that it is in the best interests of the Corporation and its shareholders to increase the number of shares of the Corporation’s common stock subject to the Plan to a total of 1,325,000, to grant the Committee administering the Plan the authority to delegate to one or more directors who are also officers of the Corporation to grant certain options under the Plan, to provide certain limitations on the exercise price and term of options granted under the Plan and to prohibit the extension of the original term or reduction of the exercise price of options granted under the Plan, and other amendments as provided herein. The Board of Directors intends that the amendments to the Plan provided in this Amendment No. 3 shall be submitted to the shareholders of the Corporation for approval within one year of the date of adoption of this Amendment by the Board of Directors. Section 2.1 of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 2.1 to read as follows: “2.1 Effective Date. The Plan was approved by the Board on October 13, 1997 (the “Effective Date”) and by the shareholders of the Corporation on May 20,1998. Amendments to the Plan were approved by the Board on February 10, 2000 (the “2000 Amendments”) and became effective as of such date. However, the 2000 Amendments and Plan, as so amended and restated, shall be submitted to the shareholders of the Corporation for approval within 12 months of the Board’s approval thereof. No Incentive Stock Options covering shares in excess of 750,000 granted under the Plan may be exercised prior to approval of the 2000 Amendments by the shareholders and if the shareholders fail to approve the 2000 Amendments within 12 months of the Board’s approval thereof, any Incentive Stock Options covering shares in excess of 750,000 shares and previously granted hereunder shall be automatically converted to Non-Qualified Stock Options without any further act. In the discretion of the Committee, Awards may be made to Covered Employees which are intended to constitute qualified performance-based compensation under Code Section 162(m). Any such Awards shall be contingent upon the shareholders having approved the 2000 Amendments.” Section 4.3 of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 4.3 to read as follows: "4.3 Authority of Committee. Except as provided below, the Committee has the exclusive power, authority and discretion to: a. Designate Participants; b. Determine the type or types of Awards to be granted to each Participant; c. Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate; d. Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each case on such considerations as the Committee in its sole discretion determines; e. Accelerate the vesting or lapse of restrictions of any outstanding Award, based in each case on such considerations as the Committee in its sole discretion determines; f. Determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered; g. Prescribe the form of each Award Agreement, which need not be identical for each Participant; (h) Decide all other matters that must be determined in connection with an Award; h. Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; i. Make all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to administer the Plan; and j. Amend the Plan or any Award Agreement as provided herein. Not withstanding the above, the Board or the Committee may expressly delegate to a special committee consisting of one or more directors who are also officers of the Corporation some or all of the Committee’s authority under subsections (a) through (g) above with respect to those eligible Participants who, at the time of grant are not, and are not anticipated to be become, either (i) Covered Employees or (ii) persons subject to the insider trading restrictions of Section 16 of the 1934 Act.” Section 5.1 of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 5.1 to read as follows: “5.1. Number of Shares. Subject to adjustment as provided in Section 14.1, the aggregate number of shares of Stock reserved and available for Awards or which may be used to provide a basis of measurement for or to determine the value of an Award (such as with a Stock Appreciation Right or Performance Share Award) shall be 1,325,000, no more than 20% of which shall be Restricted Stock or unrestricted Stock Awards.” Section 7.1(a) of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 7.1(a) to read as follows: “(a) Exercise Price. The exercise price per share of Stock under an Option shall be determined by the Committee, provided that the exercise price for any Option shall not be less than the Fair Market Value as of the date of the grant.” Section 7.1(c) of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 7.1(c) to read as follows: “(c) Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, shares of Stock, or other property (including “cashless exercise” arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants; provided, however, that if shares of Stock are used to pay the exercise price of an Option, such shares must have been held by the Participant for at least six months.” Section 7.1(e) of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 7.1(e) to read as follows: "(e) Exercise Term. In no event may any Option be exercisable for more than ten years from the date of its grant." Section 15.2 of the Plan is hereby amended by deleting such section in its entirety and by substituting in lieu thereof a new Section 15.2 to read as follows: “15.2 Awards Previously Granted. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without approval of the Participant; provided, however, that, subject to the terms of the applicable Award Agreement, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination; and provided further that the original term of any Option may not be extended and, except as otherwise provided in the anti-dilution provision of the Plan, the exercise price of any Option may not be reduced. No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant.” Except as expressly amended hereby, the terms of the Plan shall be and remain unamended and the Plan as amended shall remain in full force and effect. IN WITNESS WHEREOF, the Corporation has caused this Amendment to be executed by its duly authorized representative on the day and year first above written. RARE HOSPITALITY INTERNATIONAL, INC. By: /s/ PHILIP J. HICKEY, JR. ------------------------------------ Philip J. Hickey, Jr. Its: President and Chief Executive Officer --------------------------------------------------------------------------------
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.21 AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT AND CONSENT     This AMENDMENT No. 1 TO CREDIT AND SECURITY AGREEMENT AND CONSENT, dated as of February 7, 2000 (the "Amendment"), between Lifecore Biomedical, Inc. (the "Borrower") and U.S. Bank National Association (the "Lender"). RECITALS:     A.  The Borrower and the Lender are parties to that certain Credit and Security Agreement dated as of December 29, 1998 (the "Original Agreement").     B.  The Borrower has requested that the Lender amend a certain Section of the Original Agreement.     C.  The Borrower has requested that the Lender consent to the Borrower's formation of a new subsidiary to be known as Lifecore Biomedical, GmbH.     D.  Subject to the terms and conditions of this Amendment, the Lender will agree to the foregoing requests of the Borrower.     NOW, THEREFORE, the parties agree as follows:     1.  Defined Terms. All capitalized terms used in this Amendment shall, except where the context otherwise requires, have the meanings set forth in the Original Agreement as amended hereby.     2.  Amendments. The Original Agreement is further amended as follows:     (a) The definition of "Investment" appearing in Section 1.1 is amended in its entirety to read as follows:     "Investment": The acquisition, purchase, making or holding of any stock or other security, any loan, advance, contribution to capital, extension of credit, any acquisitions of real and personal property (other than real and personal property acquired in the ordinary course of business) and any purchase or commitment or option to purchase stock or other debt or equity securities of, or any interest in, another Person or any integral part of any business or the assets comprising such business or part thereof."     (b) A new Section 4.28 is added to read as follows:     "Year 2000. Borrower has reviewed and assessed its business operations and computer systems and applications to address the "year 2000 problem" (that is, that computer applications and equipment used by Borrower, directly or indirectly through third parties, may have been or may be unable to properly perform date-sensitive functions before, during and after January 1, 2000). Borrower represents and warrants that the year 2000 problem has not resulted in and will not result in a material adverse change in Borrower's business condition (financial or otherwise), operations, properties or prospects or ability to repay Lender. Borrower agrees that this representation and warranty will be true and correct on and shall be deemed made by Borrower on each date Borrower requests any advance under this Agreement or any Note or delivers any information to Lender. Borrower will promptly deliver to Lender such information relating to this representation and warranty as Lender requests from time to time."     (c) Section 6.11 is amended in its entirety to read as follows:     "6.11 Investments. Acquire for value, make, have or hold any Investments, except: (a) advances to employees of the Borrower or any Subsidiary for travel or other ordinary business expenses; (b) advances to subcontractors and suppliers in maximum aggregate -------------------------------------------------------------------------------- amounts reasonably acceptable to the Lender; (c) extensions of credit to: (i) Persons other than Subsidiaries incorporated outside the United States (such Subsidiaries being referred to herein as "Foreign Subsidiaries") in the nature of Accounts Receivable or notes receivable arising from the sale of goods and services in the ordinary course of business; or (ii) to Foreign Subsidiaries in the nature of Accounts Receivable or notes receivable arising from the sale of goods and services in the ordinary course of business so long as such extensions of credit do not exceed $1,500,000.00 in the aggregate; (d) shares of stock, obligations or other securities received in settlement of claims arising in the ordinary course of business; (e) Investments (other than Investments in the nature of loans or advances) outstanding on the date hereof in Subsidiaries by the Borrower and other Subsidiaries; (f) additional Investments (including, without limitation, through loans and advances) in Subsidiaries existing on the date hereof by the Borrower and other Subsidiaries so long as the sum of: (i) the aggregate amount of such additional Investments; plus (ii) the amount of the Indebtedness guarantied by the Borrower pursuant to Section 6.14 does not exceed $500,000; (g) other Investments outstanding on the date hereof and listed on Schedule 6.11; and (h) other Investments consented to by the Lender in writing.     (d) Schedule 4.1 attached to the Original Agreement is amended to conform to Schedule 4.1 (Amended 2/00) attached hereto.     (e) Schedule 4.10 attached to the Original Agreement is amended to conform to Schedule 4.10 (Amended 2/00) attached hereto.     (f)  Schedule 4.12 attached to the Original Agreement is amended to conform to Schedule 4.12 (Amended 2/00) attached hereto.     (g) Schedule 4.13 attached to the Original Agreement is amended to conform to Schedule 4.13 (Amended 2/00) attached hereto.     3.  Conditions to Effectiveness. This Amendment shall become effective on the date (the "Effective Date") when, and only when, the Lender shall have received:     (a) Counterparts of this Amendment executed by the Borrower;     (b) A certified copy of Resolutions of the Board of Directors of Borrower authorizing or ratifying the execution, delivery and performance of this Amendment and any other documents provided for in this Amendment;     (c) A certificate by the Secretary or any Assistant Secretary of Borrower certifying the names of the officers of Borrower authorized to sign this Amendment and any other documents provided for in this Amendment together with a sample of the true signature of such officers;     (d) Such other documents as the Lender may reasonably request.     4.  Representations and Warranties. To induce the Lender to enter into this Amendment, the Borrower represents and warrants to the Lender as follows:     (a) The execution, delivery and performance by the Borrower of this Amendment and any other documents to be executed and/or delivered by the Borrower in connection herewith have been duly authorized by all necessary corporate action, do not require any approval or consent of, or any registration, qualification or filing with, any government agency or authority or any approval or consent of any other person (including, without limitation, any stockholder), do not and will not conflict with, result in any violation of or constitute any default under, any provision of the Borrower's articles of incorporation or bylaws, any agreement binding on or applicable to the Borrower or any of its property, or any law or governmental regulation or court decree or order, binding upon or applicable to the Borrower or of any of its property and will not result in the creation or imposition of any security interest or other lien or encumbrance in or on any of its property pursuant to the provisions of any agreement applicable to the Borrower or any of its property; --------------------------------------------------------------------------------     (b) The representations and warranties contained in the Original Agreement are true and correct as of the date hereof as though made on that date except to the extent that such representations and warranties relate solely to an earlier date;     (c) No events have taken place and no circumstances exist at the date hereof which would give the Borrower the right to assert a defense, offset or counterclaim to any claim by the Lender for payment of the Obligations;     (d) No Default or Event of Default and no Adverse Event has occurred and is continuing; and     (e) The Original Agreement as amended by this Amendment and each other Loan Document to which the Borrower is a party are the legal, valid and binding obligations of the Borrower and are enforceable in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws, rulings or decisions at the time in effect affecting the enforceability of rights of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies.     5.  Reference to and Effect on the Loan Documents.     (a) From and after the date of this Amendment, each reference in the Original Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Original Agreement, and each reference to the "Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Original Agreement in any other Loan Document shall mean and be a reference to the Original Agreement as amended hereby     (b) Except as specifically set forth above, the Original Agreement remains in full force and effect and is hereby ratified and confirmed.     (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under the Agreement or any other Loan Document, nor constitute a waiver of any provision of the Agreement or any such other Loan Document.     6.  Costs, Expenses and Taxes. The Borrower agrees to pay on demand all costs and expenses of the Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other documents to be delivered hereunder or thereunder, including their reasonable attorneys' fees and legal expenses. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery, filing or recording of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save the Lender harmless from and against any and all liabilities with respect to, or resulting from, any delay in the Borrower's paying or omission to pay, such taxes or fees.     7.  Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Minnesota.     8.  Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.     9.  Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original.     10. Consent.   On the Effective Date, the Lender consents to: (a) the Borrower's formation of its new Subsidiary, Lifecore Biomedical, GmbH, and (b) the Borrower's initial Investment of approximately $100,000.00 therein, and waives the Borrower's compliance with the provisions of the Loan Documents which would otherwise limit, restrict or prohibit the Borrower from forming such Subsidiary or making such Investment. Such consent is limited to the specific consent described above, and is not intended, and shall not be construed, to be a general waiver of any term or provision of the Credit and Security Agreement. --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first above.     LIFECORE BIOMEDICAL, INC.           By:   /s/ DENNIS J. ALLINGHAM    --------------------------------------------------------------------------------     Title: Executive VP & CFO           U.S. BANK NATIONAL ASSOCIATION           By:   /s/ KIM LEPPANEN    --------------------------------------------------------------------------------     Title: Vice President -------------------------------------------------------------------------------- Schedule 4.1—Trade Names, Etc. to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Lifecore Biomedical, Inc. Lifecore Biomedical SpA (Italy) Orthomatrix, Inc. Sustain Systems, Inc. Implant Support Systems, Inc. Diagnostic, Inc. Lifecore Biomedical, GmbH -------------------------------------------------------------------------------- Schedule 4.10—Subsidiaries/Ownership to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Lifecore Biomedical SpA (Lifecore Biomedical, Inc. 95%, James W. Bracke 5%) Sustain Systems, Inc. (Lifecore Biomedical, Inc. 100%) Implant Support Systems, Inc. (Lifecore Biomedical, Inc. 100%) Lifecore Biomedical, GmbH (Lifecore Biomedical, Inc. 100%) -------------------------------------------------------------------------------- Schedule 4.12—Business Locations to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Lifecore Biomedical, Inc. 3515 Lyman Boulevard Chaska, MN 55318-3051 (Mortgagee: Norwest Bank Minnesota, NA) Lifecore Biomedical SpA via Pietro Gobetti n. 9 37138 Verona, Italia (Owner/Lessor: Prof. Vittorio Puchetti—Annamaria Pecchini) Sustain Systems, Inc. 3515 Lyman Boulevard Chaska, MN 55318-3051 (Mortgagee: Norwest Bank Minnesota, NA) Implant Support Systems, Inc. 3515 Lyman Boulevard Chaska, MN 55318-3051 (Mortgagee: Norwest Bank Minnesota, NA) Lifecore Biomedical, GmbH                      -------------------------------------------------------------------------------- Schedule 4.13—Collateral Locations to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Lifecore Biomedical, Inc. 3515 Lyman Boulevard Chaska, MN 55318-3051 (Mortgagee: Norwest Bank Minnesota, NA) Lifecore Biomedical SpA via Pietro Gobetti n. 9 37138 Verona, Italia (Owner/Lessor: Prof. Vittorio Puchetti—Annamaria Pecchini) Vital Pharma, Inc. 1006 West 15th Street Riviera Beach, FL 33404 (contract vendor for INTERGEL Solution) Lifecore Biomedical, GmbH                      Numerous vendors from time to time with respect to ORD raw materials to perform processes such as etching, coating and sterilization. -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT NO. 1 TO CREDIT AND SECURITY AGREEMENT AND CONSENT RECITALS: Schedule 4.1—Trade Names, Etc. to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Schedule 4.10—Subsidiaries/Ownership to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Schedule 4.12—Business Locations to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00) Schedule 4.13—Collateral Locations to CREDIT AND SECURITY AGREEMENT between US BANK NATIONAL ASSOCIATION ("the Lender") and LIFECORE BIOMEDICAL, INC. ("the Borrower") (Amended 2/00)
-------------------------------------------------------------------------------- AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT TANISYS TECHNOLOGY, INC. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS   1    ACCOUNTING AND OTHER TERMS   4   2    LOAN AND TERMS OF PAYMENT  4         2.1    Advances  4         2.2    Overadvances  4         2.3    Interest Rate, Payments  5         2.4    Fees  5   3    CONDITIONS OF LOANS  6         3.1    Conditions Precedent to Initial Advance   6         3.2    Conditions Precedent to all Advances   6   4    CREATION OF SECURITY INTEREST  6         4.1    Grant of Security Interest  6   5    REPRESENTATIONS AND WARRANTIES  6         5.1    Due Organization and Authorization   6         5.2    Collateral  6         5.3    Litigation  7         5.4    No Material Adverse Change in Financial Statements  7         5.5    Solvency  7         5.6    Regulatory Compliance  7         5.7    Subsidiaries  7         5.8    Full Disclosure  7   6    AFFIRMATIVE COVENANTS  8         6.1    Government Compliance  8         6.2    Financial Statements, Reports, Certificates  8         6.3    Inventory; Returns  8         6.4    Taxes  8         6.5    Insurance  9         6.6    Primary Accounts  9         6.7    Financial Covenants  9         6.8    Registration of Intellectual Property Rights  9         6.9    Further Assurances  9   7    NEGATIVE COVENANTS  9         7.1    Dispositions  9         7.2    Changes in Business, Ownership, Management or Business Locations  10         7.3    Mergers or Acquisitions  10         7.4    Indebtedness  10         7.5    Encumbrance  10         7.6    Distributions; Investments  10         7.7    Transactions with Affiliates  10         7.8    Subordinated Debt  10         7.9    Compliance  10   8    EVENTS OF DEFAULT  11         8.1    Payment Default  11         8.2    Covenant Default  11         8.3    Material Adverse Change  11         8.4    Attachment  11         8.5    Insolvency  11         8.6    Other Agreements  11         8.7    Judgments  12         8.8    Misrepresentations  12   2 -------------------------------------------------------------------------------- 9    BANK’S RIGHTS AND REMEDIES  12         9.1    Rights and Remedies  12         9.2    Power of Attorney  12         9.3    Accounts Collection  13         9.4    Bank Expenses  13         9.5    Bank’s Liability for Collateral   13         9.6    Remedies Cumulative  13         9.7 Demand Waiver  13   10   NOTICES  13   11   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER  13   12   GENERAL PROVISIONS  14          12.1    Successors and Assigns  14          12.2    Indemnification  14          12.3    Time of Essence  14          12.4    Severability of Provision  14          12.5    Amendments in Writing, Integration  14          12.6    Counterparts  14          12.7    Survival  14          12.8    Confidentiality  15          12.9    Effect of Amendment and Restatement  15          12.10    Attorneys’ Fees, Costs and Expenses  15   13   DEFINITIONS  15           13.1    Definitions  15   3 --------------------------------------------------------------------------------           This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated September 19, 2000, between SILICON VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara, California 95054 with a loan production office located at 9020 Capital of Texas Hwy. North, Austin, Texas 78759 and TANISYS TECHNOLOGY, INC. (“Borrower”), whose address is 12201 Technology Boulevard, Suite 125, Austin, Texas 78727 provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties agree as follows: RECITALS            A.    Bank and Borrower are parties to that certain Accounts Receivable Financing Agreement dated April 3, 2000, as amended (collectively, the “Original Agreement”).            B.   Borrower and Bank desire in this Agreement to set forth their agreement with respect to a working capital loan and to amend and restate in its entirety without novation the Original Agreement in accordance with the provisions herein. 1       ACCOUNTING AND OTHER TERMS           Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term “financial statements” includes the notes and schedules. The terms “including” and “includes” always mean “including (or includes) without limitation,” in this or any Loan Document. This Agreement shall be construed to impart upon Bank a duty to act reasonably at all times. 2       LOAN AND TERMS OF PAYMENT 2.1    ADVANCES.           Borrower will pay Bank the unpaid principal amount of all Advances and interest on the unpaid principal amount of the Advances. 2.1.1 REVOLVING ADVANCES.           (a) Bank will make Advances not exceeding the lesser of (A) the Committed Revolving Line or (B) the Borrowing Base. Amounts borrowed under this Section may be repaid and reborrowed during the term of this Agreement.           (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be made. Borrower must promptly confirm the notification by delivering to Bank the Payment/Advance Form attached as Exhibit B. Bank will credit Advances to Borrower’s deposit account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank suffers due to such reliance.           (c) The Committed Revolving Line terminates on the Revolving Maturity Date, when all Advances are immediately payable. 2.2    OVERADVANCES.           If Borrower’s Obligations under Section 2.1.1 exceed the lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower must immediately pay Bank the excess. 4 -------------------------------------------------------------------------------- 2.3    INTEREST RATE, PAYMENTS.           (a) Interest Rate. Advances accrue interest on the outstanding principal balance at a per annum rate of 1.50 percentage points above the Prime Rate, decreasing to a per annum rate of 1.00 percentage point above the Prime Rate, effective the first day of the month following Borrower maintaining a Quick Ratio (as described in Section 6.7) of at least 1.50 to 1.00 for 3 consecutive months. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360 day year for the actual number of days elapsed. Bank will not compute the interest in a manner that would cause Bank to contract for, charge or receive interest that would exceed the Maximum Lawful Rate or the Maximum Lawful Amount. After an Event of Default, Obligations accrue interest at the Default Interest Rate. The Default Interest Rate is, at the Bank’s options, (i) the Maximum Lawful Rate, if the Maximum Lawful rate is established by applicable law, or (ii) the interest rate applicable immediately prior to the occurrence of the Event of Default plus 5 percentage points, if no Maximum Lawful Rate law has been established by applicable law; or (iii) 18% per annum; or (iv) such lesser rate of interest as Bank in its sole discretion may choose to charge; but in no event more than the Maximum Lawful Rate.           (b) Spreading of Interest. Due to irregular periodic balances of principal, the variable nature of the interest rate, or prepayment, the total interest that will accrue under this Agreement cannot be determined in advance. Bank does not intend to contract for, charge or receive more than the Maximum Lawful Rate or Maximum Lawful Amount permitted by applicable state or federal law, and to prevent such an occurrence Bank and Borrower agree that all amounts of interest, whenever contracted for, charged or received by Bank, with respect to the Obligations, will be spread, prorated or allocated over the full period of time the Obligations are unpaid, including the period of any renewal or extension thereof. If the maturity of the Obligations is accelerated for any reason whether as a result of an Event of Default or otherwise prior to the full stated term, the total amount of interest contracted for, charged or received to the time of such demand shall be spread, prorated or allocated along with any interest thereafter accruing over the full period of time that the Obligations thereafter remain unpaid for the purpose of determining if such interest exceeds the Maximum Lawful Amount.           (c) Excess Interest. At maturity (whether by acceleration or otherwise) or on earlier final payment of the Obligations, Bank will compute the total amount of interest that has been contracted for, charged or received by Bank or payable by Borrower hereunder and compare such amount to the Maximum Lawful Amount that could have been contracted for, charged or received by Bank. If such computation reflects that the total amount of interest that has been contracted for, charged or received by Bank or payable by Borrower exceeds the Maximum Lawful Amount, then Bank shall apply such excess to the reduction of the principal balance, such excess shall be refunded to Borrower. This provision concerning the crediting or refund of excess interest shall control and take precedence over all other agreements between Borrower and Bank so that under no circumstances shall the total interest contracted for, charged or received by Bank exceed the Maximum Lawful Amount.           (d) Payments. Interest due on the Committed Revolving Line is payable on the 18th of each month. Bank may debit any of Borrower’s deposit accounts including Account Number ______________________ for principal and interest payments owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower’s accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest accrue. 2.4    FEES.           Borrower will pay:           (a) Facility Fee. A fully earned, non-refundable Facility Fee of $5,000 due on the Closing Date;           (b) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and reasonable expenses) incurred through and after the date of this Agreement, are payable when due; and 5 --------------------------------------------------------------------------------           (c) Non-Usage Fee. A non-usage fee equal to the daily unused portion under the Committed Revolving Line, multiplied by a per annum rate of 0.50%, calculated and payable quarterly in arrears. 3       CONDITIONS OF LOANS 3.1    CONDITIONS PRECEDENT TO INITIAL ADVANCE.           Bank’s obligation to make the initial Advance is subject to the condition precedent that it receive the agreements, documents and fees it requires.           The purpose of the initial Advance shall be to pay off any and all outstandings under that certain Accounts Receivable Financing Agreement, dated April 3, 2000, by and between Borrower and Bank. 3.2    CONDITIONS PRECEDENT TO ALL ADVANCES.           Bank’s obligations to make each Advance, including the initial Advance, is subject to the following:           (a) timely receipt of any Payment/Advance Form; and           (b) the representations and warranties in Section 5 must be materially true on the date of the Payment/Advance Form and on the effective date of each Advance and no Event of Default may have occurred and be continuing, or result from the Advance. Each Advance is Borrower’s representation and warranty on that date that the representations and warranties of Section 5 remain true. 4       CREATION OF SECURITY INTEREST 4.1    GRANT OF SECURITY INTEREST.           Borrower continues to grant Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of Borrower’s duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. Bank may place a “hold“on any deposit account pledged as Collateral. If this Agreement is terminated, Bank’s lien and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. 5       REPRESENTATIONS AND WARRANTIES           Borrower represents and warrants as follows: 5.1    DUE ORGANIZATION AND AUTHORIZATION.           Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change.           The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s formation documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 5.2    COLLATERAL.           Borrower has good title to the Collateral, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each Patent is valid and enforceable and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party, except to the extent such claim could not reasonably be expected to cause a Material Adverse Change. 6 -------------------------------------------------------------------------------- 5.3    LITIGATION.           Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower’s Responsible Officers and legal counsel, threatened by or against Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 5.4    NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.           All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank. 5.5    SOLVENCY.           The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 5.6    REGULATORY COMPLIANCE.           Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 5.7    SUBSIDIARIES.           Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 5.8    FULL DISCLOSURE.           No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. It being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 7 -------------------------------------------------------------------------------- 6       AFFIRMATIVE COVENANTS           Borrower will do all of the following: 6.1    GOVERNMENT COMPLIANCE.           Borrower will maintain its and all Subsidiaries’ legal existence and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower’s business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change. 6.2    FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.           (a) Borrower will deliver to Bank: (i) as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations during the period, in a form and certified by a Responsible Officer acceptable to Bank; (ii) as soon as available, but no later than 90 days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iii) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; (iv) budgets, sales projections, operating plans or other financial information Bank reasonably requests; and (v) prompt notice of any material change in the composition of the Intellectual Property, including any subsequent ownership right of Borrower in or to any Copyright, Patent or Trademark not shown in any intellectual property security agreement between Borrower and Bank or knowledge of an event that materially adversely affects the value of the Intellectual Property.           (b) Prior to the initial Advance and at such times as Advances are outstanding, within 20 days after the last day of each month, Borrower will deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of Exhibit C, with aged listings of accounts receivable.           (c) Within 30 days after the last day of each month, Borrower will deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit D.           (d) Bank has the right to audit Borrower’s Collateral at Borrower’s expense, but the audits will be conducted no more often than every year unless an Event of Default has occurred and is continuing. 6.3    INVENTORY; RETURNS.           Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower’s customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims, that involve more than $50,000. 6.4    TAXES.           Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments and will deliver to Bank, on demand, appropriate certificates attesting to the payment. 8 -------------------------------------------------------------------------------- 6.5    INSURANCE.           Borrower will keep its business and the Collateral insured for risks and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank’s reasonable discretion. All property policies will have a lender’s loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 20 days notice before canceling its policy. At Bank’s request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank’s option, be payable to Bank on account of the Obligations. 6.6    PRIMARY ACCOUNTS.           Borrower will maintain its primary depository and operating accounts with Bank. 6.7    FINANCIAL COVENANTS.           Borrower will maintain as of the last day of each month:           (i) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at least 1.15 to 1.00 for the month ended August 31, 2000, increasing to 1.20 to 1.00 for the months ending September 30, 2000 through December 31, 2000, increasing to 1.30 to 1.00 for the months ending January 31, 2001 through March 31, 2001, and increasing to 1.50 to 1.00 for the month ending April 30, 2001 and thereafter.           (ii) Profitability. Borrower will have a quarterly minimum net profit of $300,000 as of the quarter ending September 30, 2000; $100,000 as of the quarter ending December 31, 2000; $300,000 as of the quarter ending March 31, 2001; and $300,000 as of the quarter ending June 30, 2001. 6.8    REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.           Borrower will register with the United States Patent and Trademark Office or the United States Copyright Office its Intellectual Property within 30 days of the date of this Agreement, and additional Intellectual Property rights developed or acquired including revisions or additions with any product before the sale or licensing of the product to any third party.           Borrower will (i) protect, defend and maintain the validity and enforceability of the Intellectual Property and promptly advise Bank in writing of material infringements and (ii) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank’s written consent. 6.9    FURTHER ASSURANCES.           Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s security interest in the Collateral or to effect the purposes of this Agreement. 7       NEGATIVE COVENANTS           Borrower will not do any of the following without Bank’s prior written consent, which will not be unreasonably withheld: 7.1    DISPOSITIONS.           Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; or (iii) of worn-out or obsolete Equipment. 9 -------------------------------------------------------------------------------- 7.2    CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.           Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its (i) ownership (other than the sale of Borrower’s equity securities in a public offering or to venture capital investors approved by Bank) of greater than 25% or (ii) key management without Bank’s approval, which such approval shall not be unreasonably withheld. Borrower will not, without at least 30 days prior written notice, relocate its chief executive office or add any new offices or business locations. 7.3    MERGERS OR ACQUISITIONS.           Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where (i) no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement and (ii) such transaction would not result in a decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower. 7.4     INDEBTEDNESS.           Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 7.5     ENCUMBRANCE.           Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens. 7.6     DISTRIBUTIONS; INVESTMENTS.           Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so. Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock. 7.7     TRANSACTIONS WITH AFFILIATES.           Directly or indirectly enter into or permit any material transaction with any Affiliate except transactions that are in the ordinary course of Borrower’s business, on terms less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person. 7.8     SUBORDINATED DEBT.           Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt without Bank’s prior written consent. 7.9    COMPLIANCE.           Become an “investment company” or a company controlled by an “investment company,” under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Advance for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 10 -------------------------------------------------------------------------------- 8       EVENTS OF DEFAULT           Any one of the following is an Event of Default: 8.1    PAYMENT DEFAULT.           If Borrower fails to pay any of the Obligations within 3 days after their due date. During the additional period the failure to cure the default is not an Event of Default (but no Advance will be made during the cure period); 8.2    COVENANT DEFAULT.           If Borrower does not perform any obligation in Section 6 or violates any covenant in Section 7 or does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant that can be cured, has not cured the default within 10 days after it occurs, or if the default cannot be cured within 10 days or cannot be cured after Borrower’s attempts within 10 day period, and the default may be cured within a reasonable time, then Borrower has an additional period (of not more than 30 days) to attempt to cure the default. During the additional time, the failure to cure the default is not an Event of Default (but no Advances will be made during the cure period); 8.3    MATERIAL ADVERSE CHANGE.           (i) If there occurs a material impairment in the perfection or priority of the Bank’s security interest in the Collateral or in the value of such Collateral (other than normal depreciation) which is not covered by adequate insurance or (ii) if the Bank determines, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower will fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period. 8.4    ATTACHMENT.           If any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency and not paid within 10 days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Advances will be made during the cure period); 8.5    INSOLVENCY.           If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but no Advances will be made before any Insolvency Proceeding is dismissed); 8.6    OTHER AGREEMENTS.           If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a Material Adverse Change; 11 -------------------------------------------------------------------------------- 8.7    JUDGMENTS.           If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Advances will be made before the judgment is stayed or satisfied); or 8.8    MISREPRESENTATIONS.           If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document. 9       BANK’S RIGHTS AND REMEDIES 9.1    RIGHTS AND REMEDIES.           When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:           (a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);           (b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;           (c) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable;           (d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;           (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;           (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit; and           (g) Dispose of the Collateral according to the Code. 9.2    POWER OF ATTORNEY.           Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower’s name on any checks or other forms of payment or security; (ii) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower’s insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower’s name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank’s appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Advances terminates. 12 -------------------------------------------------------------------------------- 9.3    ACCOUNTS COLLECTION.           When an Event of Default occurs and continues, Bank may notify any Person owing Borrower money of Bank’s security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit. 9.4    BANK EXPENSES.           If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. 9.5     BANK’S LIABILITY FOR COLLATERAL.           If Bank complies with reasonable banking practices and Section 9-207 of the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Borrower bears all risk of loss, damage or destruction of the Collateral. 9.6    REMEDIES CUMULATIVE.           Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 9.7    DEMAND WAIVER.           Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 10      NOTICES           All notices or demands by any party about this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to the addresses set forth at the beginning of this Agreement. A party may change its notice address by giving the other party written notice. 11      CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER           Texas law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Travis or Williamson County, Texas. 13 -------------------------------------------------------------------------------- BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH COUNSEL. 12      GENERAL PROVISIONS 12.1   SUCCESSORS AND ASSIGNS.      This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it without Bank’s prior written consent which may be granted or withheld in Bank’s discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement. 12.2   INDEMNIFICATION.           Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct. 12.3   TIME OF ESSENCE.           Time is of the essence for the performance of all obligations in this Agreement. 12.4   SEVERABILITY OF PROVISION.           Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 12.5   AMENDMENTS IN WRITING, INTEGRATION.      All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents. 12.6   COUNTERPARTS.           This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 12.7   SURVIVAL.           All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 14 -------------------------------------------------------------------------------- 12.8   CONFIDENTIALITY.           In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Bank’s subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans, (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank’s examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 12.9   EFFECT OF AMENDMENT AND RESTATEMENT.           This Agreement is intended to and does completely amend and restate, without novation, the Original Agreement. All advances or loans outstanding under the Original Agreement are and shall continue to be outstanding under this Agreement. All security interests granted under the Original Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement. 12.10  ATTORNEYS’ FEES, COSTS AND EXPENSES.           In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys’fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 13      DEFINITIONS 13.1   DEFINITIONS.           In this Agreement:           “Accounts” are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.           “Advance” or “Advances” is a loan advance (or advances) under the Committed Revolving Line.           “Affiliate” of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.           “Bank Expenses” are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys’fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings).           “Borrower’s Books” are all Borrower’s books and records including ledgers, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information.           “Borrowing Base” is 80% of Eligible Accounts as determined by Bank from Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank may lower the percentage of the Borrowing Base after performing an audit of Borrower’s Collateral.           “Business Day” is any day that is not a Saturday, Sunday or a day on which the Bank is closed. 15 --------------------------------------------------------------------------------           “Closing Date” is the date of this Agreement.           “Code” is the Texas Uniform Commercial Code.           “Collateral” is the property described on Exhibit A.           “Committed Revolving Line” is an Advance of up to $2,000,000.           “Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation“does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement.           “Copyrights” are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held.           “Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities which mature within one (1) year.           “Eligible Accounts” are Accounts in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5; butBank may change eligibility standards by giving Borrower notice. Unless Bank agrees otherwise in writing, Eligible Accounts will not include:           (a) Accounts that the account debtor has not paid within 90 days of invoice date;           (b) Accounts for an account debtor, 50% or more of whose Accounts have not been paid within 90 days of invoice date;           (c) Credit balances over 90 days from invoice date;           (d) Accounts for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed that percentage, unless the Bank approves in writing;           (e) Accounts for which the account debtor does not have its principal place of business in the United States, unless the Bank approves in writing;           (f) Accounts for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality;           (g) Accounts for which Borrower owes the account debtor, but only up to the amount owed (sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);           (h) Accounts for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on approval, bill and hold, or other terms if account debtor’s payment may be conditional; 16 --------------------------------------------------------------------------------           (i) Accounts for which the account debtor is Borrower’s Affiliate, officer, employee, or agent;           (j) Accounts in which the account debtor disputes liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;           (k) Accounts for which Bank reasonably determines collection to be doubtful.           “Equipment” is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.           “ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.           “GAAP” is generally accepted accounting principles.           “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.           “Insolvency Proceeding” are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.      “Intellectual Property” is:           (a) Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties from the use;           (b) Any trade secrets and any intellectual property rights in computer software and computer software products now or later existing, created, acquired or held;           (c) All design rights which may be available to Borrower now or later created, acquired or held;           (d) Any claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use or infringement of the intellectual property rights above;           All proceeds and products of the foregoing, including all insurance, indemnity or warranty payments.           “Inventory” is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title.           “Investment” is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.           “Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. 17 --------------------------------------------------------------------------------           “Loan Documents” are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated.           “Mask Works” are all mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired.           “Material Adverse Change” is defined in Section 8.3.           “Maximum Lawful Rate” is the maximum rate of interest and the term “Maximum Lawful Amount” means the maximum amount of interest that is permissible under applicable state or federal laws for the type of loan evidenced by the Loan Documents. If the Maximum Lawful Rate is increased by statute or other governmental action after the Closing Date, then the new Maximum Lawful Rate will be applicable to the payments from the date of the effective date of the rate change, unless otherwise prohibited by law.           “Obligations” are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank.           “Original Agreement” has the meaning set forth in recital paragraph A.           “Patents” are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.           “Permitted Indebtedness” is:           (a) Borrower’s indebtedness to Bank under this Agreement or any other Loan Document;           (b) Indebtedness existing on the Closing Date and shown on the Schedule;           (c) Subordinated Debt;           (d) Indebtedness to trade creditors incurred in the ordinary course of business; and           (e) Indebtedness secured by Permitted Liens.           “Permitted Investments” are:           (a) Investments shown on the Schedule and existing on the Closing Date; and           (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard &Poor’s Corporation or Moody’s Investors Service, Inc., and (iii) Bank’s certificates of deposit issued maturing no more than 1 year after issue.           ”Permitted Liens” are:           (a) Liens existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents;           (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, ifthey have no priority over any of Bank’s security interests; 18 --------------------------------------------------------------------------------           (c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, ifthe Lien is confined to the property and improvements and the proceeds of the equipment;           (d) Licenses or sublicenses granted in the ordinary course of Borrower’s business and any interest or title of a licensor or under any license or sublicense, if the licenses and sublicenses permit granting Bank a security interest;           (e) Leases or subleases granted in the ordinary course of Borrower’s business, including in connection with Borrower’s leased premises or leased property;           (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase.           “Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.           “Prime Rate” is Bank’s most recently announced “prime rate,“even if it is not Bank’s lowest rate.           “Quick Assets” is, on any date, the Borrower’s consolidated, unrestricted cash, cash equivalents, net billed accounts receivable and investments with maturities of fewer than 12 months determined according to GAAP.           “Responsible Officer” is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower.           “Revolving Maturity Date” is September 18, 2001.           “Schedule” is any attached schedule of exceptions.           “Subordinated Debt” is debt incurred by Borrower subordinated to Borrower’s indebtedness owed to Bank and which is reflected in a written agreement in a manner and form acceptable to Bank and approved by Bank in writing.           “Subsidiary” is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person.           “Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, Patents, trade and service marks and names, Copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, and(ii) Total Liabilities.           “Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt.           “Trademarks” are trademark and servicemark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of Assignor connected with the trademarks. 19 -------------------------------------------------------------------------------- BORROWER: Tanisys Technology, Inc. By: /s/ Terry Reynolds Title: Vice President BANK: SILICON VALLEY BANK By: /s/ Sheila Colson Title: V.P. 20 -------------------------------------------------------------------------------- EXHIBIT A           The Collateral consists of all of Borrower’s right, title and interest in and to the following:           All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;           All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above;           All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind;           All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower;           All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower’s Books relating to the foregoing;           All copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and           All Borrower’s Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. -------------------------------------------------------------------------------- INTELLECTUAL PROPERTY SECURITY AGREEMENT                      This Intellectual Property Security Agreement is entered into as of September 19, 2000 by and between SILICON VALLEY BANK (“Bank”) and Tanisys Technology, Inc. (“Grantor”). RECITALS           A. Bank has agreed to make certain advances of money and to extend certain financial accommodation to Grantor (the “Loans”) in the amounts and manner set forth in that certain Amended and Restated Loan and Security Agreement by and between Bank and Grantor dated September 19, 2000 (as the same may be amended, modified or supplemented from time to time, the “Loan Agreement”; capitalized terms used herein are used as defined in the Loan Agreement). Bank is willing to make the Loans to Grantor, but only upon the condition, among others, that Grantor shall grant to Bank a security interest in certain Copyrights, Trademarks, Patents, and Mask Works to secure the obligations of Grantor under the Loan Agreement.           B. Pursuant to the terms of the Loan Agreement, Grantor has granted to Bank a security interest in all of Grantor’s right, title and interest, whether presently existing or hereafter acquired, in, to and under all of the Collateral.           NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, as collateral security for the prompt and complete payment when due of its obligations under the Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as follows: AGREEMENT           To secure its obligations under the Loan Agreement, Grantor grants and pledges to Bank a security interest in all of Grantor’s right, title and interest in, to and under its Intellectual Property Collateral (including without limitation those Copyrights, Patents, Trademarks and Mask Works listed on Schedules A, B, C, and D hereto), and including without limitation all proceeds thereof (such as, by way of example but not by way of limitation, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, all rights corresponding thereto throughout the world and all re-issues, divisions continuations, renewals, extensions and continuations-in-part thereof.           This security interest is granted in conjunction with the security interest granted to Bank under the Loan Agreement. The rights and remedies of Bank with respect to the security interest granted hereby are in addition to those set forth in the Loan Agreement and the other Loan Documents, and those which are now or hereafter available to Bank as a matter of law or equity. Each right, power and remedy of Bank provided for herein or in the Loan Agreement or any of the Loan Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power or remedy provided for herein and the exercise by Bank of any one or more of the rights, powers or remedies provided for in this Intellectual Property Security Agreement, the Loan Agreement or any of the other Loan Documents, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including Bank, of any or all other rights, powers or remedies.           IN WITNESS WHEREOF, the parties have cause this Intellectual Property Security Agreement to be duly executed by its officers thereunto duly authorized as of the first date written above. -------------------------------------------------------------------------------- Address of Grantor: 12201 Technology Boulevard, Suite 125 Austin, TX 78727 Attn:           —————————————— GRANTOR: Tanisys Technology, Inc. By: /s/ Terry Reynolds Title: Vice President Address of Bank: 9020 Capital of Texas Hwy. North Austin, TX 78727 Attn:           —————————————— BANK: SILICON VALLEY BANK By: /s/ Sheila Colson Title: V.P. 2
AXCELIS TECHNOLOGIES, INC. EMPLOYEE STOCK PURCHASE PLAN 1.     PURPOSE.         The purpose of this Plan is to provide an opportunity for Employees of Axcelis Technologies, Inc. (the "Corporation") and its Designated Subsidiaries, to purchase Common Stock of the Corporation and thereby to have an additional incentive to contribute to the prosperity of the Corporation. It is the intention of the Corporation that the Plan qualifies as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. 2.     DEFINITIONS.         (a)     "Board" shall mean the Board of Directors of the Corporation.         (b)     "Code" shall mean the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein shall be a reference to any       successor or amended section of the Code.         (c)     "Committee" shall mean the committee appointed by the Board in accordance with Section 14 of the Plan.         (d)     "Common Stock" shall mean the Common Stock of the Corporation, or any stock into which such Common Stock may be converted.         (e)     "Compensation" shall mean base pay, including pay under any system which measures earnings by quantity and quality of production, variable pay, including without limitation, bonuses and incentive payments (but excluding sign-on bonuses and bonuses paid under the Executive Incentive Compensation Plan, the Executive Strategic Compensation Plan, the Senior Operating Managers Plan, and any successors to such plans and any other similar management bonuses or incentive payments), shift premium and overtime pay, but excluding severance pay in a single lump sum and not as salary continuation, pay in lieu of vacation, cost-of-living allowance, retainers, fees, and any other special remuneration, with any modifications determined by the Committee. The Committee shall have the authority to determine and approve all forms of pay to be included in the definition of Compensation and may change the definition on a prospective basis.         (f)     "Corporation" shall mean Axcelis Technologies, Inc., a Delaware corporation.         (g)     "Designated Subsidiary" shall mean a Subsidiary that has been designated by the Committee as eligible to participate in the Plan with respect to its Employees.         (h)     "Employee" shall mean an individual classified as an employee (within the meaning of Code Section 3401(c) and the regulations thereunder) by the Corporation or a Designated Subsidiary on the Corporation's or such Designated Subsidiary's payroll records during the relevant participation period. Employees shall not include individuals classified as independent contractors.         (i)     "Entry Date" shall mean the first Trading Day of the Offering Period or, for any Employee who became a Participant after such date, the first Trading Day of the first Purchase Period commencing after the date on which such Employee became a Participant.         (j)    "Fair Market Value" shall be the closing sales price for the Common Stock (or the closing bid, if no sales were reported) as quoted on the NASDAQ National Market, or other principal securities market on which the Common Stock is traded, on the date of determination if that date is a Trading Day, or if the date of determination is not a Trading Day, the last market Trading Day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable. "Fair Market Value" on the effective date of the Plan shall be the offering price of the Common Stock specified in the Registration Statement on Form S-1.         (k)    "Offering Period" shall mean the period of twenty-four (24) months commencing on the first Trading Day on or about July 1 of every other year and terminating on the last Trading Day in the period ending twenty-four (24) months later. The first offering period shall commence on the beginning of the effective date of the Registration Statement on Form S-1 for the initial public offering of the Company's Common Stock (the "IPO Date") and continue until June 30, 2002, subject to the limitation set forth in Section 4.4. The duration and timing of Offering Periods may be changed or modified by the Committee.         (l)    "Participant" shall mean a participant in the Plan as described in Section 5 of the Plan.         (m)    "Plan" shall mean the Axcelis Technologies, Inc. Employee Stock Purchase Plan.         (n)    "Purchase Date" shall mean the last Trading Day of each Purchase Period.         (o)    "Purchase Period" shall mean the period of six (6) months commencing after one Purchase Date and ending with the next Purchase Date, except that the first Purchase Period shall commence on the Plan's effective date. For those Employees who are eligible and become Participants in the Plan as of the effective date of the Plan (the first Entry Date), the initial Purchase Period will begin on the Plan's effective date and end on June 30, 2001. For those Employees who are eligible and become Participants on the Plan's second Entry Date (January 1, 2001), the initial Purchase Period for such participants will begin on January 1, 2001 and end on June 30, 2001. Subsequent Purchase Periods, if any, shall run consecutively after the termination of the preceding Purchase Period.         (p)    "Purchase Price" shall mean 85% of the Fair Market Value of a share of Common Stock on the Entry Date or on the Purchase Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Committee pursuant to Section 7.4.         (q)    "Shareholder" shall mean a record holder of shares entitled to vote shares of Common Stock under the Corporation's by-laws.         (r)    "Subsidiary" shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, as described in Code Section 424(f).         (s)    "Trading Day" shall mean a day on which U.S. national stock exchanges and the NASDAQ System are open for trading. 3.     ELIGIBILITY.         3.1    Any Employee regularly employed on a full-time or part-time basis by the Corporation or by any Designated Subsidiary on an Entry Date shall be eligible to participate in the Plan with respect to the Purchase Period commencing on such Entry Date, provided that the Committee may establish administrative rules requiring that employment commence some minimum period (e.g., one pay period) prior to an Entry Date to be eligible to participate with respect to the Purchase Period beginning on that Entry Date.         3.2    The Committee may also determine that a designated group of highly compensated Employees are ineligible to participate in the Plan so long as the excluded category fits within the definition of "highly compensated employee" in Code Section 414(q). No Employee may participate in the Plan if immediately after an option is granted the Employee owns or is considered to own (within the meaning of Code Section 424(d)), shares of stock, including stock which the Employee may purchase by conversion of convertible securities or under outstanding options granted by the Corporation, possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Corporation or of any of its Subsidiaries.         3.3    All Employees who participate in the Plan shall have the same rights and privileges under the Plan except for differences which may be mandated by local law and which are consistent with Code Section 423(b)(5); provided, however, that any affiliate of the Corporation whose Employees are not granted options under this Plan may adopt a separate "sub-plan" in accordance with the provisions of Section 15 which is not designed to qualify under Code section 423 and the Employees participating thereunder need not have the same rights and privileges as Employees participating in the Code section 423 Plan. The Board may impose restrictions on eligibility and participation of Employees who are officers and directors to facilitate compliance with federal or state securities laws or foreign laws. 4.    OFFERING PERIODS.         4.1    The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after the date twenty-four (24) months from the first date of the immediately preceding Offering Period, or on such other date as the Committee shall determine, and continuing thereafter for twenty-four (24) months or until terminated pursuant to Section 13 hereof. A Participant whose Entry Date is after the beginning of a 24-month Offering Period shall have a truncated Offering Period of eighteen (18), twelve (12), or six (6) months.         4.2    The first offering period shall commence on the beginning of the effective date of the Registration Statement on Form S-1 for the initial public offering of the Company's Common Stock (the "IPO Date") and continue until June 30, 2002.         4.3    The Committee shall have the authority to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without Shareholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter.         4.4    Notwithstanding any other provision of this Plan to the contrary, no purchase under this Plan shall be consummated if the effect of such purchase would cause Eaton Corporation not to be in control of the Company for purposes of Section 368(c) of the Code or prevent Eaton Corporation from filing a consolidated federal income tax return with the Company for the period covering such purchase. All offers to sell Company Common Stock and all order to purchase shares of Common Stock shall be subject to and condition by this limitation. If Eaton Corporation disposes of all or substantially all of its ownership interest in the Company, the limitation set forth in this Section 4.4 shall be without force and effect. 5.     PARTICIPATION.         5.1    An Employee who is eligible to participate in the Plan in accordance with Section 3 may become a Participant by completing and submitting, on a date prescribed by the Committee prior to an applicable Entry Date (unless a later date is set by the Committee), a completed payroll deduction authorization and Plan enrollment form provided by the Corporation or by following an electronic or other enrollment process as prescribed by the Committee. An eligible Employee may authorize payroll deductions at the rate of any whole percentage of the Employee's Compensation, not to exceed ten percent (10%) of the Employee's Compensation. As determined by the Committee, payroll deductions may begin at a date after the effective date of the Plan. All payroll deductions may be held by the Corporation and commingled with its other corporate funds where administratively appropriate. No interest shall be paid or credited to the Participant with respect to such payroll deductions. The Corporation shall maintain a separate bookkeeping account for each Participant under the Plan and the amount of each Participant's payroll deductions shall be credited to such account. A Participant may not make any additional payments into such account.         5.2    Under procedures established by the Committee, a Participant may withdraw from the Plan during a Purchase Period, by completing and filing a new payroll deduction authorization and Plan enrollment form with the Corporation or by following electronic or other procedures prescribed by the Committee, prior to a date set by the Committee that precedes the Purchase Date. If a Participant withdraws from the Plan during a Purchase Period, his or her accumulated payroll deductions will be refunded to the Participant without interest. The Committee may establish rules limiting the frequency with which Participants may withdraw and re-enroll in the Plan and may impose a waiting period on Participants wishing to re-enroll following withdrawal.         5.3    A Participant may change his or her rate of contribution through payroll deductions during the periods specified by the Committee by filing a new payroll deduction authorization and Plan enrollment form or by following electronic or other procedures prescribed by the Committee. If a Participant has not followed such procedures to change the rate of contribution, the rate of contribution shall continue at the originally elected rate throughout the Purchase Period and future Purchase Periods (including Purchase Periods of subsequent Offering Periods). In accordance with Section 423(b)(8) of the Code, the Committee may reduce a Participant's payroll deductions to zero percent (0%) at any time during a Purchase Period. 6.     TERMINATION OF EMPLOYMENT.         In the event any Participant terminates employment with the Corporation or any of its Designated Subsidiaries for any reason (including death) prior to the expiration of a Purchase Period, the Participant's participation in the Plan shall terminate and all amounts credited to the Participant's account shall be paid to the Participant or, in the case of death, to the Participant's heirs or estate, without interest. Whether a termination of employment has occurred shall be determined by the Committee. The Committee may also establish rules regarding when leaves of absence or changes of employment status will be considered to be a termination of employment, including rules regarding transfer of employment among Designated Subsidiaries, Subsidiaries and the Corporation, and the Committee may establish termination of employment procedures for this Plan which are independent of similar rules established under other benefit plans of the Corporation and its Subsidiaries. 7.     OFFERING.         7.1    Subject to adjustment as set forth in Section 10, the maximum number of shares of Common Stock which may be issued pursuant to the Plan shall be 2.5 million shares, plus an annual increase to be added on the last day of each fiscal year of the Corporation beginning in 2001, equal to one percent (1%) of the outstanding shares of the Corporation on such date or a lesser amount determined by the Committee, provided that the maximum number of shares of Common Stock that may be issued pursuant to the Plan shall be 7.5 million shares. If, on a given Purchase Date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Corporation shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.         7.2    Each Purchase Period shall be determined by the Committee. For those Employees who are eligible and become Participants in the Plan as of the effective date of the Plan (the first Entry Date), the initial Purchase Period will begin on the Plan's effective date and end on June 30, 2001. For those Employees who are eligible and become Participants on the Plan's second Entry Date (January 1, 2001), the initial Purchase Period for such participants will begin on January 1, 2001 and end on June 30, 2001. Unless otherwise determined by the Committee, the Plan will operate with successive six (6) month Purchase Periods commencing at July 1 and January 1. The Committee shall have the power to change the duration of future Purchase Periods, without Shareholder approval, and without regard to the expectations of any Participants.         7.3    With respect to any Offering Period, each eligible Employee who has elected to participate as provided in Section 5.1 shall be granted, as of such Employee's Entry Date, an option for each Purchase Period within the Offering Period to purchase that number of whole shares of Common Stock (not to exceed 1,500 shares) which may be purchased with the payroll deductions accumulated on behalf of such Employee during each such Purchase Period at the purchase price specified in Section 7.4 below, subject to the additional limitation that no Employee participating in the Section 423 Plan shall be granted an option to purchase Common Stock under the Plan at a rate which exceeds U.S. twenty-five thousand dollars (U.S. $25,000) of the Fair Market Value of such Common Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. The foregoing sentence shall be interpreted so as to comply with Code Section 423(b)(8).         7.4    The purchase price under each option shall be the lower of: (i) a percentage (not less than eighty-five percent (85%)) established by the Committee ("Designated Percentage") of the Fair Market Value of the Common Stock on the Entry Date on which an option is granted, or (ii) the Designated Percentage of the Fair Market Value on the Purchase Date on which the Common Stock is purchased. The Committee may change the Designated Percentage with respect to any future Offering Period, but not below eighty-five percent (85%), and the Committee may determine with respect to any prospective Offering Period that the option price shall be the Designated Percentage of the Fair Market Value of the Common Stock on the Purchase Date. 8.     PURCHASE OF STOCK.         Upon the expiration of each Purchase Period, a Participant's option shall be exercised automatically for the purchase of that number of whole shares of Common Stock which the accumulated payroll deductions credited to the Participant's account at that time shall purchase at the applicable price specified in Section 7.4. Notwithstanding the foregoing, the Corporation or its designee may make such provisions and take such action as it deems necessary or appropriate for the withholding of taxes and/or social insurance which the Corporation or its Designated Subsidiary is required by law or regulation of any governmental authority to withhold. Each Participant, however, shall be responsible for payment of all individual tax liabilities arising under the Plan. 9.     PAYMENT AND DELIVERY.         As soon as practicable after the exercise of an option, the Corporation shall deliver to the Participant a record of the Common Stock purchased and the balance of any amount of payroll deductions credited to the Participant's account not used for the purchase, except as specified below. The Committee may permit or require that shares be deposited directly with a broker designated by the Committee or to a designated agent of the Corporation, and the Committee may utilize electronic or automated methods of share transfer. The Committee may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares. The Corporation shall retain the amount of payroll deductions used to purchase Common Stock as full payment for the Common Stock and the Common Stock shall then be fully paid and non-assessable. No Participant shall have any voting, dividend, or other Shareholder rights with respect to shares subject to any option granted under the Plan until the shares subject to the option have been purchased and delivered to the Participant as provided in this Section 9. 10.     RECAPITALIZATION.         If after the grant of an option, but prior to the purchase of Common Stock under the option, there is any increase or decrease in the number of outstanding shares of Common Stock because of a stock split, stock dividend, combination or recapitalization of shares subject to options, the number of shares to be purchased pursuant to an option, the price per share of Common Stock covered by an option and the maximum number of shares specified in Section 7.1 may be appropriately adjusted by the Board, and the Board shall take any further actions which, in the exercise of its discretion, may be necessary or appropriate under the circumstances.         The Board's determinations under this Section 10 shall be conclusive and binding on all parties. 11.    MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.         In the event of shareholder approval of a liquidation or dissolution of the Corporation, the Offering Period will terminate immediately, unless otherwise provided by the Board in its sole discretion, and all outstanding options shall automatically terminate and the amounts of all payroll deductions will be refunded without interest to the Participants.         In the event of a sale of all or substantially all of the assets of the Corporation, the acquisition by a person (including any entity or group) of beneficial ownership of a majority of the Corporation's outstanding capital stock (based on voting power, but excluding any acquisition by the Corporation, its affiliate, employee benefit plans of the Corporation or its affiliate, and any underwriter holding securities temporarily pursuant to an offering), or the merger or consolidation of the Corporation with or into another corporation, then in the sole discretion of the Board, (1) each option shall be assumed or an equivalent option shall be substituted by the successor corporation or parent or subsidiary of such successor corporation, (2) a date established by the Board on or before the date of consummation of such merger, consolidation or sale shall be treated as a Purchase Date, and all outstanding options shall be exercised on such date, or (3) all outstanding options shall terminate and the accumulated payroll deductions will be refunded without interest to the Participants. 12.    TRANSFERABILITY.         Options granted to Participants may not be voluntarily or involuntarily assigned, transferred, pledged, or otherwise disposed of in any way, and any attempted assignment, transfer, pledge, or other disposition shall be null and void and without effect. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interests under the Plan, other than as permitted by the Code, such act shall be treated as an election by the Participant to discontinue participation in the Plan pursuant to Section 5.2. 13.    AMENDMENT OR TERMINATION OF THE PLAN.         13.1    The Plan shall continue until June 30, 2020 unless otherwise terminated in accordance with Section 13.2.         13.2    The Board may, in its sole discretion, insofar as permitted by law, terminate or suspend the Plan, or revise or amend it in any respect whatsoever, except that, without approval of the Shareholders, no such revision or amendment shall materially increase the number of shares subject to the Plan, other than an adjustment under Section 10 of the Plan. 14.    ADMINISTRATION.         The Board shall appoint a Committee consisting of at least two members who will serve for such period of time as the Board may specify and whom the Board may remove at any time. The Committee will have the authority and responsibility for the day-to-day administration of the Plan, the authority and responsibility specifically provided in this Plan and any additional duty, responsibility and authority delegated to the Committee by the Board, which may include any of the functions assigned to the Board in this Plan. The Committee may delegate to one or more individuals the day-to-day administration of the Plan. The Committee shall have full power and authority to promulgate any rules and regulations which it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, to make factual determinations relevant to Plan entitlements and to take all action in connection with administration of the Plan as it deems necessary or advisable, consistent with the delegation from the Board. Decisions of the Board and the Committee shall be final and binding upon all participants. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting of the Committee duly held. The Corporation shall pay all expenses incurred in the administration of the Plan. No Board or Committee member shall be liable for any action or determination made in good faith with respect to the Plan or any option granted hereunder. 15.    COMMITTEE RULES FOR FOREIGN JURISDICTIONS.         The Committee may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules and procedures regarding handling of payroll deductions, payment of interest, conversion of local currency, payroll tax, withholding procedures and handling of stock certificates which vary with local requirements.         The Committee may also adopt "sub-plans" separate from this Plan for purposes of Code Section 423 applicable to particular affiliates of the Corporation, which sub-plans may be designed to be outside the scope of Code section 423. Notwithstanding the foregoing, the shares of Common Stock issued under any sub-plan shall be aggregated with the shares of Common Stock issued under this Plan and such aggregate number of shares shall be subject to the maximum number set forth under Section 7.1 hereof. The rules of such sub-plans may take precedence over other provisions of this Plan, with the exception of Section 7.1, but unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan. 16.    SECURITIES LAWS REQUIREMENTS.         The Corporation shall not be under any obligation to issue Common Stock upon the exercise of any option unless and until the Corporation has determined that: (i) it and the Participant have taken all actions required to register the Common Stock under the Securities Act of 1933, or to perfect an exemption from the registration requirements thereof; (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed has been satisfied; and (iii) all other applicable provisions of state, federal and applicable foreign law have been satisfied. 17.    GOVERNMENTAL REGULATIONS.         This Plan and the Corporation's obligation to sell and deliver shares of its stock under the Plan shall be subject to the approval of any governmental authority required in connection with the Plan or the authorization, issuance, sale, or delivery of stock hereunder. 18.    NO ENLARGEMENT OF EMPLOYEE RIGHTS.         Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the employ of the Corporation or any Designated Subsidiary or to interfere with the right of the Corporation or Designated Subsidiary to discharge any Employee at any time. 19.    GOVERNING LAW.         This Plan shall be governed by Delaware law, without regard to that State's choice of law rules. 20.    EFFECTIVE DATE.         This Plan shall become effective on the IPO Date, subject to approval of the Shareholders of the Corporation within 12 months before or after its adoption by the Board. 21.    REPORTS.         Individual accounts shall be maintained for each Participant in the Plan. Statements of account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.
Exhibit 10.2 EMPLOYMENT AND NON-COMPETE AGREEMENT THIS AGREEMENT is between AutoZone, Inc., a Nevada corporation and its various subsidiaries (collectively "AutoZone"), and _____________________, an individual ("Employee") dated as of ________________ ___, 200__ ("Effective Date"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties are agreed as follows: 1.    Employment. AutoZone agrees to employ Employee and Employee agrees to remain in the employment of AutoZone, or a subsidiary or affiliate, until the expiration or earlier termination of this Agreement. 2.    Term. This agreement shall be effective as of the Effective Date and shall continue until it is terminated pursuant to Paragraph 8, 9, or 10. 3.    Salary. Employee shall receive a salary from AutoZone as follows: During the term of this Agreement, Employee shall receive annual compensation of dollars ($XXX,XXX.XX), subject to increases as determined by the Compensation Committee of the Board of Directors ("Base Salary"). The Base Salary amount shall be paid on a pro-rated basis for all partial years based on a 364 day year. AutoZone reserves the right to increase the Base Salary above the amounts stated above in its sole discretion. All salary shall be paid at the same time and in the same manner that AutoZone's other officers are paid. 4.    Bonus. During the term of this Agreement, Employee shall receive a bonus up to ____% of his Base Salary in accordance with policies and procedures established by AutoZone's Compensation Committee and Board of Directors which shall be based upon the financial and operational goals and objectives for the Employee and AutoZone established by the Compensation Committee for each of AutoZone's fiscal years ("Target") in accordance with AutoZone's Executive Incentive Compensation Plan. The Target is established at the sole discretion of the Compensation Committee and Board of Directors and is subject to review and revision at any time upon notification to the Employee. All bonuses shall be paid at the same time and in the same manner that AutoZone's other officers are paid. 5.    Duties. Employee shall serve as AutoZone's Senior Vice President performing such duties as AutoZone's Board of Directors may direct from time to time and as are normally associated with such a position. AutoZone may, in its sole discretion, alter, expand or curtail the services to be performed by Employee or position held by Employee from time to time, without adjustment in compensation. Employee shall devote his entire time and attention to AutoZone's business. During the term of this Agreement, Employee shall not engage in any other business activity that conflicts with his duties with AutoZone, regardless of whether it is pursued for gain or profit. Employee may, however, invest his assets in or serve on the Board of Directors of other companies so long as they do not require Employee's services in the day to day operation of their affairs and do not violate AutoZone's conflict of interest policy. Notwithstanding, Employee may from time to time invest deminimus amounts in the publicly traded stock of Competitors upon written approval of AutoZone's General Counsel. 6.    Other Benefits. Other benefits to be received by Employee from AutoZone shall be the ordinary benefits received by AutoZone's other executive officers, which may be changed by AutoZone in its sole discretion from time to time. 7.    Taxes. Employee understands that all salary, bonus and other benefits will be subject to reduction for amounts required to be withheld by law as taxes and otherwise. 8.    Termination by AutoZone. (a) Without Cause . AutoZone may terminate this Agreement without Cause at any time upon notice to Employee and Employee shall cease to be an officer of AutoZone. In such event, Employee shall continue to be paid his then current Base Salary (on a pro-rated basis in the same manner as Employee is then receiving his base salary) until two years after the termination date ("Continuation Period"). During the Continuation Period, Employee shall not receive any bonus payments. During the Continuation Period, Employee shall continue to be an employee of AutoZone or a subsidiary (on leave of absence) available to perform such services as may be requested by the Chief Executive Officer of AutoZone, and Employee's stock options shall continue to vest and may be exercised in the manner set forth in the respective stock option agreements until the end of the Continuation Period, at which time Employee's employment with AutoZone shall be terminated and further stock option exercise and vesting shall be governed by the terms of the stock option agreement. During the Continuation Period, Employee shall receive such other benefits as other employees of AutoZone, including, but not limited to, health and life insurance, on the same terms and conditions. AutoZone shall pay Employee a prorated bonus for the fiscal year in which this Agreement is terminated pursuant to this paragraph calculated based on the period of time elapsed during such fiscal year until this Agreement is terminated and the formula established by the Compensation Committee for officers for that fiscal year. Said bonus shall be paid when other officer bonuses are paid for that fiscal year. AutoZone shall have no other obligations other than those stated herein upon the termination of this Agreement and Employee hereby releases AutoZone from any and all obligations and claims except those as are specifically set forth herein. (b) With Cause. AutoZone shall have the right to terminate this Agreement and Employee's employment with AutoZone for Cause at any time. Upon such termination for Cause, Employee shall have no right to receive any compensation, salary, or bonus and shall immediately cease to receive any benefits (other than those as may be required pursuant to the AutoZone Pension Plan or by law) and any stock options shall be governed by the respective stock option agreements in effect between the Employee and AutoZone at that time. "Cause" shall mean the willful engagement by the Employee in conduct which is demonstrably or materially injurious to AutoZone, monetarily or otherwise. For this purpose, no act or failure to act by the Employee shall be considered "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of AutoZone. 9.    Termination by Employee. Employee may terminate this Agreement at anytime upon written notice to AutoZone. Upon such termination, Employee's employment shall terminate and Employee shall cease to receive any further salary, benefits, or bonus, and all stock options granted shall be governed by the respective stock option agreement(s) between the Employee and AutoZone. 10.    Termination by Employee upon a Change of Control. Employee may terminate this Agreement upon a Change of Control of AutoZone by giving written notice to AutoZone within sixty days of the occurrence of a Change of Control. Upon giving such notice to AutoZone, Employees employment shall terminate and Employee shall cease to receive any payments or benefits pursuant this Agreement and all stock options held by Employee shall be govern by the respective stock option agreement(s). Any of the following events shall constitute a "Change of Control": (a) the acquisition after the date hereof, in one or more transactions, of beneficial ownership (as defined in Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended ("Exchange Act")), by any person or entity or any group of persons or entities who constitute a group (as defined in Section 13(d)(3) under the Exchange Act) of any securities such that as a result of such acquisition such person, entity or group beneficially owns AutoZone, Inc.'s then outstanding voting securities representing 51% or more of the total combined voting power entitled to vote on a regular basis for a majority of the board of Directors of AutoZone, Inc. or (b) the sale of all or substantially all of the assets of AutoZone (including, without limitation, by way of merger, consolidation, lease or transfer) in a transaction where AutoZone or the beneficial owners (as defined in Rule 13d-3(a)(1) under the Exchange Act) of capital stock of AutoZone do not receive (i) voting securities representing a majority of the total combined voting power entitled to vote on a regular basis for the board of directors of the acquiring entity or of an affiliate which controls the acquiring entity or (ii) securities representing a majority of the total combined equity interest in the acquiring entity, if other than a corporation; provided however, that the foregoing provisions of this Paragraph 10 shall not apply to any transfer, sale or disposition of shares of capital stock of AutoZone to any person or persons who are affiliates of AutoZone on the date hereof. 11.    Effect of Termination. Any termination of Employee's service as an officer of AutoZone shall be deemed a termination of Employee's service on all boards and as an officer of all subsidiaries of AutoZone. 12.    Non-Compete. Employee agrees that he will not, for the period commencing on the termination date of this Agreement pursuant to Paragraph 8 or 9 (whichever is applicable) of this Agreement and ending on (i) the date two years after said termination date of this Agreement if either Employee voluntarily terminates this Agreement or this Agreement is terminated by AutoZone for Cause or (ii) the end of the Continuation Period if this Agreement is terminated by AutoZone without Cause, be engaged in or concerned with, directly or indirectly, any business related to or involved in the retail sale of auto parts to "DIY" customers, or the wholesale or retail sale of auto parts to commercial installers in any state, province, territory or foreign country in which AutoZone operates now or shall operate during the term set forth in this non-compete paragraph (herein called "Competitor"), as an employee, director, consultant, beneficial or record owner, partner, joint venturer, officer or agent of the Competitor. The parties acknowledge and agree that the time, scope, geographic area and other provisions of this Non-Compete section have been specifically negotiated by sophisticated commercial parties and specifically hereby agree that such time, scope, geographic area and other provisions are reasonable under the circumstances and are in exchange for the obligations undertaken by AutoZone pursuant to this Agreement. Further, Employee agrees not to hire, for himself or any other entity, encourage anyone or entity to hire, or entice away from AutoZone any employee of AutoZone during the term of this non-compete obligation. If at any time a court of competent jurisdiction holds that any portion of this Non-Compete section is unenforceable for any reason, then Employee shall forfeit his right to any further salary, bonus, stock option exercises, or benefits from AutoZone during any Continuation Period. This Paragraph 12 shall not apply to a termination by Employee pursuant to Paragraph 10. 13.    Confidentiality. Unless otherwise required by law, Employee shall hold in confidence any proprietary or confidential information obtained by him during his employment with AutoZone, which shall include, but not be limited to, information regarding AutoZone's present and future business plans, vendors, systems, operations and personnel. Confidential information shall not include information: (a) publicly disclosed by AutoZone; (b) rightfully received by Employee from a third party without restrictions on disclosure (c) approved for release or disclosure by AutoZone; or (d) produced or disclosed pursuant to applicable laws, regulation or court order. Employee acknowledges that all such confidential or proprietary information is and shall remain the sole property of AutoZone and all embodiments of such information shall remain with AutoZone. 14.    Breach by Employee. The parties further agree that if, at any time, despite the express agreement of the parties hereto, Employee violates the provisions of this Agreement by violating the Non-Compete or Confidentiality sections, or by failing to perform his obligations under this Agreement, Employee shall forfeit any unexercised stock options, vested or not vested, and AutoZone may cease paying any further salary or bonus. In the event of breach by Employee of any provision of this Agreement, Employee acknowledges that such breach will cause irreparable damage to AutoZone, the exact amount of which will be difficult or impossible to ascertain, and that remedies at law for any such breach will be inadequate. Accordingly, AutoZone shall be entitled, in addition to any other rights or remedies existing in its favor, to obtain, without the necessity for any bond or other security, specific performance and/or injunctive relief in order to enforce, or prevent breach of any such provision. 15.    Death of Employee or Disability. If Employee should die or become disabled (such that he is no longer capable of performing his duties) during the term of this Agreement, then all salary and bonus shall cease as of the date of his death or disability, all stock options shall be governed by the terms of the respective stock option agreements, and Employee shall receive disability or death benefits as may be provided under AutoZone's then existing policies and procedures related to disability or death of AutoZone employees. 16.    Waiver. Any waiver of any breach of this Agreement by AutoZone shall not operate or be construed as a waiver of any subsequent breach by Employee. No waiver shall be valid unless in writing and signed by an authorized officer of AutoZone. 17.    Assignment. Employee acknowledges that his services are unique and personal. Accordingly, Employee shall not assign his rights or delegate his duties or obligations under this Agreement. Employee's rights and obligations under this Agreement shall inure to the benefit of and be binding upon AutoZone successors and assigns. AutoZone may assign this Agreement to any wholly-owned subsidiary operating for the use and benefit of AutoZone. 18.    Entire Agreement. This Agreement contains the entire understanding of the parties related to the matters discussed herein. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. 19.    Jurisdiction. This Agreement shall be governed and construed by the laws of the State of Tennessee, without regard to its choice of law rules. The parties agree that the only proper venue for any dispute under this Agreement shall be in the state or federal courts located in Shelby County, Tennessee. 20.    Survival. Sections 8, 12, 13, 14 and 19 of this Agreement shall survive any termination of this Agreement or Employee's employment with AutoZone (including, without limitation termination pursuant to Paragraphs 8, 9, or 10). IN WITNESS WHEREOF, the respective parties execute this Agreement. AUTOZONE, INC.                                                          Employee By:_____________________                                         _____________________________                                                                                           Employee Title:____________________                                                                                          Date:  ________________________ By:_____________________ Title:____________________ Schedule 1                                                 Date of                     Base                      Possible Bonus Name of Officer         Employment Agreement        Salary                       Percentage Brett D. Easley           November 16, 2000             $240,000.00                 60% Robert D. Olsen         November 9, 2000               $285,000.00                 60%
AMENDMENT TO THE TELLABS, INC. 1991 STOCK OPTION PLAN (As Amended and Restated Effective June 26, 1992)   WHEREAS, Tellabs, Inc. (the "Corporation") has heretofore established the Tellabs, Inc. 1991 Stock Option Plan (the "Plan") for the benefit of participating officers and other key employees of the Corporation and its subsidiaries; WHEREAS, the Corporation deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of the Corporation; WHEREAS, the Compensation Committee of the Corporation has considered the recommendations and recommended that the Board of Directors of the Corporation approve this Amendment to the Plan; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Article 2 of the Plan, the following definition of "Change in Control" shall be added: (q) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Corporation or any subsidiary of the Corporation, or any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of the Corporation and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation or all or substantially all of the Corporation'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 voting securities of the Corporation; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. II. Under Article 2 of the Plan, the following definition of "Disability" shall be added: (t) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Article 14 shall be amended in its entirety to read as follows: 14. Termination of Employment. Except as set forth in Article 14A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option Agreement, the following rules shall apply upon termination of the Grantee's employment with the Corporation and all subsidiaries: (a) Except as set forth in subsections (b), (c) and (d) below, in the event a Grantee ceases to be an employee of the Corporation and its subsidiaries for any reason, any Option or unexercised portion thereof granted under this Plan may be exercised, to the extent such Option would have exercisable by the Grantee hereunder on the date on which the Grantee ceased to be an employee, within three months of such date (seven months in the event such termination occurs after the occurrence of a Change in Control), but in no event later than the date of expiration of the term of the Option. (b) In the event of termination of employment due to the death the Grantee, each Option held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option held by the Grantee may, to the extent exercisable at the time of such termination, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Corporation or its subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or an affiliate of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points          75% of each unvested option shall vest At least 90 points                                  100% of each unvested option shall vest and all Options held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a non-qualified stock option. IV. The Plan shall hereby be amended by adding a new Article 14A to read: 14A. Change in Control. (a) Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. V. Article 15 of the Plan shall be amended in its entirety to read as follows: 15. Effect of Change in Stock Subject to Plan. Except as provided below, the Board shall make equitable adjustments in the number and class of shares of stock subject to the Plan, and to the Option rights granted hereunder and the exercise prices of such Option rights, in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, acquisition, separation or other change in the capital structure of the Corporation. IN WITNESS WHEREOF, the foregoing amendments to the Tellabs, Inc. 1991 Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   TELLABS, INC.   By: /s Michael J. Birck Name: Michael J. Birck Its: President and Chief Executive Officer
QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Avocent Employment Services Co. (formerly known as Polycon Investments, Inc.), a Texas corporation ("Employer"), Avocent Corporation, a Delaware corporation, and Stephen F. Thornton (the "Employee"). RECITALS     WHEREAS, the Employer is a direct or indirect subsidiary of Avocent Corporation engaged in the business of leasing employees to Avocent Corporation and its affiliates, including Apex Inc. ("Apex") and Cybex Computer Products Corporation ("Cybex");     WHEREAS, Avocent Corporation and its affiliates (collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/ KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee, Employer, and Cybex entered into that certain Employment and Noncompetition Agreement dated July 1, 1999, as amended by that certain First Amendment dated March 7, 2000 (collectively, the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, Cybex, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as its Chairman of the Board, President, and Chief Executive Officer, and Employer agrees to employ the Employee and lease the Employee to Avocent to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of Chairman of the Board, President, and Chief Executive Officer. The Employee shall report only to the Boards of Directors of the Employer, Cybex, and Avocent Corporation and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Chairman of the Board, President, and Chief Executive Officer of Avocent Corporation.     2.  TERM OF EMPLOYMENT.     2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or -------------------------------------------------------------------------------- by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which 2 -------------------------------------------------------------------------------- shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, 3 -------------------------------------------------------------------------------- all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which 4 -------------------------------------------------------------------------------- will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $350,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a)  THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical 5 -------------------------------------------------------------------------------- examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was March 1, 1984.     (b)  VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than four weeks during each year of this Agreement.     (c)  LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d)  REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of eighteen (18) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to fifty percent (50%) of the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination; provided, however, that in the event the Employee votes his shares of common stock of Avocent Corporation in favor of the Change in Control, the term "eighteen (18) months" in this sentence shall be deemed amended to be "nine (9) months." Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer. 6 --------------------------------------------------------------------------------     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of eighteen (18) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to fifty percent (50%) of the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  In consideration of the payment set forth on Exhibit A to this Agreement and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, during the term of this Agreement and for a period of thirty-six (36) months thereafter, the Employee will not, without the Employer's and Avocent Corporation's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time; provided, however, that the Employee shall not be entitled to any payment under this Section 5 upon a termination of employment under Section 2.5 or Section 2.6 of this Agreement. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5. Payments by the Employer to the Employee under this Section 5 shall be made within thirty (30) days following a termination of the Employee's employment with the Employer by delivery of a bank cashier's check to the Employee at the address set forth in Section 6.6 of this Agreement.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation. 7 --------------------------------------------------------------------------------     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 5 or Section 6.1 hereof.     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to General Counsel   If to the Employee:   Stephen F. Thornton [          ] [          ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Huntsville, Madison County, Alabama, for any lawsuit arising from or relating to this Agreement. 8 --------------------------------------------------------------------------------     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred 9 -------------------------------------------------------------------------------- in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     AVOCENT EMPLOYMENT SERVICES, INC.:           By:   /s/ JULIE YARBROUGH    --------------------------------------------------------------------------------     Its: President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ STEPHEN F. THORNTON    -------------------------------------------------------------------------------- Stephen F. Thornton 10 -------------------------------------------------------------------------------- EXHIBIT A     Avocent Employment Services Co. (formerly known as PolyCon Investments, Inc.), a Texas corporation (the "Employer"), Avocent Corporation, a Delaware corporation, and Stephen F. Thornton, a resident of the State of Alabama (the "Employee"), hereby agree that the payment required to be paid by Employer to the Employee pursuant to Section 5 of that certain Employment and Noncompetition Agreement dated July 1, 1999 between the Employer, Cybex Computer Products Corporation (a wholly-owned subsidiary of Avocent Corporation), and the Employee, as amended by that certain Amended and Restated Employment and Noncompetition Agreement dated as of October 31, 2000 between the Employer, Avocent Corporation, and Employee, shall be Four Hundred Thousand Dollars ($400,000). 11 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT EXHIBIT A
Exhibit 10(p) Contract No. 117164   NATURAL GAS PIPELINE COMPANY OF AMERICA (NATURAL) STORAGE RATE SCHEDULE DSS AGREEMENT DATED March 9, 2000   1. SHIPPER is: NORTH SHORE GAS COMPANY, a SHIPPER. 2. (a) MDQ totals: 35,000 MMBtu per day.     (b) MSV totals: 1,750,000 MMBtu.     (c) The primary Delivery Point(s) and associated MDQ(s) are contained in Exhibit B attached hereto and are a part of this Agreement. 3. TERM: May 1, 2000 through April 30, 2003. 4. [ ] This Agreement supersedes and cancels a ____________ Agreement dated ___________. [X] Service and reservation charges commence the latter of: (a) May 1, 2000, and (b) the date capacity to provide the service hereunder is available on Natural's System. [ ] Other:_____________________________________________ 5. SHIPPER'S ADDRESSES   NATURAL'S ADDRESSES       General Correspondence :       NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA RAULIE DE LARA   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P. O. BOX 283 77001-0283     HOUSTON, TEXAS         Statements/Invoices/Accounting Related Materials :       NORTH SHORE GAS COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA 130 E. RANDOLPH DR.   ATTENTION: ACCOUNT SERVICES CHICAGO, IL 60601-6207   ONE ALLEN CENTER, SUITE 1000     500 DALLAS ST., 77002     P.O. BOX 283 77001-0283     HOUSTON, TEXAS     Payments :     NATURAL GAS PIPELINE COMPANY OF AMERICA     P.O. BOX 70605     CHICAGO, ILLINOIS 60673-0605           FOR WIRE TRANSFER OR ACH:     DEPOSITORY INSTITUTION: THE CHASE     MANHATTAN BANK, NEW YORK, NY     WIRE ROUTING #: 021000021     ACCOUNT #: 323-206042     6. The above stated Rate Schedule, as revised from time to time, controls this Agreement and is incorporated herein. NATURAL AND SHIPPER ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the entire agreement between the parties and no waiver, representation, or agreement shall affect this Agreement unless it is in writing. AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   NORTH SHORE GAS COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President   Contract No. 117164     EXHIBIT B DATED: May 9, 2000 EFFECTIVE DATE: May 1, 2000   COMPANY: NORTH SHORE GAS COMPANY CONTRACT: 117164   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL TONNE RD COOK COOK IL 7866 09 35,000 INTERCONNECT WITH NORTH           SHORE GAS COMPANY ON           TRANSPORTER'S HOWARD STREET           LINE IN SEC. 27-T41N-R11E, COOK           COUNTY, ILLINOIS.             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.  
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.4 [LOGO]        PERFORMANCE SHARE AGREEMENT GRANTED TO   GRANT DATE   NUMBER OF SHARES OF COMMON STOCK   PURCHASE PRICE PER SHARE   SOCIAL SECURITY NUMBER «First» «Last» «Street1» «City», «State» «Zip»     03     20     00   «M   of  Shares  Th»- Threshold «M   of  Shares  T»-Target «M   of  Shares  O»- Outstanding         «National  ID 1.The Grant. Alliant Techsystems Inc., a Delaware corporation (the "Company") hereby grants to the individual named above (the "Employee"), as of the above Grant Date, the above Number of Performance Shares (the "Shares), on the terms and conditions set forth in this Performance Share Agreement (this "Agreement") and in the Alliant Techsystems Inc. 1990 Equity Incentive Plan (the "Plan"). 2.Measuring Period. The Shares shall be payable, in the form provided in Paragraph 4 below, and to the extent provided in Paragraph 3 below, as soon as practical after the end of the above Measuring Period. 3.Performance Goals. Up to 100% of the Shares shall be payable, depending upon the Business Unit achieving the Performance Goals set forth in the accompanying Performance Accountability Chart. 4.Form of Payment. Any shares payable pursuant to Paragraph 3 above shall be paid in shares of Common Stock of the Company ("Stock"), except to the extent that the Personnel and Compensation Committee of the Company's Board of Directors, in its discretion, determines that cash be paid in lieu of some or all of such shares of stock. 5.Forfeiture. If an Employee voluntarily resigns or is involuntarily terminated (for cause), all Shares will be forfeited. In the event of the Employee's death, disability, retirement, or layoff, the number of Shares delivered will be based on year-end performance and prorated for the period of active employment. 6.Rights. Nothing herein shall be deemed to grant the Employee any rights as a holder of Stock unless and until certificates for shares of Stock are actually issued in the name of the Employee as provided herein. 7.Income Taxes. The Employee is liable for any federal, state and local income taxes applicable upon receipt of the Shares. Upon demand by the Company, the Employee shall promptly pay to the Company in cash, and/or the Company may withhold from the Employee's compensation or from the shares of Stock or any cash payable in lieu of some or all of such shares of Stock, an amount necessary to pay any income withholding taxes required by the Company to be collected upon such payment. 8.Acknowledgment. This grant will not be effective until the Employee dates and signs the form of Acknowledgment below and returns to the Company a signed copy of this Agreement. By signing the Acknowledgment, the Employee agrees to the terms and conditions referred to in Paragraph 1 above and acknowledges receipt of a copy of the Prospectus related to the Plan. ACKNOWLEDGMENT:   ALLIANT TECHSYSTEMS INC.   -------------------------------------------------------------------------------- EMPLOYEE'S SIGNATURE           -------------------------------------------------------------------------------- DATE       Paul David Miller Director, President, Chairman of the Board and Chief Executive Officer -------------------------------------------------------------------------------- SOCIAL SECURITY NUMBER     -------------------------------------------------------------------------------- QUICKLINKS [LOGO] PERFORMANCE SHARE AGREEMENT
EXHIBIT 10.11 PURCHASE AND SALE AGREEMENT by and between WHFST Real Estate Limited Partnership,  a Delaware limited partnership "Seller" and Inktomi Corporation,  a Delaware corporation "Buyer" -------------------------------------------------------------------------------- TABLE OF CONTENTS Section Page No. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1.   SALE OF THE PROPERTY   1 2.   DEPOSITS   1 3.   PURCHASE PRICE   2 4.   CONDITIONS TO PARTIES' OBLIGATIONS   2 5.   REMEDIES/LIQUIDATED DAMAGES   10 6. CLOSING AND ESCROW 11 7.   INTERIM OPERATION OF THE PROPERTY   13 8. INTENTIONALLY OMITTED. 15 9.   SELLER'S MAINTENANCE OF THE P ROPERTY   15 10. CASUALTY AND CONDEMNATION 15 11.   LIMITED LIABILITY   16 12. RELEASE 16 13.   AS-IS CONDITION OF PROPERTY   18 14. PRORATIONS AND RENT ARREARAGES 19 15.   CLOSING COSTS   20 16. BROKERS 22 17.   NOTICES   22 18. ENTIRE AGREEMENT 23 19.   ASSIGNMENT   23 20. SEVERABILITY 24 21.   CALIFORNIA LAW   24 22. MODIFICATIONS/SURVIVAL 24 23.   CONFIDENTIALITY   24 i   -------------------------------------------------------------------------------- 24.   COUNTERPARTS   25 25. DISPUTE COSTS 25 26.   SELLER'S REPRESENTATIONS   25 27. BUYER'S REPRESENTATIONS 27 28.   TIME OF THE ESSENCE; AND B USINESS DAYS   28 29. AGREEMENT DATE 28 30.   NO THIRD PARTY B ENEFICIARIES   30 31. INTENTIONALLY OMITTED 30 32.   DRAFTS NOT AN OFFER TO ENTER INTO A L EGALLY BINDING CONTRACT   30 33. LEGACY LEASE AMENDMENT 30 34.   ASSIGNMENT OF INKTOMI LEASE   30 35. PURCHASE OPTION TERMINATION 30   EXHIBITS: EXHIBIT A LEGAL DESCRIPTION OF THE REAL PROPERTY   EXHIBIT B ASSIGNMENT AND ASSUMPTION OF LEASES   EXHIBIT C ASSIGNMENT AND ASSUMPTION OF CONTRACTS,     WARRANTIES AND PERMITS   EXHIBIT D GRANT DEED   EXHIBIT E BILL OF SALE   EXHIBIT F NOTICE TO TENANTS   EXHIBIT G NATURAL HAZARD DISCLOSURE STATEMENT   EXHIBIT H LEGACY LEASE AMENDMENT ii -------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into as of June 30, 2000 (the "Agreement Date"), by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Seller"), and Inktomi Corporation, a Delaware corporation ("Buyer"), with reference to the following facts. RECITALS           A.          Seller is the owner of that certain improved and unimproved real property located at, and contiguous to, 4000 and 4100 East Third Avenue, Foster City, California, all as legally described in Exhibit A attached hereto and made a part hereof (collectively, the "Real Property") together with all (i) improvements, structures and fixtures (other than trade fixtures) (collectively, the "Improvements") and personal property (the "Personal Property") actually owned by Seller (if any) located in, on or about the Real Property or the Improvements and actually used in the operation of the Improvements, and (ii) easements, appurtenances, rights and privileges actually belonging thereto (collectively, the “Appurtenances”). The Real Property, the Improvements, the Personal Property and the Appurtenances are collectively referred to herein as the "Property."           B.           Seller desires to sell to Buyer and Buyer desires to purchase from Seller the Property, in accordance with the terms and provisions hereinafter contained in this Agreement.           NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:           1.           SALE OF THE PROPERTY.           Seller shall sell to Buyer and Buyer shall purchase from Seller the Property at the Closing (defined in Section 6 below), subject to and on the terms and conditions contained herein.           2.           DEPOSITS.                     2.1           Initial Deposit. Within two (2) business days after the Agreement Date, Buyer shall place on deposit into the escrow account (the "Escrow Account") to be opened with Fidelity National Title Insurance Company located at 50 California Street, Suite 2950, San Francisco, California 94111 (Attention: Mr. Bill Waite) ("Title Company" or "Escrow Holder") the amount of One Million Dollars ($1,000,000) as an initial deposit (the "Initial Deposit"). The Title Company shall cause the Initial Deposit to be placed into an interest bearing bank account acceptable to Buyer. Any interest earned on the Initial Deposit shall be included as part of the Initial Deposit. The Initial Deposit and interest earned thereon, shall be fully refundable to Buyer during the period commencing with the Agreement Date and ending at 5:00 p.m. (Pacific Time) on July 5, 2000 (the "Conditions Period"). For purposes hereof, the last day of the Conditions Period shall mean and be referred to herein as the "Approval Date". If Buyer fails to deli ver the Initial Deposit into the Escrow Account strictly as and when contemplated herein, Seller shall have the right to terminate this Agreement by delivering written notice thereof to Buyer at any time and thereafter neither party shall have any further rights or obligations hereunder except for (A) the  1 -------------------------------------------------------------------------------- indemnities contained in Sections 4.4 and 16 below, Buyer's covenants made herein which are expressly intended to survive any such termination and Buyer's obligations under Section 4.3 below to deliver to Seller the Due Diligence Materials (defined below) (collectively, "Buyer's Surviving Obligations") and (B) Seller's covenants made herein which are expressly intended to survive any such termination (collectively, "Seller's Surviving Obligations"). If Buyer decides to proceed with the transaction contemplated herein, then Buyer shall deliver written notice thereof to Seller prior to the expiration of the Conditions Period (the "Approval Notice"); provided, if Buyer fails to timely deliver the Approval Notice, this Agreement shall be deemed automatically terminated and of no further force or effect except for Buyer's Surviving Obligations, and Escrow Holder shall return the Initial Deposit to Buyer without further instruction or written approval from Seller.                     2.2           Additional Deposit. If Buyer delivers to Seller the Approval Notice prior to 5:00 p.m. (Pacific Time) on the Approval Date then (i) at the end of the Conditions Period the Initial Deposit shall become non-refundable to Buyer, and (ii) within two (2) business days after the Approval Date Buyer shall place on deposit into the Escrow Account, the amount of Four Million Dollars ($4,000,000) as the additional deposit (the "Additional Deposit"). The Escrow Holder shall cause the Additional Deposit to be placed into an interest bearing bank account acceptable to Buyer and Seller. Any interest earned on the Additional Deposit shall be included as part of the Additional Deposit. The Additional Deposit shall be retained in the Escrow Account until the Closing (defined below), and the Additional Deposit shall be non-refundable to Buyer; provided, however, the Initial Deposit and the Additional Deposit (including any interest earned thereon) shall be refundable to Buyer if all of the Buyer's Closing Conditions (defined below ) are not satisfied or otherwise waived by Buyer in accordance with the provisions of Section 4.3 of this Agreement. If Buyer fails to deliver the Additional Deposit into the Escrow Account strictly as and when contemplated herein, Seller shall have the right to terminate this Agreement by delivering written notice thereof to Buyer at any time and the Initial Deposit shall be retained by Seller as liquidated damages under Section 5.1 of this Agreement. Thereafter neither party shall have any further rights or obligations hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations. The Initial Deposit and the Additional Deposit shall be applied to the Purchase Price at the Closing. The Initial Deposit and the Additional Deposit are collectively referred to herein as the "Deposits."           3.           PURCHASE PRICE.           The purchase price for the Property is One Hundred Twelve Million Dollars ($112,000,000) (the "Purchase Price"), as such amount may be adjusted for prorations in accordance with the provisions of Section 14 below. At the Closing, the balance of the Purchase Price remaining after deduction for the Deposits, shall be paid by Buyer to Seller in cash, in immediately available funds via wire transfer.           4.           CONDITIONS TO PARTIES' OBLIGATIONS.                         4.1       Buyer's Pre-Closing Conditions. Buyer's obligations under this Agreement shall be subject to the approval of, or written waiver by Buyer of, the following described matters (collectively, the "Pre-Closing Conditions") on or before the earlier of (i) the time periods specified in each subsection below, or (ii) 5:00 p.m. (Pacific Time) on the Approval Date: >                         4.1.1          Title. If not already delivered prior > to the Agreement Date, within five (5) days after the Agreement Date, Seller > will cause to be issued and delivered to Buyer a preliminary title report for > the Property, together with all documents evidencing exceptions to title  2 -------------------------------------------------------------------------------- > referred to therein issued by the Title Company (collectively, the "Title > Report"). Buyer shall have until 5:00 p.m. (Pacific Time) on the date which is > five (5) business days prior to the Approval Date to either approve of the > exceptions (if any) contained therein, or to notify Seller in writing, > specifying any exceptions to which Buyer objects ("Title Objection Notice"). > Seller shall have a period of three (3) business days after Seller's receipt > of the Title Objection Notice (a) to remove, or agree to remove prior to the > Closing, some or all of those exceptions to which Buyer has objected in the > Title Objection Notice, and to inform Buyer of the same, or (b) to advise > Buyer, in writing, that Seller will not agree to remove some or all of those > exceptions to which Buyer has objected in the Title Objection Notice; the > foregoing election by Seller being at Seller's sole option and discretion > ("Title Response Notice"). If Seller fails to timely deliver to Buyer the > Title Response Notice, it shall be conclusively deemed that Seller has elected > not to remove any of those exceptions to which Buyer has objected as specified > in the Title Objection Notice. If Seller advises Buyer in its Title Response > Notice that it will not remove or agree to remove some or all of those > exceptions to which Buyer has objected in the Title Objection Notice (or > Seller is deemed to have so advised Buyer), then Buy er shall have until 5:00 > p.m. (Pacific Time) on the Approval Date to advise Seller, in writing, whether > Buyer elects to waive such objections and proceed with the acquisition of the > Property or to terminate this Agreement. Failure by Seller to remove or > failure of Seller to inform Buyer that Seller has or has not removed those > specified exceptions which Seller has expressly agreed to remove in the Title > Response Notice on or before the business day prior to the Closing Date shall > be deemed to be a failure of this condition, in which event the Agreement > shall terminate, the Deposits shall be returned to Buyer, and the parties > shall have no further obligations hereunder except for Buyer's Surviving > Obligations and Seller's Surviving Obligations, unless Buyer withdraws its > objections in writing. Notwithstanding the foregoing, on or prior to Closing > Seller shall remove or cause to be removed those certain monetary liens or > encumbrances affecting the Property which Seller has created or expressly > permitted to e xist other than current taxes and assessments, and Seller also > shall extinguish all rights in and to the Property arising under the Specialty > Agreements (as defined in Section 4.1.8 below). > >                         4.1.2    Physical Inspections.  Within five (5) days > after the Agreement Date, but only to the extent the same is actually in > Seller's or its property manager's possession or under their immediate control > and has not already been delivered to Buyer by Seller prior to the Agreement > Date, without any warranty or representation as to the accuracy or > thoroughness thereof or to the ability of Buyer to rely thereon, a true and > complete copy of the most recent environmental site assessment report(s) with > respect to an evaluation of Hazardous Materials (defined below) in, on or > under the Property. After Buyer has provided to Seller a certificate of > insurance(s) evidencing Buyer's or Buyer's agents', consultants' and/or > contractors' (as the case may be) procurement of a commercial general > liability insurance policy as required herein, Seller shall permit Buyer and > its authorized agents, consultants and contractors to enter upon the Property > during reasonable business hours (provided, Buyer shall not interfere with or > distu rb any tenants’ operations therein or Seller's operation of the > Property) to make and perform such environmental evaluations, and other > inspections and investigations of the physical condition of the Property. > Buyer shall maintain, and shall ensure that its agents, consultants and > contractors maintain, public liability and property damage insurance insuring > against any liability arising out of any entry, tests or investigations of the > Property pursuant to the provisions hereof. Such insurance maintained by Buyer > and/or its consultants, agents and contractors (as applicable) shall be in the > amount of Two Million Dollars ($2,000,000.00) combined single limit for injury > to or death of one or more persons in an occurrence, and for damage to > tangible property (including  3 -------------------------------------------------------------------------------- > loss of use) in an occurrence. The policy maintained by Buyer shall insure the > contractual liability of Buyer covering the indemnities herein and shall (i) > name the Seller and its manager (and their successors, assigns and affiliates) > as additional insureds, (ii) contain a cross-liability provision, and (iii) > contain a provision that "the insurance provided by Buyer hereunder shall be > primary and non-contributing with any other insurance available to Seller." > Buyer shall provide Seller with evidence of such insurance coverage prior to > any entry, tests or investigations of the Property. The aforementioned > insurance coverage may be obtained under a blanket policy carried by Buyer or > its agents, consultants or contractors, as the case may be. Notwithstanding > the foregoing, Buyer shall not be permitted to undertake any intrusive or > destructive testing of the Property, including without limitation a "Phase II" > environmental assessment, without in each instance first obtaining Seller's > written consent thereto, which consent Seller may give or withhold in Seller's > sole and absolute discretion. Prior to entering the Property (and on each and > every occasion), Buyer shall deliver to Seller prior written notice thereof > [or verbal notice wherein Buyer actually speaks with a representative of > Seller (not a voicemail message) with written notice delivered immediately > thereafter, if requested at such time], and shall afford Seller a reasonable > opportunity to have a representative of Seller present to accompany Buyer > while Buyer performs its evaluations, inspections, tests and other investigat > ions of the physical condition of the Property. Prior to any entry to perform > any necessary on-site inspections, tests or investigations, Buyer shall give > Seller written notice thereof [or verbal notice wherein Buyer actually speaks > with a representative of Seller (not a voicemail message) with written notice > delivered immediately thereafter, if requested at such time], including the > identity of the company or party(s) who will perform such inspections, tests > or investigations and the proposed scope of the inspections, tests or > investigations. Seller shall approve or disapprove any proposed inspections, > tests or investigations and the party(s) performing the same within two (2) > business days after receipt of such notice. Seller’s failure to advise Buyer > of its disapproval of any proposed inspections, tests or investigations and > the party(s) performing the same within such two (2) business day period shall > be deemed Seller’s approval thereof, except to the extent said proposed > inspections, tests o r investigations relate to "Phase II" environmental > matters, in which event Seller’s failure to advise Buyer of its approval or > disapproval of any proposed environmental inspections, tests or investigations > and the party(s) performing the same within such two (2) business day period > shall be deemed Seller’s disapproval thereof. Upon request, Buyer shall > promptly deliver to Seller copies of any reports relating to any inspections, > tests or investigations of the Property performed by or on behalf of Buyer. > Prior to Buyer contacting the tenants, Buyer shall give Seller written notice > thereof, including the identity of the company or persons who will perform any > tenant interview or contacts. Seller or its representative(s) may be present > at any such interview or meeting with the tenants and Buyer will reasonably > cooperate and coordinate with Seller to effectuate same. Buyer shall have > until 5:00 p.m. (Pacific Time) on the Approval Date to notify Seller in > writing of its approval of all such evaluat ions, inspections and > investigations. The term "Hazardous Materials" as used in this Agreement shall > mean and refer to (a) any hazardous or toxic wastes, materials or substances, > or chemicals, and other pollutants or contaminants, which are or become > regulated by applicable local, state, regional and/or federal orders, > ordinances, statutes, rules, regulations (as interpreted by judicial and > administrative decisions) and laws; (b) asbestos, asbestos-containing > materials or urea formaldehyde; (c) polychlorinated biphenyls; (d) flammables, > explosive, corrosive or radioactive materials; (e) medical waste and > biochemicals; and (f) gasoline, diesel, petroleum or petroleum by-products. > >                       4.1.3    Plans, Permits, Reports and Related > Information. Within five (5) days after the Agreement Date, but only to the > extent the same is actually in Seller's or its property  4 -------------------------------------------------------------------------------- > manager's possession or under their immediate control and has not already been > delivered to Buyer by Seller prior to the Agreement Date, Seller will deliver > to Buyer or otherwise make available to Buyer at Seller’s property management > company’s offices during normal business hours for inspection by Buyer, a true > and complete copy of (a) property tax bills for the most recent tax fiscal > year; (b) without any warranty or representation as to the accuracy thereof or > to the ability of Buyer to rely thereon, soils reports, ADA reports, as-built > plans and specifications, drawings, structural or engineering studies or > reports, construction and development files; and (c) without any warranty or > representation as to the accuracy thereof or to the ability of Buyer to rely > thereon, a copy of any existing survey(s) of the Property. Buyer shall have > until 5:00 p.m. (Pacific Time) on the Approval Date to notify Seller in > writing of its approval of such matters. In no event shall Seller be required > to prepare or obtain any information, report, document or survey not presently > in Seller's or its property manager's possession or under their immediate > control. Notwithstanding the foregoing, to the extent Seller has the legal > right to obtain a copy of information in the possession any third party > consultant(s) previously hired by Seller to prepare such information, at > absolutely no cost or liability to Seller, Seller will use commercially > reasonable efforts to assist Buyer in obtaining said information from such > third party consultant. > >                       4.1.4    Leases and Expenses Statements. Within five (5) > days after the Agreement Date, but only to the extent the same is actually in > Seller's or its property manager's possession or under their immediate control > and has not already been delivered to Buyer by Seller prior to the Agreement > Date, Seller will deliver to Buyer or otherwise make available to Buyer at > Seller's property management company's offices during normal business hours > for inspection by Buyer, the following described documents and information: > (i) a copy of all existing and pending leases and subleases together with any > amendments or modifications thereof affecting any portion of the Property > other than the Office Lease, dated October 9, 1998, as amended (the "Inktomi > Lease"), by and between Buyer, as tenant, and Seller, as landlord with respect > to the leased premises described therein (the "Inktomi Premises") > (collectively, the "Leases"), and any correspondence with the tenants (other > than Buyer) of the Property; (ii) a current rent roll for the Property, in the > format customarily used by Seller, with the information contained therein made > as of the date specified therein; and (iii) a copy of a summary of expenses > for the Property for the most recent full calendar year prior to the Closing > and to the extent available, the current year. Seller's obligations under the > preceding sentence shall not include the delivery of any documents or other > materials related to the Inktomi Lease. Buyer shall have until 5:00 p.m. > (Pacific Time) on the Approval Date to notify Seller in writing, of its > approval of the Leases and the other information to be provided under this > Section 4.1.4; provided, however, except as otherwise set forth in Section 33 > with respect to the Legacy Lease Amendment, Seller shall not be required to > modify, terminate or otherwise supplement any of the Leases. Seller shall > assign to Buyer at the Closing its rights and interests in and to the Leases, > other than to the Inktomi Lease, and all security deposits (if any) then being > held by Seller, pursuant to th e Assignment and Assumption of Leases in > substantially the form attached hereto as Exhibit B, and made a part hereof. > >                       4.1.5    Contracts. Within five (5) days after the > Agreement Date, but only to the extent the same is actually in Seller's or its > property manager's possession or under their immediate control, Seller will > deliver to Buyer a copy of all service agreements, commission agreements, > maintenance agreements, easement agreements, improvement agreements, license > agreements, and other agreements related to or affecting the Property and not > included as part of the title documents delivered pursuant to Section 4.1.1 > hereof (collectively, the "Contracts"). Buyer shall have until 5:00 p.m. > (Pacific Time) on the date which is five (5) business days prior  5 -------------------------------------------------------------------------------- > to the Approval Date to either approve of any such Contracts, or to notify > Seller in writing, specifying any Contracts which Buyer desires be terminated > on or before the Closing, and which, by their express terms, may be terminated > on or before the Closing (the "Disapproved Contracts"); provided, however, in > no event shall Seller be required to terminate any Contracts which by their > terms are not terminable prior to the Closing unless Buyer agrees, in writing, > to pay the prorated charges or costs thereunder as of the Closing Date. Seller > shall have until one (1) business day prior to the expiration of the > Conditions Period to notify Buyer, in writing, of its agreement to lawfully > terminate such Disapproved Contracts prior to the Closing, with such > Disapproved Contracts being terminated effective on or before the Closing. > Those Contracts not expressly disapproved by Buyer and those Disapproved > Contracts which Seller has advised Buyer it will not terminate at or prior to > the Closing (collectively, the "Approved Contracts") shall be assigned by > Seller to Buyer at the Closing. Seller shall assign its rights and interests > under the Approved Contracts to Buyer at the Closing pursuant to the > Assignment and Assumption of Contracts, Warranties and Permits in > substantially the form attached hereto as Exhibit C, and made a part hereof. > Failure by Seller to agree to so terminate some or all of the Disapproved > Contracts within the specified period shall be deemed to be a failure of this > condition, unless Buyer withdraws its disapproval or rejection, in writing, > prior to the 5:00 p.m. (Pacific Time) on the Approval Date. > >                       4.1.6    Economic Feasibility. Buyer's determination, in > its sole and absolute discretion, of the economic feasibility of the Property > for Buyer's intended ownership. > >                       4.1.7    Natural Hazard Disclosure Statement. By the > date which is seven (7) business days after the Agreement Date, Seller shall > have executed and delivered to Buyer, a Natural Hazard Disclosure Statement, > as and to the extent prescribed by California law, in substantially the form > of Exhibit G attached hereto and made a part hereof (the "NHDS"). On or prior > to the Approval Date, Buyer shall execute and deliver to Seller one (1) > counterpart original of the NHDS which signature shall, among other things, > serve to acknowledge Buyer's receipt from Seller of such NHDS and Buyer's > understanding and acceptance thereof. > >                       4.1.8    Specialty Agreements. Within five (5) days > after the Agreement Date, but only to the extent the same has not already been > delivered to Buyer by Seller prior to the Agreement Date, Seller will deliver > to Buyer a true and complete copy of that certain Option Agreement made by > Seller and Specialty Restaurants Corporation, a California Corporation > ("Specialty"), dated March 1, 2000, the Purchase and Sale Agreement by and > between Seller's predecessor in interest and Specialty, dated November 27, > 1996 as amended by that certain First Amendment to Purchase and Sale > Agreement, dated January 22, 1997, the Second Amendment to Purchase and Sale > Agreement, dated as of February 12, 1997, the Third Amendment to Purchase and > Sale Agreement dated as of March 3, 1997, the Fourth Amendment to Purchase and > Sale Agreement dated as of April 10, 1997, and the Fifth Amendment to Purchase > and Sale Agreement dated as of April 28, 1997, the Assignment of Contract > Rights from Lincoln Property Company N.C., Inc. in favor of Seller, and that > certain letter agreement between Seller and Bank of America N.T.& S.A, dated > April 29, 1997 (collectively, the "Specialty Agreements"). Buyer shall have > until 5:00 p.m. (Pacific Time) on the Approval Date to notify Seller, in > writing, of its approval of such Specialty Agreements. Notwithstanding > anything to the contrary contained herein, in no event shall Seller be > required to modify, supplement or otherwise amend any of the Specialty > Agreements. 6 --------------------------------------------------------------------------------             For purposes of this Agreement, (i) the term or phrase "under the (their) immediate control" shall not impose upon Seller the obligation to obtain from a third party (including without limitation, any governmental agency) such information or documents to the extent not already in Seller's or its property manager's possession and (ii) documents or materials that are "in Seller's possession" or "in Seller's property manager's possession" include only those documents or materials that are actually in the possession of Seller or Seller's property manager.                         4.2   Closing Conditions. >                       4.2.1    Buyer's Closing Conditions. Following the > Approval Date, Buyer's obligation to consummate the purchase of the Property > shall be subject to the approval or waiver by Buyer of the following > conditions (collectively, the "Buyer's Closing Conditions"): > > >                         4.2.1.1   Seller's Delivery of Estoppel > > Certificates. Seller will obtain and deliver to Buyer by no later than five > > (5) business days prior to the Closing, (the "Estoppel Delivery Date"), > > estoppel certificates from two (2) of the tenants of the Property, Legacy > > Partners L.P. ("Legacy") and The Perkin-Elmer Corporation ("PE"). Said > > estoppel certificates shall be in the form prescribed in each of said > > tenant's leases (collectively, the "Estoppel Certificates"). Buyer shall be > > deemed to have approved each of the Estoppel Certificates so long as there > > are no defaults specified therein and no material deviations between the > > information specified in said Estoppel Certificates and the leases to which > > such Estoppel Certificates relate. If Seller is unable to provide Buyer with > > an Estoppel Certificate from PE, Seller may elect to extend the Estoppel > > Delivery Date and the Closing Date for a period of up to an additional > > thirty (30) days in order to obtain said missing Estoppel Certificate. > > Seller shall notify Buyer, in writing, of its election by the Estoppel > > Delivery Date and shall specify therein the extended estoppel delivery date > > (the "Extended Estoppel Delivery Date") and the extended Closing Date. If > > Seller is unable to provide Buyer with an Estoppel Certificate from PE by > > the Estoppel Delivery Date or the Extended Estoppel Delivery Date, as > > applicable, Buyer may either elect to (a) terminate this Agreement in which > > case the Deposits (to the extent then made) shall be returned to Buyer, or > > (b) consummate the transaction in accordance with the provisions hereof > > without Seller being required to obtain the missing Estoppel Certificates. > > Buyer shall notify Seller of its disapproval or approval of the Estoppel > > Certificates and, if applicable, of its election under clauses (a) or (b) > > hereof, in writing, by the earlier of the date which is two (2) business > > days after Seller's delivery to Buyer of the required Estoppel Certificates > > or the Estoppel Delivery Date or the Extended Estoppel Delivery Date, as the > > case may be. > > > >                         4.2.1.2    Seller's Delivery of Closing Documents. > > Seller shall have delivered to Escrow Holder or Buyer, as appropriate, all > > of the documents referred to in Section 6.4.1 below. > > > >                         4.2.1.3   Delivery of Title Policy. At the Closing, > > if Buyer has timely delivered to the Title Company an ALTA Survey in > > insurable form reasonably acceptable to the Title Company, the Title Company > > shall be irrevocably committed to issue to Buyer the ALTA Policy (defined > > below). Alternatively, if Buyer has not timely delivered to the Title > > Company an ALTA Survey in insurable form reasonably acceptable to the Title > > Company, the Title Company shall be irrevocably committed to issue to Buyer > > the  7 -------------------------------------------------------------------------------- > > CLTA Title Policy (defined below). The ALTA Policy or the CLTA Title Policy, > > as the case may be, shall be subject only to (i) a lien for real property > > taxes and assessments not then delinquent; (ii) matters of title respecting > > the Real Property approved or deemed approved by Buyer pursuant to the > > provisions of this Agreement; and (iii) matters affecting the condition of > > title to the Real Property created or permitted by, or with the written > > consent of, Buyer or its agents, representatives, consultants or contractors > > (collectively, the "Permitted Exceptions"). > > > >                         4.2.1.4    Representations. Except as Seller > > otherwise discloses to Buyer, in writing, prior to the Approval Date, > > Seller's representations contained in Section 26 of this Agreement shall > > have been true and correct in all material respects when made and shall, > > subject to the provisions of the last paragraph of Section 26 below, be true > > and correct in all material respects as of the Closing Date. > > > >                         4.2.1.5    Termination of Disapproved Instruments. > > Seller lawfully terminating, or causing the lawful termination of, the > > Disapproved Contracts which Seller has agreed to terminate in accordance > > with the provisions of Section 4.1.5 hereof, all of which having an > > effective date of termination being on or before the Closing. Additionally, > > effective as of the Closing Date, Seller shall terminate any property > > management agreement made with its property management company with respect > > to the Property. > > > >                         4.2.1.6    No Material Default. Seller shall not be > > in material default of its obligations hereunder. > >                         4.2.2    Seller's Closing Conditions. Seller's > obligation to consummate the sale of the Property is conditioned upon the > approval or Seller's written waiver on or prior to the Closing Date of the > following conditions (collectively, the "Seller's Closing Conditions"): > > >                         4.2.2.1    Delivery of Funds. Not later than one (1) > > business day prior to Closing, Buyer shall deliver into the Escrow Account > > (for payment to Seller), in immediately available funds, cash in an amount > > of the balance of the Purchase Price remaining after deduction for the > > Deposits plus the costs, expenses and prorations required to be paid by > > Buyer hereunder. > > > >                         4.2.2.2    No Material Default. Buyer shall not be > > in material default of its obligations hereunder. > > > >                         4.2.2.3    Buyer's Delivery of Closing Documents. > > Each of the documents required to be delivered by Buyer pursuant to Section > > 6.4.2 shall have been timely delivered as provided therein. > > > >                         4.2.2.4    Representations. All of Buyer's > > representations and warranties contained herein shall be true and correct in > > all material respects when made and shall be true and correct in all > > material respects as of the Closing Date. > > > >                         4.2.2.5    Seller's receipt of a release reasonably > > satisfactory to Seller, by Specialty and Bank of America of all right, title > > and interest in and to the Property held  8 -------------------------------------------------------------------------------- > > by Specialty and Bank of America, pursuant to the terms and provisions of > > the Specialty Agreements.                         4.3    Failure of Conditions. If Buyer approves or otherwise waives, in writing, all of the Pre-Closing Conditions within the applicable time periods specified in Section 4.1 above, by timely delivering to Seller an Approval Notice, the parties shall proceed with this transaction and the Closing. If Buyer fails to timely deliver to Seller all required Approval Notices within the applicable time periods specified in Section 4.1 above, then this Agreement shall be deemed automatically terminated without either party having any further rights or obligations hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations. If Buyer elects to terminate this Agreement or this Agreement is deemed terminated, the Initial Deposit shall be returned to Buyer and neither Buyer nor Seller shall have any further liability or obligation to each other, except for Buyer's Surviving Obligations and Seller's Surviving Obligations. Notwithstanding anything to the contrary contained herein, if this Agreement terminates for failure of a Pre-Closing Condition or for any other reason, within ten (10) days after such termination Buyer shall deliver to Seller a copy of all materials, tests, audits, surveys, reports, studies and the results of any and all investigations and inspections conducted by Buyer (excluding any proprietary materials) (collectively, the "Buyer's Documents") and Buyer shall also return to Seller any and all documents, leases, agreements, reports and other materials given to Buyer by or on behalf of Seller (collectively, the “Seller's Documents”) (the Buyer's Documents and the Seller's Documents are collectively referred to herein as the "Due Diligence Materials"). The foregoing covenants of Buyer shall survive any such termination of this Agreement. If Buyer delivers to Seller the Approval Notice prior to 5:00 p.m. (Pacific Time) on the Approval Date, (i) the Initial Deposit shall become non-refundable to Buyer, and (ii) within one (1) business day after the Approval Date, Buyer shall deposit into the Escrow Account, the Additional Deposit which shall also become non-refundable to Buyer subject to the satisfaction or waiver of the Buyer's Closing Conditions. The funding by Buyer of the Additional Deposit shall conclusively constitute Buyer's approval of each and every aspe c t of the Property as well as of the Pre-Closing Conditions. If the Pre-Closing Conditions are satisfied or waived by Buyer but any or all of the Buyer's Closing Conditions are not satisfied or waived by Buyer on or before the date established for the Closing, then Buyer shall notify Seller in writing of those Buyer's Closing Conditions which have not been satisfied or otherwise waived by Buyer (the "Buyer's Closing Conditions Failure Notice"). Seller shall have three (3) business days after Buyer has delivered to Seller the Buyer's Closing Conditions Failure Notice (and the Closing shall be extended, if necessary to give Seller such three (3) business day period) to notify Buyer in writing of Seller's election either to (a) take such actions as may be necessary to cure such matters to Buyer's reasonable satisfaction prior to the date of Closing (as same may be extended), or (b) advise Buyer that Seller will not cure such matters (the "Seller's Conditions Notice"). If Seller elects not to cure such matters , then within two (2) business days after Buyer's receipt of the Seller's Conditions Notice (and the Closing shall be extended, if necessary to give Buyer such two (2) business day period), Buyer, at its sole option, may elect to do any of the following: (1) Buyer may elect to terminate this Agreement by delivering written notice thereof to Seller, in which event Seller shall promptly cause the return to Buyer of the Deposits, and the parties shall have no further obligations hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations; (2) if the Buyer's Closing Condition in question is any of those conditions specified in Sections 4.2.1.1, 4.2.1.3 or 4.2.1.4 and Seller is not in any material manner responsible for the deviation or failure of such Buyer's Closing Condition, then Buyer may elect to terminate this Agreement by delivering written notice thereof to Seller, in which event Seller shall promptly cause the return to Buyer of the Deposits, and the parties shall have no furth er obligations hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations; (3) if the Buyer's Closing Condition in question is any of those conditions specified in Sections 4.2.1.2 or 4.2.1.5, or if the Buyer's Closing Condition in question is any of those conditions  9 -------------------------------------------------------------------------------- specified in Sections 4.2.1.1, 4.2.1.3 or 4.2.1.4 and Seller is actually responsible for the deviation or failure of such Closing Condition, then Buyer may pursue the remedies available to it pursuant to Section 5.2 below; or (4) Buyer may elect to waive the Buyer's Closing Condition(s) in question and proceed with the purchase of the Property. If Buyer elects to terminate the Agreement, neither party shall have any further liability or obligation hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations. If Seller elects to cure such matters as set forth in the Buyer's Closing Conditions Failure Notice, Seller shall promptly take any and all actions as may be necessary to cure same and the date of the Closing may be extended for a period of time reasonably acceptable to both Seller and Buyer to enable Seller to accomplish same. Failure by Buyer to notify Seller of any failure of a Buyer's Closing Condition within the specified time periods set fort h herein, shall be deemed an approval by Buyer of each such matter, in which event all such Closing Conditions and contingencies shall be conclusively deemed to be satisfied and approved. If any of the Seller's Closing Conditions are not satisfied or otherwise waived by Seller prior to the Closing Date, Seller may elect, in its sole and absolute discretion, to terminate this Agreement.                         4.4    Investigations Indemnity. Buyer shall keep the Property free from all liens and shall indemnify, defend (with counsel reasonably satisfactory to Seller), protect, and hold Seller and each of the parties comprising Seller and each of their members, partners, officers, trustees, employees, representatives, agents, lenders, related and affiliated entities, successors and assigns harmless from and against any and all claims, demands, liabilities, judgments, penalties, losses, costs, damages, and expenses (including, without limitation, attorneys' and experts' fees and costs) relating to or arising in any manner whatsoever from any studies, evaluations, inspections, investigations or tests made by Buyer or Buyer's agents or representatives relating to or in connection with the Property or entries by Buyer or its agents or representatives in, on or about the Property; provided, Buyer shall not be liable to Seller under the foregoing indemnity solely as a result of the discovery by Buyer of a pre-existing condition in or on the Property. Notwithstanding any provision to the contrary in this Agreement, the indemnity obligations of Buyer under this Agreement shall survive any termination of this Agreement or the delivery of the Grant Deed and the transfer of title. In addi tion to the foregoing indemnity, if there is any damage to the Property caused by Buyer's and/or its agents' or representatives' entry in or on the Property, Buyer shall immediately restore the Property substantially to the same condition existing prior to Buyer's and its agents' or representatives' entry in, on or about the Property.                 5.     REMEDIES/LIQUIDATED DAMAGES.                         5.1    BUYER'S DEFAULT.  IF BUYER FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY AS PROVIDED IN THIS AGREEMENT BY REASON OF ANY DEFAULT OF BUYER (AND NOT DUE TO A FAILURE OF A CONDITION PRECEDENT), SELLER SHALL BE RELEASED FROM ITS OBLIGATION TO SELL THE PROPERTY TO BUYER. BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO FIX OR ESTABLISH THE ACTUAL DAMAGE SUSTAINED BY SELLER AS A RESULT OF SUCH DEFAULT BY BUYER, AND AGREE THAT THE DEPOSITS AND THE DELIVERY TO SELLER BY BUYER OF THE DUE DILIGENCE MATERIALS IS A REASONABLE APPROXIMATION THEREOF. A CCORDINGLY, IN THE EVENT THAT BUYER BREACHES THIS AGREEMENT BY DEFAULTING IN THE COMPLETION OF THE PURCHASE, THE DEPOSITS AND THE DELIVERY TO SELLER BY BUYER OF THE DUE DILIGENCE MATERIALS SHALL CONSTITUTE AND BE DEEMED TO BE THE AGREED AND LIQUIDATED DAMAGES OF SELLER, AND SHALL BE PAID BY BUYER TO SELLER AND THE TITLE COMPANY AS SELLER'S SOLE AND EXCLUSIVE REMEDY. SELLER AGREES TO WAIVE ALL OTHER REMEDIES AGAINST BUYER WHICH SELLER MIGHT OTHERWISE HAVE AT LAW OR IN EQUITY BY REASON OF SUCH DEFAULT BY BUYER; PROVIDED, HOWEVER, THE FOREGOING  10 -------------------------------------------------------------------------------- SHALL NOT LIMIT (I) BUYER'S OBLIGATIONS TO PAY TO SELLER ALL ATTORNEYS' FEES AND COSTS OF SELLER TO ENFORCE THE PROVISIONS OF THIS SECTION 5.1 AND/OR BUYER'S INDEMNITY OBLIGATIONS UNDER SECTIONS 4.4 AND 16 HEREOF, (II) BUYER'S INDEMNITY OBLIGATIONS UNDER SECTIONS 4.4 AND 16 HEREOF, OR (III) THE ABILITY AND RIGHT OF SELLER TO ENFORCE SUCH INDEMNITIES. EACH OF THE PAYMENT OF THE DEPOSITS, THE PAYMENT BY BUYER OF ALL ESCROW CANCELLATION CHARGES AND FEES, AND THE DELIVERY TO SELLER BY BUYER OF THE DUE DILIGENCE MATERIALS AS LIQUIDATED DAMAGES IS NOT INTENDED TO BE A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER'S INITIALS:   BUYER'S INITIALS:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                         5.2    SELLER'S DEFAULT.  IF SELLER FAILS TO COMPLETE THE SALE OF THE PROPERTY AS PROVIDED IN THIS AGREEMENT BY REASON OF ANY DEFAULT OF SELLER (AND NOT DUE TO A FAILURE OF A CONDITION PRECEDENT), BUYER SHALL BE RELEASED FROM ITS OBLIGATION TO PURCHASE THE PROPERTY FROM SELLER, AND BUYER MAY EITHER (I) PROCEED AGAINST SELLER BY BRINGING AN ACTION FOR SPECIFIC PERFORMANCE UNDER THIS AGREEMENT WITHOUT ANY RIGHT TO SEEK DAMAGES OF ANY KIND OR NATURE, OR (II) TERMINATE THIS AGREEMENT IN WHICH EVENT SELLER SHALL REIMBURSE BUYER FOR ITS ACTUAL, VERIFIABLE THIRD-PARTY OUT-OF-POCKET COSTS ACTUALLY INCURRED IN CONNECTION WITH THIS TRANSACTION UP TO A MAXIMUM OF ONE HUNDRED THOUSAND DOLLARS ($100,000), THE DEPOSITS SHALL BE RETURNED TO BUYER AND BUYER SHALL PROMPTLY RETURN TO SELLER THE SELLER’ S DOCUMENTS. BUYER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO FIX OR ESTABLISH THE ACTUAL DAMAGE SUSTAINED BY BUYER AS A RESULT OF SUCH MATERIAL DEFAULT BY SELLER, AND AGREE THAT THE REMEDY SET FORTH IN CLAUSE (II) ABOVE IS A REASONABLE APPROXIMATION THEREOF. ACCORDINGLY, IN THE EVENT THAT SELLER BREACHES THIS AGREEMENT BY MATERIALLY DEFAULTING IN THE COMPLETION OF THE SALE, AND BUYER ELECTS NOT TO EXERCISE THE REMEDY SET FORTH IN CLAUSE (I) ABOVE BUT INSTEAD ELECTS THE REMEDY SET FORTH IN CLAUSE (II) ABOVE, SUCH SUMS SHALL CONSTITUTE AND BE DEEMED TO BE THE AGREED AND LIQUIDATED DAMAGES OF BUYER WHICH IS NOT INTENDED TO BE A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO BUYER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. THE FOREGOING SHALL NOT LIMIT SELLER' S OBLIGATION TO PAY TO BUYER ALL ATTORNEYS' FEES AND COSTS OF BUYER TO ENFORCE THE PROVISIONS OF THIS SECTION5.2.  BUYER AGREES TO, AND DOES HEREBY, WAIVE ALL OTHER REMEDIES AGAINST SELLER WHICH BUYER MIGHT OTHERWISE HAVE AT LAW OR IN EQUITY BY REASON OF SUCH DEFAULT BY SELLER. SELLER'S INITIALS:   BUYER'S INITIALS:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------         6.    CLOSING AND ESCROW.                          6.1    Escrow Instructions. Upon execution of this Agreement, the parties hereto shall deposit a copy of an executed counterpart of this Agreement with Escrow Holder and this instrument shall serve as the instructions to Escrow Holder for consummation of the purchase and sale contemplated hereby. Seller and Buyer agree to execute such additional and supplementary escrow instructions as may be appropriate to enable the Escrow Holder to comply with the terms of this Agreement; provided, however, that in the event of any conflict between the provisions of this Agreement and any supplementary escrow instructions, the terms of this Agreement shall control. 11 --------------------------------------------------------------------------------                         6.2    Date of Closing. Unless otherwise agreed to in writing by the parties and subject to the provisions of Section 4.2.1.1 hereof, escrow shall close on or before 8:00 a.m. (Pacific Time) on July 21, 2000 (the "Initial Closing Date"), with time being of the essence. Buyer may extend the Initial Closing Date until August 8, 2000 (the “First Extended Closing Date”) by delivering to Seller written notice of such election by no later than 5:00 p.m. (Pacific Time) on July 14, 2000 (the “First Extension Notice Date”) and depositing into the Escrow Account on or before the First Extension Notice Date the sum of One Million Dollars ($1,000,000) which, together with interest thereon, shall be applicable to the Purchase Price and shall become part of the Deposits for all purposes hereunder. Buyer may extend the First Extended Closing Date until August 22, 2000 (the “Second Extended Closing Date”) by delivering to Seller writ ten notice of such election by no later than 5:00 p.m. (Pacific Time) on July 31, 2000 (the “Second Extension Notice Date”) and depositing into the Escrow Account on or before the Second Extension Notice Date the sum of One Million Dollars ($1,000,000) which, together with interest thereon, shall be applicable to the Purchase Price and shall become part of the Deposits for all purposes hereunder. The Initial Closing Date, the First Extended Closing Date and the Second Extended Closing Date, as applicable, may not be further extended without the prior written approval of both Seller and Buyer, except as otherwise expressly provided in this Agreement and, in particular, in Section 4.2.1.1 hereof. In the event the Closing does not occur on or before the Initial Closing Date, the First Extended Closing Date or the Second Extended Closing Date, as the case may be (as same may be extended pursuant to Section 4.2.1.1 hereof), the Escrow Holder shall, unless it is notified by both parties to the contrar y within three (3) days prior to the actual date on which the Closing occurs, return to the depositor thereof items which may have been deposited hereunder. Any such return shall not, however, relieve either party hereto of any liability it may have for its wrongful failure to close. For purposes of this Agreement, all references to the term “Closing Date” shall mean and refer to the actual date on which the Closing occurs.                         6.3    Conveyance. At Closing, Seller shall convey to Buyer fee simple title to the Property (excluding the Personal Property), by means of a grant deed in substantially the form of Exhibit D attached hereto and made a part hereof ("Grant Deed"), subject to all applicable laws, rules, regulations, codes, ordinances and orders, and the Permitted Exceptions. The Closing shall mean the date that the Grant Deed is recorded in the official records of San Mateo County, possession of the Property is delivered to Buyer, and Buyer fulfills all of its obligations hereunder. If Seller cannot so deliver title to the Property to Buyer, Buyer may, at its option, take title to the Property in such condition as Seller can then convey, without abatement of the Purchase Price or, at Buyer's option, Buyer may exercise its remedies in accordance with the provisions of Section 5.2 above.                         6.4    Closing Documents. >                         6.4.1    Seller's Closing Documents.  At Closing, in > addition to the Grant Deed, Seller shall deliver to Buyer, or Escrow Holder > for delivery to Buyer, all of the following documents: (i) originals or true > and complete copies of the Approved Contracts, if any; (ii) two (2) > counterparts of the Assignment and Assumption of Leases in substantially the > form attached hereto as Exhibit B, duly executed by Seller; (iii) two (2) > counterparts of the Assignment and Assumption of Contracts, Warranties and > Permits in substantially the form attached hereto as Exhibit C, duly executed > by Seller; (iv) two (2) counterparts of a bill of sale (the "Bill of Sale") > for the Personal Property, if any, in substantially the form attached hereto > as Exhibit E and made a part hereof, duly executed by Seller; (v) a > certificate of non-foreign status in accordance with the requirements of > Internal Revenue Code Section 1445, as amended ("FIRPTA Certificate")  12 -------------------------------------------------------------------------------- > and a California Form 590-RE with respect to the Property, duly executed by > Seller; (vi) notices to the tenants (other than Buyer) with respect to the > Leases, in substantially the form attached hereto as Exhibit F and made a part > hereof, duly executed by Seller or Seller’s property manager; (vii) subject to > the provisions of Section 34 hereof, two (2) counterparts of the Assignment of > Inktomi Lease (defined below), duly executed by Seller, as landlord; (viii) > subject to the provisions of Section 33 hereof, a fully executed original of > the Legacy Lease Amendment (defined below); and (ix) such other documents and > instruments as may be reasonably required by Title Company to consummate the > transactions contemplated herein. Seller's timely making and delivery of the > aforesaid documents and information shall be a condition precedent to Buyer's > obligations under this Agreement. Time is of the essence with respect hereto. > >                         6.4.2    Buyer's Closing Payments and Documents.  At > Closing, in addition to Buyer's payment to Seller of the Purchase Price, Buyer > shall deliver to Seller or Escrow Holder for delivery to Seller, as > applicable, the following: (i) two (2) counterparts of the Assignment and > Assumption of Leases in substantially the form attached hereto as Exhibit B, > duly executed by Buyer; (ii) two (2) counterparts of the Assignment and > Assumption of Contracts, Warranties and Permits in substantially the form > attached hereto as Exhibit C, duly executed by Buyer; (iii) two (2) > counterparts of the Bill of Sale in substantially the form attached hereto as > Exhibit E; (iv) subject to the provisions of Section 34 hereof, two (2) > counterparts of the Assignment of Inktomi Lease (defined below), duly executed > by Buyer's permitted assignee, as tenant; and (v) such other documents and > instruments as may be reasonably required by Title Company to consummate the > transactions contemplated herein. Buyer's timely making and delivery of the > aforesaid funds, documents and information shall be a condition precedent to > Seller's obligations under this Agreement. Time is of the essence with respect > hereto.            7.     INTERIM OPERATION OF THE PROPERTY.                         7.1    Except as otherwise contemplated or permitted by this Agreement or approved by Buyer in writing, from the Agreement Date to the Closing Date, Seller agrees that it will operate, maintain, repair and lease the Property in the ordinary course and consistent with such Seller's past practices and will not dispose of or encumber its Property, except for dispositions of personal property in the ordinary course of business or as otherwise permitted hereunder. Without limiting the foregoing, Seller shall, in the ordinary course, enforce the terms of the Leases in all material respects and perform in all material respects all of landlord's obligations under the Leases (other than Leases that are or that are in process of being terminated due to the tenant's default thereunder). Except for the Legacy Lease Amendment (as defined in Section 33 below), Seller will promptly notify Buyer of proposals to enter into new leases, modifications of leases or any early te rmination of a lease and provide Buyer with a summary of the terms of each such proposal.                         7.2    At least three (3) business days prior to becoming legally bound with respect to any new lease, agreement or modification of any existing Lease or modification or termination of any other lease or agreement (other than the Legacy Lease Amendment), Seller shall consult with and seek the consent of Buyer, and shall provide reasonable detail to Buyer including, at Buyer's request, copies of the relevant documentation, with respect thereto. Any consent to be given by Buyer pursuant to this Section 7.2 shall not be unreasonably withheld, conditioned or delayed and shall be deemed granted if Buyer does not respond in writing to Seller's request for said consent within three (3) business days thereafter. If prior to the expiration of the Conditions Period Buyer elects to withhold or condition its consent to any of such aforesaid proposed leases, agreements, modifications or terminations, then Seller may elect to 13 --------------------------------------------------------------------------------  terminate this Agreement by delivering written notice thereof to Buyer within three (3) business days after Seller's receipt of Buyer's election notice. In the event of such termination, neither party shall have any further rights or obligations hereunder except for Buyer's Surviving Obligations and Seller's Surviving Obligations.                                                  7.3    Except for leases and other agreements entered into in accordance with the provisions of this Section 7, Seller shall not enter into any agreement to create a lien or encumbrance on the Property which will survive the Closing without Buyer's prior written consent; provided, such consent shall not be unreasonably withheld, conditioned or delayed with respect to any utility or similar easement necessary for the operation of the Property. Buyer's consent shall be deemed granted if Buyer does not respond in writing to Seller's request for said consent within three (3) business days thereafter.   14 --------------------------------------------------------------------------------           8.    INTENTIONALLY OMITTED.           9.    SELLER'S MAINTENANCE OF THE PROPERTY.         Between the Agreement Date and the Closing Date, Seller shall (i) maintain the Property in substantially the same manner as prior hereto in accordance with Seller's normal course of business, subject to reasonable wear and tear and further subject to the occurrence of any damage or destruction to the Property by casualty or other causes or events beyond the control of such Seller; provided, however, that such Seller's maintenance obligations under this Section 9 shall not include any obligation to make capital expenditures or any other expenditures not incurred in Seller's normal course of business; and (ii) continue to maintain its existing insurance coverage. Notwithstanding the foregoing, in the event Seller makes emergency capital expenditures after the Agreement Date to the Property, Seller shall deliver to Buyer promptly following the occurrence of an event that would require Seller to make such emergency capital expenditure, a wr itten notice describing in reasonable detail the nature and cost of such emergency capital expenditure, and Buyer shall be obligated to reimburse Seller for such emergency capital expenditures to the extent tenants are required to pay such costs under the terms of the Leases, and the Purchase Price payable at the Closing shall be increased by an amount equal to the amount spent by Seller in respect of such emergency capital expenditure. For purposes of this Agreement, "emergency capital expenditures" shall mean any emergency capital expenditures performed by Seller that are reasonably necessary to prevent an immediate threat to the health or safety of any person or to prevent or remedy an imminent breach by Seller under a Lease. Subject to the provisions of Section 7 hereof, prior to the Closing Date, Seller shall have the right, but not the obligation (except to the extent that Seller's failure to act shall constitute a waiver of such rights or remedies), to enforce the rights and remedies of the landlord under any Lease, by summary proceedings or otherwise, and to apply all or any portion of any security deposits then held by Seller toward any loss or damage incurred by Seller by reason of any defaults by any tenant, provided, that with respect to any application by Seller of tenant security deposits held by Seller, the Seller will deliver, in connection with any such application, written notice to the affected tenant(s) indicating that their security deposits have been or are being so applied. Seller shall provide Buyer with written notice of any action taken by Seller pursuant to the foregoing provisions.         10.    CASUALTY AND CONDEMNATION.          In the event there is any damage to the Real Property or destruction of any improvement thereon or condemnation of any portion of the Property after the Agreement Date, Buyer shall be required to purchase the Property with a credit against the Purchase Price otherwise payable hereunder equal to the amount of any insurance proceeds or condemnation awards actually collected by Seller prior to the Closing as a result of any such damage or destruction or condemnation, plus the amount of any insurance deductible or any uninsured amount or retention, less (a) any sums expended by Seller prior to the Closing for the restoration or repair of the Property (and the amount of which sums expended for restoration or repair shall, subsequent to the Approval Date, be subject to Buyer's approval, not to be unreasonably withheld, delayed, or conditioned) and/or (b) any reasonable sums expended by Seller prior to the Closing in collecting such insuranc e proceeds or condemnation awards. Seller agrees that it will maintain its present casualty insurance policy with respect to the Property in full force and effect until the Closing. If the insurance proceeds or condemnation awards have not been collected as of the Closing, then such proceeds or awards shall be assigned to Buyer, except to the extent needed to reimburse Seller for sums it expended prior to the Closing for the restoration or repair of the Property or in collecting such insurance proceeds or condemnation awards. 15 --------------------------------------------------------------------------------         Notwithstanding the foregoing, if the Property is damaged or destroyed by a casualty or is condemned, to the extent that the cost of repair or restoration to substantially the same condition existing prior to such casualty (or, in the case of a condemnation, the value of the Property or portion thereof so condemned) would exceed an amount equal to five percent (5%) of the Purchase Price, then Seller shall give Buyer prompt notice thereof and the Buyer may, at its option to be exercised by delivery of written notice to Seller within five (5) business days of Seller's notice to the Buyer of the occurrence of such casualty or condemnation, elect not to purchase the Property under this Agreement. If Buyer so duly elects not to purchase the Property, this Agreement shall terminate, the Deposits (to the extent then made) shall be returned to Buyer and neither party shall have any further rights or obligations under this Agreement other than Buyer 's Surviving Obligations and Seller's Surviving Obligations. Any dispute as to the costs of such repair or restoration or value of a condemned portion of the Property shall be referred to a licensed architect jointly selected by Buyer and Seller for resolution, and the determination of such architect, which shall be made within a period of twenty (20) days after such submittal by the parties, shall be final, conclusive and binding on the parties. If the parties fail to agree upon the identity of such architect within five (5) business days after either party has notified the other of its choice of architect, then either party may at any time thereafter apply to a court of competent jurisdiction to appoint immediately such architect. The fees and expenses of such architect shall be paid equally by Buyer and Seller, and the parties shall cooperate with such architect by providing such information as such architect may reasonably require to resolve the dispute. If Buyer does not elect, in writing, not to pu rchase the Property, Buyer shall be obligated to consummate the purchase of the Property as required by the terms hereof.         11.    LIMITED LIABILITY.         Buyer on its own behalf and on behalf of its agents, members, partners, employees, representatives, related and affiliated entities, successors and assigns (collectively, the "Buyer Parties") hereby agrees that in no event or circumstance shall any of the members, partners, employees, representatives, officers, directors, agents, property management company, affiliated or related entities of Seller or Seller's property management company, namely Legacy Partners Commercial, Inc. (formerly known as Lincoln Property Company Management Services, Inc. and LPC MS, Inc.), have any personal liability under this Agreement, or to any of Buyer's creditors, or to any other party in connection with the Property .         12.    RELEASE. Buyer on its own behalf and on behalf of each of the Buyer Parties hereby agrees that each of Seller, Seller's partners or members, as the case may be, and each of their partners, members, trustees, directors, officers, employees, representatives, property managers, independent contractors, asset managers, agents, attorneys, affiliated and related entities, heirs, successors and assigns (collectively, the "Releasees") shall be, and are hereby, fully and forever released and discharged from any and all liabilities, losses, claims (including third party claims), demands, damages (of any nature whatsoever), causes of action, costs, penalties, fines, judgments, attorneys' fees, consultants' fees and costs and experts' fees (collectively, the "Claims") with respect to any and all Claims, whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with the Property including, without limitation, the physical, environmental and structural condition of the related Real Property or any law or regulation applicable thereto, including, without limitation, any Claim or matter (regardless of when it first appeared) relating to or arising from (i) the presence of any  16 -------------------------------------------------------------------------------- environmental problems, or the use, presence, storage, release, discharge, or migration of Hazardous Materials on, in, under or around the Property regardless of when such Hazardous Materials were first introduced in, on or about the Property, (ii) any patent or latent defects or deficiencies with respect to the Property, (iii) any and all matters related to the Property or any portion thereof, including without limitation, the condition and/or operation of the Property and each part thereof, (iv) the presence, release and/or remediation of asbestos and asbestos containing materials in, on or about the Property regardless of when such asbestos and asbestos containing materials were first introduced in, on or about the Property, and (v) any and all obligations and liabilities of Seller, as landlord, to the extent arising or occurring on or after the Closing Date under or with respect to the Inktomi Lease. Buyer hereby waives and agrees not to commence any action, legal proceeding, cause of action or suits in law or equity, of whatever kind or nature, including, but not limited to, a private right of action under the federal superfund laws, 42 U.S.C. Sections 9601 et seq. and California Health and Safety Code Sections 25300 et seq. (as such laws and statutes may be amended, supplemented or replaced from time to time) , directly or indirectly, against the Releasees or their agents in connection with Claims described above and expressly waives the provisions of Section 1542 of the California Civil Code which provides: > > A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW > > OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH > > IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR and all similar provisions or rules of law. Buyer elects to and does assume all risk for such Claims heretofore and hereafter arising, whether now known or unknown by Buyer. Notwithstanding anything to the contrary contained in this Section 12, the aforementioned release shall not include any Claims arising out of (i) the entry into or performance of this Agreement by Seller or (ii) any fraud on the part of Seller or the intentional concealment by Seller of any material adverse fact with respect to the Property actually known by Seller. In this connection and to the greatest extent permitted by law, Buyer hereby agrees, represents and warrants that Buyer realizes and acknowledges that factual matters now unknown to it may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and Buyer further agrees, represents and warrants that the waivers an d releases herein have been negotiated and agreed upon in light of that realization and that Buyer nevertheless hereby intends to release, discharge and acquit Seller from any such unknown Claims, debts, and controversies which might in any way be included as a material portion of the consideration given to Seller by Buyer in exchange for Seller's performance hereunder. Without limiting the foregoing, if Buyer has actual knowledge of (a) a default in any of the covenants, agreements or obligations to be performed by Seller under this Agreement and/or (b) any breach or inaccuracy in any representation of Seller made in this Agreement, and Buyer nonetheless elects to proceed to Closing, then, upon the consummation of the Closing, Buyer shall be conclusively deemed to have waived any such default and/or breach or inaccuracy and shall have no Claim against Seller or hereunder with respect thereto. Notwithstanding anything to the contrary herein, Seller shall not have any liability whatsoever to Buyer with resp ect to any matter disclosed to or discovered by Buyer or its agents or representatives prior to the Closing Date.                 Seller has given Buyer material concessions regarding this transaction in exchange for Buyer agreeing to the provisions of this Section 12. Seller and Buyer have each initialed this Section 12 to further indicate their awareness and acceptance of each and every provision hereof. The provisions of  17 -------------------------------------------------------------------------------- this Section 12 shall survive the Closing and shall not be deemed merged into any instrument or conveyance delivered at the Closing. SELLER'S INITIALS:   BUYER'S INITIALS:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                 13.    AS-IS CONDITION OF PROPERTY                         13.1     Buyer specifically acknowledges, represents and warrants that as of the Agreement Date it presently occupies as tenant under the Inktomi Lease a significant portion of the Improvements. Additionally, Buyer has designed, constructed and installed in the Inktomi Premises certain tenant improvements, additions, equipment, fixtures, furnishings, personal property and trade fixtures. Accordingly, Buyer further acknowledges that as of the Agreement Date, Buyer has full and complete knowledge of the physical condition of the Inktomi Premises and all improvements, additions, trade fixtures, equipment, personal property, fixtures and furnishings situated therein. In addition to the foregoing, Buyer acknowledges and represents that prior to Closing, it and its agents and representatives will have thoroughly inspected the Property and observed the physical characteristics and condition of the Property. By Buyer purchasing the Property and upon the occurrence of the Closing, Buyer waives (except in the event of any fraud on the part of Seller or the intentional c oncealment by Seller of any material adverse fact with respect to the Property actually known by Seller) any and all right or ability to make a claim of any kind or nature against any of the Releasees for any and all deficiencies or defects in the physical characteristics and condition of the Property which would be disclosed by such inspection and expressly agrees to acquire the Property with any and all of such deficiencies and defects and subject to all matters disclosed by Seller herein or in any separate writing with respect to the Property and/or disclosed in and set forth in the NHDS for the Property. Buyer further acknowledges and agrees that except for any representations expressly made by Seller in Section 26 of this Agreement neither Seller or any of Seller's employees, agents or representatives have made any representations, warranties or agreements by or on behalf of Seller of any kind whatsoever, whether oral or written, express or implied, statutory or otherwise, as to any matters concerning the Property, the condition of the Property, the size of the Real Property, the size of the Improvements (including without limitation, any discrepancies in the actual rentable square footage of any leased premises within the Improvements), the present use of the Property or the suitability of Buyer's intended use of the Property. Buyer hereby acknowledges, agrees and represents that the Property is to be purchased, conveyed and accepted by Buyer in its present condition,"AS IS", "WHERE IS" AND "WITH ALL FAULTS," and that no patent or latent defect or deficiency in the condition of the Property whether or not known or discovered, shall affect the rights of either Seller or Buyer hereunder nor shall the Purchase Price be reduced as a consequence thereof. Any and all information and documents furnished to Buyer by or on behalf of Seller relating to the Property shall be deemed furnished as a courtesy to Buyer but without any warranty of any kind from or on behalf of Seller. Buyer hereby represents and warrants to Seller that Buyer has performed an independent inspection and investigation of the Property and has also investigated and has knowledge of operative or proposed governmental laws and regulations including without limitation, land use laws and regulations to which the Property may be subject. Buyer further represents that, except for any representations expressly made by Seller in Section 26 of this Agreement, it shall acquire the Property solely upon the basis of its independent inspection and investigation of the Property, including without limitation, (i) the quality, nature, habitability, merchantability, use, operation, value, marketability, adequacy or physical condition of the Property or any aspect or portion thereof, including, without limitation, structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities, electrical, mechanical, HVAC, plumbing, sewage, and utility systems, facilities and appliances, soils, geology and groundwater, or whether the Real Property lies within a special flood hazard area, an area of potential flooding, a very  18 -------------------------------------------------------------------------------- high fire hazard severity zone, a wildland fire area, an earthquake fault zone or a seismic hazard zone, (ii) the dimensions or lot size of the Real Property or the square footage of the Improvements thereon or of any tenant space therein, (iii) the development or income potential, or rights of or relating to, the Real Property or its use, habitability, merchantability, or fitness, or the suitability, value or adequacy of such Real Property for any particular purpose, (iv) the zoning or other legal status of the Real Property or any other public or private restrictions on the use of the Real Property, (v) the compliance of the Real Property or its operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or regulatory agency or authority or of any other person or entity (including, without limitation, the American with Disabilities Act), (vi) the ability of Buyer to obtain any necessary governmental approvals, licenses or permits for Buyer's intended use or development of the Real Property, (vii) the presence or absence of Hazardous Materials on, in, under, above or about the Real Property or any adjoining or neighboring property, (viii) the quality of any labor and materials used in any Improvements, (ix) the condition of title to the Real Property, (x) the Leases, Contracts or any other agreements affecting the Real Property or the intentions of any party with respect to the negotiation and/or execution of any lease or contract with respect to the Real Property, (xi) Seller's ownership of the Property or any portion thereof, or (xii) the economics of, or the income and expenses, revenue or expense projections or other financial matters, relating to the operat ion of the Real Property. Without limiting the generality of the foregoing, Buyer expressly acknowledges and agrees that Buyer is not relying on any representation or warranty of Seller, nor any member partner, officer, employee, attorney, property manager, agent or broker of Seller, whether implied, presumed or expressly provided at law or otherwise, arising by virtue of any statute, common law or other legally binding right or remedy in favor of Buyer except as expressly provided in Section 26 below. Buyer further acknowledges and agrees that Seller is not under any duty to make any inquiry regarding any matter that may or may not be known to the Seller or any member, partner, officer, employee, attorney, property manager, agent or broker of Seller. SELLER'S INITIALS:   BUYER'S INITIALS:   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                         13.2    Except as may otherwise be required to be performed by Seller under the provisions of Section 9 hereof, any reports, repairs or work required by Buyer are the sole responsibility of Buyer, and Buyer agrees that there is no obligation on the part of Seller to make any changes, alterations or repairs to the Property or to cure any violations of law or to comply with the requirements of any insurer. Buyer is solely responsible for obtaining any certificate of occupancy or any other approval or permit necessary for transfer or occupancy of the Property and for any repairs or alterations necessary to obtain the same, all at Buyer's sole cost and expense. The provisions of this Section 13 shall survive the Closing and shall not be deemed merged into any instrument or conveyance delivered at the Closing.                 14.    PRORATIONS AND RENT ARREARAGES.                         14.1    At Closing, all rents actually paid and collected, and any other charges owing and which have been collected by Seller for or in respect of the month in which the Closing occurs shall be prorated as of and through the Closing Date on the basis of a 365-day year, and the prorated amount attributable to the period following the Closing shall either be paid to Buyer at the Closing or credited against the Purchase Price, at Seller's option. Any CAM and other charges and expenses payable by the tenants under the Leases (collectively, the "Tenant Charges") on an estimated basis shall be reconciled against actual charges and expenses as of and at the Closing, to the extent then possible, and Seller shall provide a proposed reconciliation for Buyer's approval. Seller shall have a period of ninety (90) days  19 -------------------------------------------------------------------------------- following the actual Closing Date to provide Buyer with a final reconciliation of Tenant Charges. If the final reconciliation shows that Seller owes Buyer additional sums, Seller shall deliver such amount to Buyer together with the delivery of the final reconciliation of the Tenant Charges. If the final reconciliation shows that Buyer owes Seller additional sums, Buyer shall pay such amount to Seller within ten (10) days after Buyer's receipt of the final reconciliation. Other than as set forth above, there shall not be any further reconciliation of such Tenant Charges after the final reconciliation thereof, the proration of such Tenant Charges pursuant to the final reconciliation being conclusively presumed to be accurate. After the final reconciliation of the Tenant Charges is made by and between the parties, Buyer shall be solely liable and responsible to the tenants for such reconciliation of Tenant Charges under the Leases. The foregoing covenants made by the parties with respect to the final reconciliation of the Tenant Charges shall survive the Closing.                         14.2    In addition, to the extent not paid directly by any tenants of the Property or reimbursed by tenants as part of the Tenant Charges, real property taxes and assessments, water, sewer and utility charges and amounts payable under the Approved Contracts (calculated on the basis of the period covered), and other expenses normal to the operation and maintenance of the Property shall be prorated as of and through the Closing Date on the basis of a 365-day year.                         14.3    At the Closing, Seller shall credit against the Purchase Price the amount equal to the aggregate of all security deposits paid by the tenants under the Leases and received by Seller in connection with the Leases, to the extent Seller has not already returned or applied any of such security deposits. At Closing, Seller shall either return or destroy, as directed by Buyer in writing, that certain Letter of Credit delivered by Buyer, as tenant, to Seller, as landlord, in accordance with the provisions of the Letter of Credit Rider to the Inktomi Lease. Buyer shall use commercially reasonable efforts after the Closing to attempt to collect any delinquent or other rental and reimbursable Tenant Charges and other expense arrearages attributable to the period prior to the Closing. After deduction of Buyer's out-of-pocket costs to collect same, Buyer shall promptly account to Seller and shall immediately reimburse Seller for all rents, expense reimbursem ents, Tenant Charges and other charges received by Buyer after the Closing which apply to any period prior to the Closing to the extent Seller has not already been paid for or credited with such sums. With respect to any rent or Tenant Charges arrears arising under any of the Leases, Seller shall have the right to attempt to collect such pre-closing delinquent rental obligations (including without limitation, all Tenant Charges) and Buyer will cooperate with Seller in such regard, at no cost to Buyer, provided that Buyer shall not be required to declare a default against such tenants under such Leases for such pre-closing delinquent rental obligations (including without limitation, all taxes and Tenant Charges). Notwithstanding the foregoing, after the Closing Seller shall not bring an action against any tenant under any of the Leases while such tenants are tenants of any portion of the Property which would seek to terminate any such tenant's lease. The provisions of this Section 14 shall survive the Clos ing.                 15.    CLOSING COSTS.                 Except as expressly set forth herein, all costs associated with the transfer of title and the associated escrow shall be in accordance with the customary practices in San Mateo County. Seller shall pay the documentary county transfer taxes. At Closing, Buyer shall obtain from the Title Company a CLTA Owner's Policy of Title Insurance in the amount of the Purchase Price insuring fee simple title to the Property in Buyer (the "CLTA Title Policy"). Buyer may elect to cause the Title Company to issue an ALTA Owner's Policy of Title Insurance (Form 1992) and if Buyer so elects in writing, Buyer shall timely provide the Title Company with an insurable ALTA Survey of the Property (and as is reasonably  20 -------------------------------------------------------------------------------- acceptable to the Title Company), at Buyer's sole cost and expense (the "ALTA Policy"). At Closing, Buyer shall pay the premium charged by the Title Company for the CLTA Title Policy, and if Buyer so elects, any and all costs and incremental premiums or other charges related to the ALTA Policy (including all endorsements thereto), the recording fees, and the escrow fees. Each party shall be solely responsible for its own legal fees and costs. 21 --------------------------------------------------------------------------------                 16.    BROKERS.                         16.1    Brokerage Commission. Seller and Buyer respectively represent that there are no brokers or other intermediaries entitled to receive brokerage commissions or fees or other compensation out of or with respect to the sale of the Property except for BT Commercial ("BT") and Cushman & Wakefield (collectively, the "Brokers"). At Closing, and only if the Closing actually occurs, Seller shall pay to the Brokers a brokerage commission, the amount of which shall be as specified in separate agreements between Seller and the Brokers. Seller and Buyer shall indemnify and save and hold each other harmless from and against all claims, suits, damages and costs incurred or resulting from the claim of any person, except the Brokers (payment of the Brokers being Seller's responsibility), that a commission, fee or remuneration is due in connection with this transaction pursuant to a written agreement made with said claimant. The provisions of this Section 16.1 shall survive the Closing or any termination of this Agreement.                         16.2    Separate Representation. Seller and Buyer hereby acknowledge and agree that (i) BT is the broker representing only Buyer in connection with this transaction and (ii) Cushman & Wakefield is the broker representing only Seller in connection with this transaction.                 17.    NOTICES.                 Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered by U.S. mail, registered or certified, return receipt requested, postage prepaid, or by overnight delivery service showing receipt of delivery, or by personal delivery, or by facsimile transmission. Such notices shall be sent to the parties at the following addresses, or such other address as may otherwise be indicated by any such party in writing. If to Seller: c/o Legacy Partners Commercial, Inc.   4000 East Third Avenue, Sixth Floor   Foster City, California 94404   Attention: Mr. Robert Phipps and Ms. Darleen Barnes   Phone number: 650-571-2200   Facsimile number: 650-235-2589 and 650-572-9527     with a copy to: Whitehall Street Real Estate Limited Partnership   85 Broad Street   New York, New York 10004   Attention: Mr. Adam Brooks   Facsimile number: 212-357-5505     and a copy to: Whitehall Street Real Estate Limited Partnership   100 Crescent Court, Suite 1000   Dallas, Texas 75201   Attention: Mr. Paul Milosevich   Phone number: 214-855-6364   Facsimile number: 214-855-6305 22 --------------------------------------------------------------------------------       and a copy to:   Real Estate Law Group, LLP     2330 Marinship Way, Suite 211     Sausalito, California 94965     Attention: Ann Shores, Esquire and John Willsie, Esquire     Phone number: 415-331-2555     Facsimile number: 415-331-7272       If to Buyer:   Inktomi Corporation     4100 East Third Avenue     Foster City, California 94404     Attention: Mr. Tom Masles     Phone number: 650-653-3139     Facsimile number: 650-653-2801       with a copy to:   Crosby, Heafey, Roach & May     Two Embarcadero Center, Suite 2000     San Francisco, California 94111     Attention: Charles Seaman, Esquire     Phone number: 415-659-5910     Facsimile number: 415-391-8269 Notices as aforesaid shall be effective upon the earlier of actual receipt, or twenty-four (24) hours after deposit with the messenger or delivery service, or the next business day after delivery to an overnight delivery service, or within three (3) days after the deposit in the U.S. mail, or upon confirmation of transmission by facsimile, or when receipt is refused.                 18.    ENTIRE AGREEMENT.                 This Agreement constitutes the entire understanding of the parties with respect to the sale and acquisition of the Property and all prior agreements, representations, and understandings between the parties, whether oral or written, are deemed null and void, all of the foregoing having been merged into this Agreement. The parties acknowledge that each party and/or its counsel have reviewed and revised this Agreement and that no rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation or enforcement of this Agreement or any amendments or exhibits to this Agreement or any document executed and delivered by either party in connection with this Agreement.                 19.    ASSIGNMENT.                 Buyer may not assign its rights, obligations and interest in this Agreement to any other person or entity, without first obtaining Seller's prior written consent thereto, which consent may be given or withheld in Seller's sole and absolute discretion, except that Buyer may assign its interest in and to this Agreement and the Property so long as (i) the assignee of Buyer assumes all of Buyer's obligations under this Agreement and agrees to timely perform same pursuant to an assignment agreement in form reasonably acceptable to Seller, (ii) Buyer delivers to Seller at least ten (10) business days prior to the Closing (a) written notice of said proposed assignment and (b) a copy of the draft of the assignment agreement for Seller's reasonable approval, and (iii) the assignee of Buyer unconditionally ratifies  23 -------------------------------------------------------------------------------- and remakes all covenants, indemnities, representations and warranties of Buyer made in or in connection with this Agreement, all of the foregoing for the express benefit and reliance of Seller. No assignment shall relieve Buyer from any liability or its obligations under or in connection with this Agreement. Any attempted assignment not in compliance with the provisions of this Section 19 shall be null and void. This Agreement shall inure to the benefit of and be binding upon the parties to this Agreement and their respective successors and permitted assigns.                 20.    SEVERABILITY.                 If for any reason, any provision of this Agreement shall be held to be unenforceable, it shall not affect the validity or enforceability of any other provision of this Agreement and to the extent any provision of this Agreement is not determined to be unenforceable, such provision, or portion thereof, shall be, and remain, in full force and effect.                 21.    CALIFORNIA LAW.                 This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.                 22.    MODIFICATIONS/SURVIVAL.                 Any and all exhibits attached hereto shall be deemed a part hereof. This Agreement, including exhibits, if any, expresses the entire agreement of the parties and supersedes any and all previous agreements between the parties with regard to the sale and acquisition of the Property. There are no other understandings, oral or written, which in any way alter or enlarge its terms, and there are no warranties or representations of any nature whatsoever, either expressed or implied, except as may expressly be set forth herein. At the Closing all of Seller’s representations made herein shall be deemed merged into the Grant Deed and shall be of no further force or effect. Any and all future modifications of this Agreement will be effective only if it is in writing and signed by the parties hereto. The terms and conditions of such future modifications of this Agreement shall supersede and replace any inconsistent provisions in this Agreement.                 23.    CONFIDENTIALITY.                 Buyer agrees that, (a) except as otherwise provided or required by valid law, (b) except to the extent Buyer considers such documents or information reasonably necessary to prosecute and/or defend any claim made with respect to the Property or this Agreement, and (c) except to the extent reasonably necessary to deliver such documents or information to Buyer's or its lender’s employees, paralegals, attorneys and/or consultants in connection with Buyer's evaluation of this transaction, (i) Buyer and Buyer's agents, consultants, representatives, attorneys, employees, successors and assigns (collectively, the "Buyer's Representatives"), shall use all diligent efforts to keep the contents of any materials, reports, documents, data, test results, and other information related to the transaction contemplated hereby, including without limitation, the Due Diligence Materials and all information regarding Buyer's acquisition or ownership of the Property strictly confidential, (ii) Buyer and Buyer's Representative s shall keep and maintain the contents of this Agreement, including without limitation, the amount of consideration being paid by Buyer for the Property strictly confidential, and (iii) Buyer and Buyer's Representatives shall refrain from generating or participating in any publicity or press release regarding this transaction without the prior written consent of Seller. Buyer acknowledges that significant portions  24 -------------------------------------------------------------------------------- of the Due Diligence Materials are proprietary in nature and that Seller would suffer significant and irreparable harm in the event of the misuse or disclosure of the Due Diligence Materials. Without affecting any other rights or remedies that either party may have, Buyer acknowledges and agrees that Seller shall be entitled to seek the remedies of injunction, specific performance and other equitable relief for any breach, threatened breach or anticipatory breach of the provisions of this Section 23 by Buyer or any of Buyer's Representatives. The provisions of this Section 23 shall survive any termination of this Agreement but shall not survive the Closing.                 24.    COUNTERPARTS.                 This Agreement may be executed in counterparts. All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original. Buyer and Seller agree that the delivery of an executed copy of this Agreement by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Agreement had been delivered.                 25.    DISPUTE COSTS.                 In the event any dispute between the parties with respect to this Agreement result in litigation or other proceeding, the prevailing party shall be reimbursed by the party not prevailing in such proceeding for all reasonable costs and expenses, including, without limitation, reasonable attorneys' and experts' fees and costs incurred by the prevailing party in connection with such litigation or other proceeding and any appeal thereof. Such costs, expenses and fees shall be included in and made a part of the judgment recovered by the prevailing party, if any. The provisions of this Section 25 shall survive any termination of this Agreement or the Closing.                 26.    SELLER'S REPRESENTATIONS.                 Seller hereby represents to Buyer that the following matters are true and correct as of the date of execution of this Agreement and shall, except as otherwise disclosed in writing by Seller to Buyer, be true and correct as of the Closing:                         26.1    Seller is a limited partnership, duly formed, validly existing and in good standing under the laws of the State of Delaware.                         26.2    This Agreement and all documents executed by Seller that are to be delivered to Buyer at Closing (i) are, or at the time of Closing will be, duly authorized, executed and delivered by Seller, (ii) do not, and at the time of Closing will not, violate any provision of any judicial order to which Seller is a party or to which Seller or the Property is subject and (iii) constitute (or in the case of closing documents will constitute) a valid and legally binding obligation of Seller. Seller has full and complete power and authority to enter into this Agreement and, subject to obtaining any consents or waivers required to be obtained prior to Closing, to perform its obligations hereunder.                   26.3    Except as set forth in the materials delivered to Buyer or made available to Buyer pursuant to Section 4 above, or as otherwise disclosed in writing by Seller to Buyer prior to Closing, (i) there are no pending or, to Seller's actual knowledge, threatened legal proceedings or administrative actions of any kind or character materially and adversely affecting the Property or Seller's interest therein, and (ii) Seller has not received written notice of any special assessment proceedings affecting the Property. 23 --------------------------------------------------------------------------------                    26.4    Except as set forth in the materials delivered to Buyer or made available to Buyer pursuant to Section 4 above, or as otherwise disclosed in writing by Seller to Buyer prior to Closing, Seller has received no written notice from any city, county, state or other government authority of any violation of any statute, ordinance, regulation, or administrative or judicial order or holding, whether or not appearing in public records, with respect to the Property, which violation has not been corrected.                   26.5    Except as set forth in the materials delivered to Buyer or made available to Buyer pursuant to Section 4 above, or as otherwise disclosed in writing by Seller to Buyer prior to Closing, Seller has received no written notice from any city, county, state or other government authority (i) of any order or directive requiring any work of repair, maintenance or improvement be performed on the Property, or (ii) relating to defects in the Improvements or relating to noncompliance with any applicable building code or restriction that has not been corrected, or relating to any threat of impending condemnation.                   26.6    To Seller's actual knowledge, and except as set forth in the materials delivered to Buyer or made available to Buyer pursuant to Section 4 above, or as set forth in the tenant estoppel certificates delivered to Buyer pursuant to Section 4.2.1.1 above, or as otherwise specifically disclosed in writing to Buyer prior to Closing, (i) the Leases are in full force and effect and have not been modified in any material manner, and (ii) there are no current defaults in the performance of the obligations of any party under the Leases. Additionally, to Seller's actual knowledge, (a) there are no outstanding assignments by Seller of Seller's interest in the Leases, and (b) there are no other leases, service contracts, maintenance agreements or other agreements with respect to the Property other than those delivered to or made available to Buyer pursuant to the provisions hereof.                   26.7    The materials delivered to Buyer or made available to Buyer pursuant to Section 4 above contain true, correct and complete copies of all Leases, all material Contracts and all material environmental and structural reports to the extent in the actual possession of Seller or its property manager's possession or under their immediate control and, to Seller's actual knowledge, said materials delivered to or otherwise made available to Buyer under this Agreement by Seller contain complete copies of the documents in Seller's possession or its property manager's possession or under their immediate control. Notwithstanding anything contained herein to the contrary, Seller is only delivering and making available said materials to the extent currently in Seller's possession or its property manager's possession or under their immediate control, and Seller shall not be required to prepare or obtain any information, document, report or survey. Seller is not making any express or implied representation as to the accuracy or thoroughness of the contents of any of said materials or of the ability of Buyer to rely on any of said materials. This representation shall not be deemed breached by virtue of any new leases or new agreements entered into after the Agreement Date in accordance with the provisions of Section 7 hereof.                         26.8    Foreign Person. Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code, as amended.                 Buyer and Seller each specifically acknowledge and agree that all references in this Agreement, in any of the exhibits attached hereto and in any document, certificate or statement to be delivered by Seller to Buyer hereunder to the phrases "to Seller's actual knowledge," or "known to Seller" (whether used in the phrase "to the actual knowledge of Seller," "actually known to Seller," "Seller's knowledge," or in  26 -------------------------------------------------------------------------------- similar or other contexts) (1) shall mean the actual (not constructive or imputed) personal knowledge of Mr. Robert Phipps, Mr. Steve Dunn, Ms. Laura de Flores, Mr. Allen Palmer, and Mr. Barry DiRaimondo (collectively, the "Seller's Personnel"); (2) shall in no case mean or refer to the actual or constructive knowledge of any other employee, partner, member, officer, director, agent, trustee or member, partner, representative or employee of a partner, member, officer, director, agent or other representative of Seller or any investment advisor, attorney, management company, contractor or representative of Seller (together with Seller's Personnel, the "Seller Representatives"); and (3) shall in no event or circumstance impose upon Seller or any of the Seller Representatives any duty or obligation to verify, inquire or make any independent inquiry or investigation of any such representation, warranty or statement, or to otherwise investigate the facts or circumstances relating or otherwise pertinent thereto. Buyer further acknowledges and agrees that none of the Seller Representatives shall be personally liable, or otherwise have any personal liability, under or in connection with this Agreement, including without limitation, in connection with any of the representations, warranties or statements made in connection with, or pursuant to, this Agreement. Notwithstanding anything to the contrary contained herein, the foregoing representations of Seller made hereinabove shall not survive the Closing and shall be deemed merged into the Grant Deed at the Closing, it being the intention of the parties that Buyer acquire the Property at the Closing "AS IS", "WHERE IS" and "WITH ALL FAULTS" and Buyer shall have no right to rely on, and Seller shall have no liability with respect to, any representation or warranty (including any future certification or statement, actually or deemed made, as to representations or warranties) which Buyer actually knows to be inaccurate or untrue at the time such representation or warranty is given, or deemed to be given or remade.         In the event a change of circumstances occurs through no fault of Seller on or prior to the Closing Date which causes any of Seller's representations set forth in this Section 26 above to become untrue, Seller shall promptly notify Buyer of same, in writing (in each instance) (the "Representation Notice"), and thereafter Seller shall have a period of five (5) business days from the date of the discovery of such change of circumstances to cure such untrue fact or condition (and the Closing Date shall, to the extent applicable, be extended to accommodate such cure period), provided the cost to cure such untrue representation(s) is quantifiable and does not, in the aggregate, exceed the sum of Five Hundred Thousand Dollars ($500,000) to cure, in which event Seller hereby agrees to expend an amount not to exceed One Hundred Thousand Dollars ($100,000) to cure such untrue representation(s). Notwithstanding the foregoing, in the event the cost to cure such untrue representation(s) is not quantifiable or is in excess of Five Hundred Thousand Dollars ($500,000) to cure and Seller elects in the Representation Notice not to cure same, Buyer shall have the right, as Buyer's sole and exclusive remedy hereunder, to either (1) terminate this Agreement by delivering written notice to Seller within two (2) business days after Buyer's receipt of the Representation Notice, in which case, this Agreement shall terminate and be of no further force or effect and the parties hereto shall have no further obligations to the other except for the Buyer's Surviving Obligations and Seller's Surviving Obligations, and except that the Deposits (to the extent made) shall be returned to Buyer or (2) waive the foregoing right of termination and close the transaction contemplated by this Agreement, in which case, Seller shall have no liability whatsoever on account of the inability of Seller to cure such untrue representation contained in this Section 26.           27.    BUYER'S REPRESENTATIONS.                Buyer hereby represents and warrants to Seller that Buyer is a corporation, duly formed, validly existing and in good standing under the laws of the State of Delaware. Buyer further represents and warrants that this Agreement and all documents executed by Buyer that are to be delivered to Seller at  27 -------------------------------------------------------------------------------- Closing (a) are, or at the time of Closing will be, duly authorized, executed and delivered by Buyer, (b) do not, and at the time of Closing will not, violate any provision of any judicial order to which Buyer is a party or to which Buyer is subject and (c) constitute (or in the case of closing documents will constitute) a valid and legally binding obligation of Buyer. Buyer further represents and warrants to Seller that Buyer has full and complete power and authority to enter into this Agreement and, subject to obtaining any consents or waivers required to be obtained prior to Closing, to perform its obligations hereunder. Buyer hereby further represents and warrants to Seller that (i) Buyer is not presently the subject of a bankruptcy, insolvency or probate proceedings and Buyer does not anticipate nor intend to file or cause to be filed any bankruptcy or insolvency proceeding involving Buyer or Buyer's assets during the pendency of this Agreement, (ii) Buyer is a sophisticated investor with substantial experience in investing in assets of the same type as the Property and has such knowledge and experience in financial and business matters that Buyer is capable of evaluating the merits and risks of an investment in the Property, (iii) Buyer is represented by competent counsel, (iv) Buyer shall furnish all of the funds for the purchase of the Property (other than funds supplied by institutional lenders which will hold valid mortgage liens against the Property) and such funds will not be from sources of funds or properties derived from any unlawful activity, (v) prior to Closing, Buyer and its agents will have thoroughly inspected the Property, fully observed the physical characteristics and condition of the Property, and performed a thorough investigation of the suitability of Buyer's intended use of the Property, including without limitation, the suitability of the topography; the availability of water rights or u tilities; any natural hazard of any kind or nature, including without limitation, flood hazard, earthquake fault or seismic hazard, or forest fire risk or hazard; the present and future zoning, subdivision and any and all other land use matters; the condition of the soil, subsoil or groundwater of the Property and any and all other environmental matters; the purpose(s) to which the Property is suited; drainage; flooding; access to public roads; and proposed routes or roads or extensions relative to the Property, (vi) Buyer acknowledges and confirms that, as of the date of Buyer's receipt of the NHDS, Buyer has received, read and understood the NHDS for the Property and agrees to accept the Property with all matters reflected, disclosed and set forth in the NHDS for the Property, and (vii) Buyer understands it will have no recourse whatsoever against Seller or any of the other Releasees except as otherwise expressly set forth in this Agreement. The foregoing representations and warranties of Buyer shall survi ve the Closing.         28.    TIME OF THE ESSENCE; AND BUSINESS DAYS.                   Time is of the essence in the performance of each of the parties' respective obligations contained herein. Unless the context otherwise requires, all periods terminating on a given day, period of days, or date shall terminate at 5:00 p.m. (Pacific Time) on such date or dates and references to "days" shall refer to calendar days except if such references are to "business days" which shall refer to days which are not a Saturday, Sunday or legal holiday. Notwithstanding the foregoing, if any period terminates on a Saturday, Sunday or legal holiday, under the laws of the State of California, the termination of such period shall be on the next succeeding business day. The time in which any act provided under this Agreement is to be done, shall be computed by excluding the first day and including the last day, unless the last day is a Saturday, Sunday or legal holiday under the laws of the State of California, and then it is also so excluded.         29.    AGREEMENT DATE.                  The parties hereby covenant and agree that the "Agreement Date" shall be the date on which the Escrow Holder confirms in writing to both Seller and Buyer that the Escrow Holder has actually received from both parties two (2) signed and initialed original counterparts of this Agreement and the Escrow Holder  28 -------------------------------------------------------------------------------- is in a position to release to each of the parties a fully executed original of this Agreement signed and initialed in counterparts. The Escrow Holder shall insert such date in each original counterpart of this Agreement on Page 1 hereof. If either party fails to submit two (2) signed and initialed original counterparts of this Agreement to Escrow Holder within five (5) business days after the delivery to Escrow Holder by the other party of two (2) signed and initialed original counterparts of this Agreement, then the party which delivered to Escrow Holder said signed and initialed counterparts of this Agreement may, at its option, withdraw such signed and initialed counterparts therefrom without any obligation to resubmit same to Escrow Holder thereafter. 29 --------------------------------------------------------------------------------            30.    NO THIRD PARTY BENEFICIARIES.          Except as otherwise expressly set forth herein, Seller and Buyer do not intend, and this Agreement shall not be construed, to create a third-party beneficiary status or interest in, nor give any third-party beneficiary rights or remedies to, any other person or entity not a party to this Agreement.         31.   INTENTIONALLY OMITTED.         32.   DRAFTS NOT AN OFFER TO ENTER INTO A LEGALLY BINDING CONTRACT.          The parties hereto agree that the submission of a draft of this Agreement by one party to another is not intended by either party to be an offer to enter into a legally binding contract with respect to the purchase and sale of the Property. The parties shall be legally bound with respect to the purchase and sale of the Property pursuant to the terms of this Agreement only if and when the parties have been able to negotiate all of the terms and provisions of this Agreement in a manner acceptable to each of the parties in their respective sole discretion, including without limitation, all of the exhibits hereto, and each of Seller and Buyer have fully executed and delivered (or caused the delivery) to each other a counterpart of this Agreement, including without limitation, all exhibits hereto.         33.    LEGACY LEASE AMENDMENT.         The parties agree that as part of this transaction, Seller, as landlord, and Legacy, as tenant, will enter into that certain lease amendment attached hereto as Exhibit H and made a part hereof ("Legacy Lease Amendment"), which Legacy Lease Amendment will modify certain terms and provisions of that certain Lease Agreement dated October 10, 1997, as amended, by and between Seller and Legacy, for those certain premises located at 4000 East Third Avenue, Sixth Floor, Foster City, California, as more particularly described therein. On the Closing Date, Seller shall (i) execute the Legacy Lease Amendment and (ii) cause the execution of the Legacy Lease Amendment by Legacy, and the Legacy Lease Amendment shall be effective as of the Closing Date.         34.    ASSIGNMENT OF INKTOMI LEASE.         During the Conditions Period Buyer and Seller shall act reasonably and in good faith to promptly agree upon the form of a separate assignment of lease for the Inktomi Lease (the "Assignment of Inktomi Lease"). Buyer hereby expressly agrees that in the Assignment of Inktomi Lease, Buyer, as tenant, will confirm, ratify and agree, for Seller's express benefit, as landlord thereunder, that certain of Buyer's obligations thereunder shall survive any such assignment of the Inktomi Lease.         35.    PURCHASE OPTION TERMINATION.         Buyer acknowledges and agrees that if, for any reason whatsoever (except Seller's default), the transaction contemplated by this Agreement fails to close escrow, that certain Option to Purchase/Rights of First Offer to Purchase Rider (the "Purchase Rider") to the Inktomi Lease, and all provisions in the Inktomi Lease with respect to such purchase options and rights of first offer to purchase, shall terminate and be of no further force or effect from and after the date of said termination. In the event of such termination of the Purchase Rider and all purchase options and rights of first offer to purchase specified therein, Buyer shall promptly and timely deliver to Seller (as landlord under the Inktomi Lease) a  30 -------------------------------------------------------------------------------- quitclaim deed, in form acceptable to Seller and Title Company, which Seller shall be authorized to record in the Official Records of San Mateo County at any time after such termination. The foregoing covenants shall survive any termination of this Agreement.         IN WITNESS WHEREOF the parties have caused this Agreement to be executed as of the day and year first above written. SELLER: WHFST Real Estate Limited Partnership, a Delaware limited partnership By: WHFST Gen-Par, Inc. a Delaware corporation General Partner By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- BUYER: Inktomi Corporation, A Delaware Corporation By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   28 -------------------------------------------------------------------------------- EXHIBIT A TO PURCHASE AND SALE AGREEMENT LEGAL DESCRIPTION OF THE REAL PROPERTY All that certain real property situated in the City of Foster City, County of San Mateo, State of California, as described as follows: PARCEL ONE: Parcel I as created by that certain Lot Line Adjustment No. RS-98-002, recorded October 19, 1998 as Document No. 98169031, Official Records, and further described as follows: COMMENCING at a point in the Northwesterly line of State Highway Route 92 (200 feet wide) being the Southwesterly corner of a parcel designated "PARCEL 1C" in that certain Final Order of Condemnation, recorded May 12, 1967, in Book 5306 of Official Records at page 220, Records of San Mateo County; thence along said Northwesterly line, North 42° 11' 46" East, 1024.01 feet to the TRUE POINT OF BEGINNING; thence North 47° 48' 14" West, 47.50 feet; thence North 42° 11' 46" East, 55.87 feet; thence North 19° 14' 15" West, 225.61 feet to a point on a non-tangent curve having a radius of 671.00 feet, from which point a radial line bears North 10° 21' 52" West; thence Northeasterly, along said curve to the left through a central angle of 8° 52' 23", an arc distance of 103.91 feet; thence, radial to last said curve, North 19° 14' 15" West, 353.53 feet to a point on the Northerly line of Parcel 2 of Parcel Map No. 39-80, filed for record in Book 52 of Parcel Maps a t pages 42 and 43, Records of San Mateo County; thence along said Northerly line the following seven (7) courses: North 66° 27' 38" East, 74.77 feet; North 62° 34' 48" East 130.91 feet; North 53° 22' 49" East 50.09 feet; North 47° 11' 51" East 125.14 feet; North 32° 12' 03" East 26.25 feet; North 44° 54' 58" East 50.19 feet; and North 55° 44' 31" East 9.79 feet; thence leaving said Northerly line, South 25° 09' 20" East 136.05 feet; thence North 64° 50' 40" East 22.71 feet; thence North 42° 27' 02" East 270.86 feet; Thence North 04° 11' 44" East 52.00 feet to a point in the Northerly line of said Parcel 2 of Parcel Map No. 39-80; thence along said Northerly line the following four (4) courses: South 64° 21' 32" East 27.73 feet; South 85° 48' 16" East 129.85 feet; North 61° 26' 03" East 51.24 feet; and North 68° 58' 30" East 127.02 feet to the most Easterly corner of said Parcel 2 and a point in said Northwesterly line of State highway Rout ce Southwesterly along said Northwesterly line and the Southeasterly line of said Parcel 2 the following three courses: South 42° 27' 02" West 897.25 feet; South 12° 32' 05" West 202.07 feet; and South 42° 11' 16" West 327.25 feet to the TRUE POINT OF BEGINNING. PARCEL TWO: Parcel II as created by that certain Lot Line Adjustment No. RS98-002, recorded October 19, 1998 as Document No. 98169031, Official Records of San Mateo County and further described as follows: COMMENCING at a point in the Northwesterly right of way line of State Highway Route 92 (200 feet wide) being also the most Easterly corner of Parcel 2 of Parcel Map No. 39-80, filed for record in Book 52 of Parcel Maps at pages 42 and 43, Records of San Mateo County; thence Westerly along the Northerly line of said Parcel 2, the following four courses: South 68° 58' 30" West, 127.02 feet; South 61° 26' 03" 51.24 feet; North 85° 48' 16" West 129.85 feet; and North 64° 21' 32" West 27.73 feet to the TRUE POINT OF BEGINNING; thence South 04° 11' 44" West 52.00 feet; thence South 42° 27' 02" West 270.86 feet; thence South 64° 50' 40" West 22.71 feet; thence North 25° 09' 20" West 136.05 feet, to said Northerly line of  A-1 -------------------------------------------------------------------------------- Parcel 2 of Parcel Map No. 39-80; thence along said Northerly line North 55° 44' 31" East 242.00 feet and North 88° 14' 15" East 65.03 feet to the TRUE POINT OF BEGINNING. PARCEL THREE: Parcel III as created by that certain Lot Line Adjustment No. RS98-002, recorded October 19, 1998 as Document No. 98169031, Official Records of San Mateo County and further described as follows: BEGINNING at a point in the Southerly line of East Third Avenue (80 feet wide), being also the Northeasterly corner of Parcel 1 of Parcel Map No. 39-80, filed for record in Book 52 of Parcel Maps at pages 42 and 43, Records of San Mateo County; thence along said Southerly line, North 70° 45' 45" East 5.97 feet to a point on a non-tangent curve, from which point a radial line bears North 46° 20' 02" East; thence Easterly, Northerly and Westerly along the right of way line of East Third Avenue, along said non-tangent curve to the left, having a radius of 44.50 feet, through a central angle of 264° 20' 35", an arc distance of 205.31 feet to a point of reverse curvature; thence Westerly, along a reverse curve to the right, having a radius of 49.50 feet, through a central angle of 18° 46' 18", an arc distance of 16.22 feet; thence, tangent to last said curve, South 70° 45' 45" West 16.24 feet to a point on the Northerly extension of the Easterly line of said Parcel 1 of Parcel Map No. 39-80; thence along said extension, North 19° 14' 15" West 22.10 feet to the intersection of the Northerly line of Third Avenue with said extension of said Easterly line; thence along said Northerly line, South 70° 45' 45" West 1,017.61 feet, to the most Westerly corner of Parcel 2 of said Parcel Map No. 39-80; thence along the Northerly line of said Parcel 2, the following thirteen (13) courses: North 49° 55' 43" East 12.25 feet; North 61° 13' 12" East 271.98 feet; North 65° 58' 42" East 49.80 feet; South 86° 22' 18" East 41.20 feet; North 55° 34' 52" East 64.36 feet; North 67° 59' 17" East 50.00 feet; North 59° 27' 28" East 101.12 feet; North 68° 22' 12" East 300.01 feet; North 67° 59' 17" East 50.00 feet; North 73° 41' 53" East 50.25 feet; North 69° 08' 02" East 450.09 feet; North 60° 01' 10" East 50.49 feet; and North 66° 27' 38" East 0.26 feet; thence leaving said Northerly line of Parcel 2, along a radial line South 19° 1 4' 15" East 353.53 feet to a point on a radial curve having a radius of 671.00 feet; thence Westerly along said curve, through a central angle of 8° 52' 23", an arc distance of 103.91 feet to a point on said curve from which point a radial line bears North 10° 21' 52" West; thence South 19° 14' 15" East 225.61 feet; thence South 42° 11' 46" West 55.87 feet; thence South 47° 48' 14" East 47.50 feet to a point in the Northwesterly right of way line of State Highway Route 92 (200 feet wide); thence along said Northwesterly line South 42° 11' 46" West 1024.01 feet to the most Southwesterly corner of a parcel of land designated "PARCEL 1C" in that certain Final Order of Condemnation, recorded May 12, 1967 in Book 5306 of Official Records at page 220, Records of San Mateo County, being also a point in the Southeasterly line of Parcel 1 of Parcel Map No. 44-81, filed for record in Volume 52 of Parcel Maps at pages 47 and 48, Records of San Mateo County; thence along said Southeasterly line, North 39° 54' 19" East 662.49 feet to the Southeasterly corner of Parcel 1 of Parcel Map No. 46-82, filed for record in Volume 53 of Parcel Maps at pages 8 and 9, Records of San Mateo County; thence along the Easterly line of said Parcel 1 of Parcel Map No. 46-82, North 19° 14' 15" West 598.13 feet to the Point of Beginning. PARCEL FOUR: A non-exclusive perpetual easement for the purposes of constructing, placing, installing, using, maintaining, operating, reconstructing, replacing, repairing, renewing, and removing an (A) underground eight (8) inch sanitary sewer line, together with any and all improvements appurtenant to such sewer line and/or any other improvements required or necessary, to construct, place, install, use, maintain, operate, reconstruct, replace, repair, renew or remove said sewer line and its appurtenances, and (B) an underground thirty-six (36) inch storm drain line, together with any and all improvements appurtenant to such storm drain line and/or any other  A-2 -------------------------------------------------------------------------------- improvements required or necessary to construct, place, install, use, maintain, operate, reconstruct, replace, repair, renew or remove said storm drain line and its appurtenances, in, through, over, along, across and under the "Easement Area", more particularly described as follows: A Strip of land, 15 feet in width, situated in Foster City, County of San Mateo, State of California, being a portion of Parcel 1, as said parcel is shown on Parcel Map No. 46-82, filed for record November 30, 1982, in Book 53 of Parcel Maps at pages 8 and 9, San Mateo County Records, the Southwesterly line of said strip being described as follows: BEGINNING at the Southwesterly corner of said Parcel 1, said corner being on the Northeasterly line of Lincoln Centre Drive (60' wide) as shown on said map; thence along the Southerly line of said Parcel 1, and the Northeasterly prolongation thereof, North 73° 11' 08" East 530.47 feet to the Northeasterly line of said Parcel 1 and the terminus of said strip. The Northwesterly line of said strip shall be lengthened or shortened to begin on the Southwesterly line of said Parcel 1 and terminate on said Northeasterly line of said Parcel 1. The above easement is appurtenant to PARCELS I & II above and was created by that certain Easement Agreement recorded July 15, 1998 as Document No. 98111669, Official Records. Assessor's Parcel Nos: 094-532-060, 094-532-300, 094-532-320, 094-532-340 and 094-532-350 A-3 -------------------------------------------------------------------------------- EXHIBIT B TO PURCHASE AND SALE AGREEMENT ASSIGNMENT AND ASSUMPTION OF LEASES         This Assignment and Assumption of Leases (the "Assignment") is made and entered into as of this ____ day of ________, 2000 ("Assignment Date"), by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Assignor"), and Inktomi Corporation, a Delaware corporation ("Assignee"), with reference to the following facts. RECITALS         A.     Assignor and Assignee are parties to that certain Purchase and Sale Agreement, made and entered into as of June __, 2000 (the "Purchase Agreement"), pursuant to which Assignor agreed to sell to Assignee, and Assignee agreed to purchase from Assignor that certain improved and unimproved real property located at, and contiguous to, 4000 and 4100 East Third Avenue, Foster City, California, as legally described in Exhibit A attached hereto and made a part hereof (collectively, the "Real Property") together with all (i) improvements, structures and fixtures (other than trade fixtures) (collectively, the "Improvements") and personal property (the "Personal Property") actually owned by Assignor (if any) located in, on or about the Real Property or the Improvements and actually used in the operation of the Improvements, and (ii) easements, appurtenances, rights and privileges actually belonging thereto (collectively, the “Appurtenances”). The Real Property, the Improvements, the Personal Property and the Appurtenances are collectively referred to herein as the "Property."         B.     Assignor has previously entered into certain leases of the Property, as more particularly described in Schedule 1 attached hereto and made a part hereof (collectively, the "Leases").         C.     Assignor presently has security deposits from the tenants under the Leases in the amounts set forth in Schedule 2 attached hereto and made a part hereof (collectively, the "Security Deposits").         D.     Assignee has acquired fee title to the Property from Assignor on the Assignment Date. Assignor now desires to assign and transfer to Assignee all of Assignor's rights and interests in and to, and obligations under, the Leases and the Security Deposits, and Assignee desires to assume all of Assignor's rights, title, interests and obligations in, to and under the Leases and the Security Deposits, as set forth herein.         NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:         1.     Assignment and Assumption. Effective as of the Assignment Date, Assignor hereby grants, transfers, conveys, assigns and delegates to Assignee all of the rights, interests and obligations of Assignor in, to and under the Leases and the Security Deposits. Assignee hereby accepts such assignment and delegation by Assignor and expressly and unconditionally assumes and covenants to keep, perform, fulfill and discharge (i) all of the terms, covenants, conditions and obligations required to be kept, performed, fulfilled and discharged by Assignor as landlord in and under the Leases and with respect to the Security Deposits, and (ii) all of the covenants, terms and obligations required to be kept, performed, fulfilled and discharged by Assignor with respect to the payment and/or provision of those certain tenant  B-1 -------------------------------------------------------------------------------- improvement costs, tenant improvement allowances and leasing commissions in the amounts and as more particularly set forth in Schedule 3 attached hereto (collectively, the "Leasing Costs"). Notwithstanding the foregoing or anything to the contrary contained herein, Assignor shall retain all rights, title and interest in and to all rentals and other amounts payable by the tenants under the Leases for the period of time prior to the Assignment Date.         2.     Dispute Costs. In the event of any dispute between Assignor and Assignee arising out of the obligations of the parties under this Assignment or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party's costs and expenses of such dispute, including without limitation, reasonably attorneys' fees and costs. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Assignment shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' fees obligation is intended to be severable from the other provisions of this Assignment and to survive and not be merged into any such judgment.         3.     Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, and all of which shall taken together be deemed one document. Assignor and Assignee agree that the delivery of an executed copy of this Assignment by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Assignment had been delivered.         4.     Survival. This Assignment and the provisions hereof shall inure to the benefit of and be binding upon the parties to this Assignment and their respective successors, heirs and permitted assigns.         5.     Limited Liability. This Assignment is made without recourse and without any express or implied representation or warranty of any kind or nature, except as expressly set forth in the Purchase Agreement. Assignee on its own behalf and on behalf of its agents, members, partners, employees, representatives, successors and assigns hereby agrees that in no event or circumstance shall any of the members, partners, employees, representatives, officers, directors, agents, property management company, affiliated or related entities of Assignor or Assignor's property management company, namely Legacy Partners Commercial, Inc. (formerly known as Lincoln Property Company Management Services, Inc. and LPC MS, Inc.), have any personal liability under this Assignment, or to any of Assignee's creditors, or to any other party in connection with the Property.         6.     No Third Party Beneficiaries. Except as otherwise expressly set forth herein, Assignor and Assignee do not intend, and this Assignment shall not be construed, to create a third-party beneficiary status or interest in, nor give any third-party beneficiary rights or remedies to, any other person or entity not a party to this Assignment. \\\\\ continued on next page B-2 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the Assignment Date. ASSIGNOR:       WHFST Real Estate Limited Partnership, a Delaware limited partnership   By: WHFST Gen-Par, Inc.,     a Delaware corporation     General Partner     By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:  -------------------------------------------------------------------------------- ASSIGNEE:   Inktomi Corporation, a Delaware corporation By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------       By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title:   -------------------------------------------------------------------------------- B-3 -------------------------------------------------------------------------------- EXHIBIT C TO PURCHASE AND SALE AGREEMENT ASSIGNMENT AND ASSUMPTION OF CONTRACTS, WARRANTIES AND PERMITS         This Assignment and Assumption of Contracts, Warranties and Permits (the "Assignment") is made and entered into as of this ____ day of ________, 2000 ("Assignment Date"), by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Assignor"), and Inktomi Corporation, a Delaware corporation ("Assignee"), with reference to the following facts. RECITALS         A.     Assignor and Assignee are parties to that certain Purchase and Sale Agreement, made and entered into as of June __, 2000 (the "Purchase Agreement"), pursuant to which Assignor agreed to sell to Assignee, and Assignee agreed to purchase from Assignor that certain improved and unimproved real property located at, and contiguous to, 4000 and 4100 East Third Avenue, Foster City, California, as legally described in Exhibit A attached hereto and made a part hereof (collectively, the "Real Property") together with all (i) improvements, structures and fixtures (other than trade fixtures) (collectively, the "Improvements") and personal property (the "Personal Property") actually owned by Assignor (if any) located in, on or about the Real Property or the Improvements and actually used in the operation of the Improvements, and (ii) easements, appurtenances, rights and privileges actually belonging thereto (collectively, the “Appurtenances”). The Real Property, the Improvements, the Personal Property and the Appurtenances are collectively referred to herein as the "Property."         B.     Assignee has acquired fee title to the Property from Assignor on the Assignment Date. Assignor now desires to assign and transfer to Assignee all of Assignor's rights and interests in, to and under the Contracts, Warranties and Permits, as hereinafter defined.         NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:         1.     Assignment and Assumption. Effective as of the Assignment Date, Assignor hereby grants, transfers, conveys, assigns and delegates to Assignee all of its rights and interests of Assignor in, to and under (i) those warranties and guaranties that are set forth in Schedule 1 attached hereto and made a part hereof (collectively, the "Warranties"); (ii) all intangible property (other than any tradenames of Seller or any affiliated or related entities of Seller) now owned by Assignor in connection with any portion of the Property, including without limitation, all governmental permits, approvals and licenses (to the extent assignable) (collectively, the "Permits"); and (iii) those agreements, utility contracts, service contracts, maintenance contracts, operating contracts and other rights relating to the ownership, use or operation of the Property that are set forth in Schedule 2 attached hereto and made a part hereof (collectively, the "Contracts"). Assignee hereby accepts such assignment and delegation by Assignor and agrees to fully perform and assume all the obligations of Assignor under the Warranties, Permits and Contracts. Notwithstanding the foregoing assignment by Assignor of the Contracts and Warranties, Assignor hereby reserves for its use and benefit all rights and interests in and to, and ability to concurrently enforce, for all of the Assignor Parties' benefit, any and all of the Warranties and any indemnity provisions of all of the Contracts; provided, however, that exercise of Assignor’s reserved rights and interests shall in no way diminish or interfere with the benefits conferred or Assignee by this Assignment. C-1 --------------------------------------------------------------------------------         2.     No Warranties. Assignee does hereby covenant with Assignor, and represents and warrants to Assignor, that Assignor is transferring each of the Warranties, Permits and Contracts to Assignee (to the extent the terms of any of the Contracts do not limit or restrict such right) without any warranty of any kind or nature. This Assignment shall not be construed as a representation or warranty by Assignor as to the transferability or enforceability of the Warranties, the Contracts, the Permits or the intangible property (collectively, the "Interests"), and Assignor shall have no liability to Assignee in the event that any or all of the Interests (a) are not transferable to Assignee or (b) are cancelled or terminated by reason of this Assignment or any acts of Assignee.         3.     Dispute Costs. In the event of any dispute between Assignor and Assignee arising out of the obligations of the parties under this Assignment or concerning the meaning or interpretation of any provision contained herein, the losing party shall pay the prevailing party's costs and expenses of such dispute, including without limitation, reasonably attorneys' fees and costs. Any such attorneys' fees and other expenses incurred by either party in enforcing a judgment in its favor under this Assignment shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys' fees obligation is intended to be severable from the other provisions of this Assignment and to survive and not be merged into any such judgment.         4.     Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, and all of which shall taken together be deemed one document. Assignor and Assignee agree that the delivery of an executed copy of this Assignment by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Assignment had been delivered.         5.     Survival. This Assignment and the provisions hereof shall inure to the benefit of and be binding upon the parties to this Assignment and their respective successors, heirs and permitted assigns.         6.     Limited Liability. This Assignment is made without recourse and without any express or implied representation or warranty of any kind or nature, except as expressly set forth in the Purchase Agreement. Assignee on its own behalf and on behalf of its agents, members, partners, employees, representatives, successors and assigns hereby agrees that in no event or circumstance shall any of the members, partners, employees, representatives, officers, directors, agents, property management company, affiliated or related entities of Assignor or Assignor's property management company, namely Legacy Partners Commercial, Inc. (formerly known as Lincoln Property Company Management Services, Inc. and LPC MS, Inc.) (collectively, the "Assignor Parties"), have any personal liability under this Assignment, or to any of Assignee's creditors, or to any other party in connection with the Property.         7.     No Third Party Beneficiaries. Except as otherwise expressly set forth herein, Assignor and Assignee do not intend, and this Assignment shall not be construed, to create a third-party beneficiary status or interest in, nor give any third-party beneficiary rights or remedies to, any other person or entity not a party to this Assignment. \\\\\ continued on next page C-2 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the Assignment Date. ASSIGNOR:       WHFST Real Estate Limited Partnership, a Delaware limited partnership   By: WHFST Gen-Par, Inc.,     a Delaware corporation     General Partner     By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:  -------------------------------------------------------------------------------- ASSIGNEE:   Inktomi Corporation, a Delaware corporation By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------       By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title:   -------------------------------------------------------------------------------- C-3 -------------------------------------------------------------------------------- EXHIBIT D TO PURCHASE AND SALE AGREEMENT GRANT DEED Recording Requested by and When Recorded Mail to, and Mail Tax Statements to:   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Attention:  -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Space Above This Line for Recorder's Use GRANT DEED         The undersigned Grantor declares that Documentary Transfer Tax is not part of the public records.         For valuable consideration, receipt of which is acknowledged, WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Grantor"), hereby grants to Inktomi Corporation, a Delaware corporation ("Grantee"), that certain real property located in the City of Foster City, County of San Mateo, State of California, as legally described in Exhibit A attached hereto and made a part hereof (the "Property") together with all of Grantor's right, title and interest in and to all improvements and structures located thereon and all easements, appurtenances, rights and privileges of Grantor appertaining to the Property.         The Property is conveyed subject to:         (a)     The lien of supplemental taxes, if any, assessed pursuant to the provisions of Chapter 3.5 (commencing with Section 75) of the Revenue and Taxation Code of the State of California;         (b)     The liens for real property taxes for the fiscal year ____-____ not yet due and payable;         (c)     All liens, encumbrances, easements, leases, covenants, conditions and restrictions of record;         (d)     All matters which would be disclosed by an inspection of the Property; and D-1 --------------------------------------------------------------------------------         (e)     Zoning ordinances and regulations and any other laws, ordinances, regulations or orders of any governmental agency having or claiming jurisdiction over the use, occupancy or enjoyment of the Property.         IN WITNESS WHEREOF, Grantor has caused its duly authorized representative to execute this instrument as of the date hereinafter written. DATED: ______________, 2000 GRANTOR:     WHFST Real Estate Limited Partnership, a Delaware limited partnership     By: WHFST Gen-Par, Inc.,   a Delaware corporation   General Partner           By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:      -------------------------------------------------------------------------------- D-2 -------------------------------------------------------------------------------- EXHIBIT E TO PURCHASE AND SALE AGREEMENT BILL OF SALE For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Seller"), does hereby GRANT, SELL, CONVEY, TRANSFER AND DELIVER to Inktomi Corporation, a Delaware corporation ("Buyer"), without any warranty of any kind, any and all of Seller's rights, title and interests in and to the personal property owned by Seller and described in Schedule 1 attached hereto and made a part hereof (the "Personal Property") which Personal Property was utilized by Seller in connection with the operation and management of the realty described in Exhibit A attached hereto and made a part hereof (the "Property"). From and after the date of this Bill of Sale, it is intended by the parties that Buyer and its successors and assigns shall have the right to use, have, hold and own the Personal Property forever. This Bill of Sale may be executed in counterparts, each of which shall be deemed an original, and all of which shall taken together be deemed one document. Seller and Buyer agree that the delivery of an executed copy of this Bill of Sale by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Bill of Sale had been delivered. Buyer hereby acknowledges, covenants, represents and warrants that Seller has made absolutely no warranties or representations of any kind or nature regarding title to the Personal Property or the condition of the Personal Property. Buyer on behalf of itself and its officers, directors, employees, partners, agents, representatives, successors and assigns hereby agrees that in no event or circumstance shall Seller or its partners, members, trustees, employees, representatives, officers, related or affiliated entities, successors or assigns have any personal liability under this Bill of Sale, or to any of Buyer's creditors, or to any other party in connection with the Personal Property or the Property. \\\\\ continued on next page E-1 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties have executed this Bill of Sale as of this ___ day of __________, 2000.   SELLER:     WHFST Real Estate Limited Partnership, a Delaware limited partnership     By: WHFST Gen-Par, Inc.,   a Delaware corporation   General Partner           By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:      --------------------------------------------------------------------------------   BUYER:           Inktomi Corporation,   a Delaware corporation   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------       By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   E-2 -------------------------------------------------------------------------------- Schedule 1 List of Personal Property E-3 -------------------------------------------------------------------------------- EXHIBIT F TO PURCHASE AND SALE AGREEMENT NOTICE TO TENANTS [SELLER'S PROPERTY MANAGER'S LETTERHEAD] VIA CERTIFIED MAIL [TENANT'S NAME] [TENANT'S ADDRESS] CITY, STATE ZIP ATTN: __________________ Re: ____ East Third Avenue, Foster City, California Dear _______________: Please be advised that on [CLOSING DATE], ownership of the above-referenced real property was transferred to Inktomi Corporation, a Delaware corporation (the "Purchaser"). In connection with the sale of the property, and in conformance with the laws of the State of California, the obligations under the tenant security deposits were transferred to the Purchaser, whose address is ________________________, __________________________, ______________, California 9_____; Attention: _________________, without deduction or offset. Hereafter, please make rent payable to "______________," and mail your payments to:   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This Notice is given in accordance with the requirements of California Civil Code Section 1950.7(d). From and after ____________, 2000, your sole recourse for the return of your security deposit upon the termination of your tenancy will be against the Purchaser. If you have any questions, please call [Mr./Ms.] ______________ at ________________. Thank you.       Very truly yours,         -------------------------------------------------------------------------------- a --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------         cc: --------------------------------------------------------------------------------   [name of Buyer's property manager]   Ms. Darleen Barnes   F-1 -------------------------------------------------------------------------------- EXHIBIT G TO PURCHASE AND SALE AGREEMENT NATURAL HAZARD DISCLOSURE STATEMENT This statement applies to the following described real property: 4000 and 4100 East Third Avenue, Foster City, California and unimproved contiguous property in Foster City, California. The undersigned Seller discloses the following information with the knowledge that even though this is not a warranty, the undersigned prospective Buyer may rely on this information in deciding whether and on what terms to purchase the subject real property. The following disclosures are made by the Seller based solely upon the information contained in the report attached hereto and made a part hereof. This information is merely a disclosure and shall not be deemed to be part of any contract between the Buyer and Seller. THIS REAL PROPERTY LIES WITHIN THE FOLLOWING HAZARDOUS AREA(S): A VERY HIGH FIRE HAZARD SEVERITY ZONE pursuant to Section 51178 or 51179 of the Government Code. The owner of this property is subject to the maintenance requirements of Section 51182 of the Government Code. Yes No -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                           A WILDLAND AREA THAT MAY CONTAIN SUBSTANTIAL FOREST FIRE RISKS AND HAZARDS pursuant to Section 4125 of the Public Resources Code. The owner of this property is subject to the maintenance requirements of Section 4291 of the Public Resources Code. Additionally, it is not the state's responsibility to provide fire protection services to any building or structure located within the wildlands unless the Department of Forestry and Fire Protection has entered into a cooperative agreement with a local agency for those purposes pursuant to Section 4142 of the Public Resources Code. Yes No -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THESE HAZARDS MAY LIMIT YOUR ABILITY TO DEVELOP THE REAL PROPERTY, TO OBTAIN INSURANCE, OR TO RECEIVE ASSISTANCE AFTER A DISASTER. THE ATTACHED REPORT ON WHICH THESE DISCLOSURES ARE BASED ESTIMATE WHERE NATURAL HAZARDS EXIST. THEY ARE NOT DEFINITIVE INDICATORS OF WHETHER OR NOT A PROPERTY WILL BE AFFECTED BY A NATURAL DISASTER. BUYER IS HEREBY ADVISED TO OBTAIN INDEPENDENT PROFESSIONAL ADVICE REGARDING THOSE HAZARDS AND OTHER HAZARDS THAT MAY AFFECT THE SUBJECT PROPERTY. This statement may be signed in one or more counterparts. Seller hereby states that the information set forth herein is true and correct to the best of the Seller's knowledge based solely upon the information contained in the attached report, and such knowledge is limited to be as of the date specified below. Seller has not independently verified the information G-1 -------------------------------------------------------------------------------- contained in this statement and the attached report, and Seller is not personally aware of any errors or inaccuracies in the information contained in this statement. SELLER:     WHFST Real Estate Limited Partnership, a Delaware limited partnership     By: WHFST Gen-Par, Inc.,   a Delaware corporation   General Partner           By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:      -------------------------------------------------------------------------------- Date: -------------------------------------------------------------------------------- , 2000 Buyer hereby represents and warrants that it has read and understands the information contained in this disclosure statement and in the attached report and will rely upon the information contained in the report as though the report were addressed directly to Buyer.   BUYER:           Inktomi Corporation,   a Delaware corporation   By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------       By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   G-2 -------------------------------------------------------------------------------- EXHIBIT H TO PURCHASE AND SALE AGREEMENT LEGACY LEASE AMENDMENT FIFTH AMENDMENT TO LEASE AGREEMENT        This Fifth Amendment to Lease Agreement (the "Amendment") is made and entered into as of this ___ day of _____, 2000, by and between WHFST Real Estate Limited Partnership, a Delaware limited partnership ("Landlord"), and Legacy Partners L.P., a California limited partnership ("Tenant"), with reference to the following facts. Recitals A.     Landlord and Tenant entered into that certain Lease Agreement, dated as of October 10, 1997, as amended by that certain First Amendment to Lease, dated October 30, 1997, that certain Second Amendment to Lease, dated as of December 11, 1998, that certain Third Amendment to Lease Agreement, dated as of August 13, 1999 and that certain Fourth Amendment to Lease Agreement, dated as of January 31, 2000 (collectively, the "Lease") for the leasing of certain premises consisting of approximately 23,155 rentable square feet located at 4000 E. Third Avenue, Foster City, California (the "Premises") as such Premises are more fully described in the Lease. B.     Landlord and Tenant wish to modify the Lease to amend the Lease upon and subject to the terms, conditions, and provisions set forth herein.      NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree as follows: 1.     Recitals: Landlord and Tenant agree that the above recitals are true and correct and are hereby incorporated herein as though set forth in full. 2.     Base Rent: Beginning as of July 1, 2000 (the “Effective Date”) and continuing through the Expiration Date of the Lease, the monthly Base Rent and Adjustments to Base Rent set forth on page 1 of the Lease are hereby amended to be as follows: (i) for and with respect to the period commencing on the Effective Date and continuing through the day preceding the first anniversary of the Effective Date, the Base Rent shall be at the monthly rate of Four Dollars ($4.00) per rentable square foot of the Premises; (ii) for and with respect to the period commencing on the first anniversary of the Effective Date and on each and every anniversary of the Effective Date thereafter, the annual Base Rent shall increase by an amount equal to three percent (3%) per annum. All references in the Lease to Base Rent are hereby modified accordingly. 3.     Assignment and Subletting: Article 14.2.4 of the Lease is hereby deleted in its entirety and replaced with the following: The terms of the proposed Transfer will allow the Transferee to exercise a right of renewal, right of expansion, right of first offer, or other similar right held by Tenant (or will allow the Transferee to occupy space leased by Tenant pursuant to any such right) except in connection with a right of renewal  3 -------------------------------------------------------------------------------- assigned to a Permitted Affiliate or other transferee in connection with an assignment of Tenant's entire interest in this Lease pursuant to this Article 14; 4.     Estoppel Certificates: Article 17 of the Lease is hereby modified to provide that Tenant shall have twenty (20) days following written request by Landlord to execute and deliver an estoppel certificate in the prescribed form. 5.     Events of Default: Section 19.1 of the Lease is deleted in its entirety and replaced with the following:         19.1.1     Any failure by Tenant to pay any Rent or other charge required to be paid under this Lease, or any part thereof, within five (5)  days after written notice of delinquency; provided, however, that if Landlord has given Tenant two (2) such delinquency notices in the preceding twelve (12) month period, then Tenant’s subsequent failure to pay any Rent or other charge when due shall constitute a default under this Lease without requirement of any notice or cure period except as required by statute; or         19.1.2     Any failure by Tenant to observe or perform any other provision, covenant, or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible; provided, further, however, that the maximum period for Tenant’s cure of such default will not exceed two hundred ten (210) days after Landlord’s written notice of default. 6.    Substitution of Other Premises: Article 22 of the Lease is hereby deleted in its entirety. 7.   Late Charges: Article 25 of the Lease is hereby deleted in its entirety and replaced with the following: > If any installment of Rent or any other sum due from Tenant shall not be > received by Landlord or Landlord's designee within five (5) days after notice > from Landlord that said amount is past due, then Tenant shall pay to Landlord > a late charge equal to five percent (5%) of the amount due or in the case of a > delinquent installment of Base Rent, two percent (2%) of the delinquent > amount; provided, however, that if Landlord has given Tenant one (1) such > delinquency notice in the preceding twelve (12) month period, then the late > charge shall be imposed for any subsequent delinquent payment of Rent by > Tenant, without requirement of any notice or cure period. The late charge > shall be deemed Additional Rent and the right to require it shall be in > addition to all of Landlord's other rights and remedies hereunder or at law > and shall not be construed as liquidated damages or as limiting Landlord's > remedies in any manner. In addition to the late charge described above, any > Rent or other amounts owing hereunder which are not paid when they are due > shall thereafter bear interest until paid at a rate (the "Interest Rate") > equal to the lower of (i) the then-current prime interest rate as such  4 -------------------------------------------------------------------------------- > rate is announced by The Wall Street Journal plus two (2) percentage points, > or (ii) the highest rate permitted by applicable law. 8.    Signage:  Section 29.27 of the Lease is deleted in its entirety and replaced with the following: > Building Name and Signage. Landlord shall have the right at any time to change > the name of the Building and Real Property and to install, affix and maintain > any and all signs on the exterior and on the interior of the Building or any > portion of the Real Property. Notwithstanding any provision contained herein > to the contrary, Landlord may not modify, relocate, remove or otherwise alter > any existing Tenant signage in, on or about the Premises, Building, or Real > Property without the prior written consent of Tenant, which consent may be > withheld at Tenant’s sole discretion. At all times during the Term of this > Lease, subject to the approval of all applicable governmental entities and > compliance with all applicable governmental laws and ordinances, Tenant shall > have the non-exclusive right, at Landlord's sole cost and expense, to place > its name and/or logo on any monument sign existing now or hereafter > constructed in, on or about the Real Property. 9.    Extension Option: The Bayside Towers Extension Option Rider to the Lease is hereby deleted in its entirety and replaced with the Bayside Towers Extension Option Rider attached hereto and incorporated herein. 10.  Effect of Amendment: Except as modified herein, the terms and conditions of the Lease shall remain unmodified and continue in full force and effect. In the event of any conflict between the terms and conditions of the Lease and this Amendment, the terms and conditions of this Amendment shall prevail. 11.  Definitions: Unless otherwise defined in this Amendment, all terms not defined in this Amendment shall have the meanings assigned to such terms in the Lease. 12.  Authority: Subject to the assignment and subletting provisions of the Lease, this Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, representatives, successors and assigns. Each party hereto and the persons signing below warrant that the person signing below on such party's behalf is authorized to do so and to bind such party to the terms of this Amendment. 13.  Incorporation: The terms and provisions of the Lease are hereby incorporated in this Amendment. \\\\\ continued on next page 5 -------------------------------------------------------------------------------- Counterparts: This Amendment may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one Amendment. Landlord and Tenant agree that the delivery of an executed copy of this Amendment by facsimile shall be legal and binding and shall have the same full force and effect as if an original executed copy of this Amendment had been delivered. Facsimile signatures shall be binding upon the parties hereto. LANDLORD: WHFST Real Estate Limited Partnership,  a Delaware limited partnership By: Legacy Partners Commercial, Inc.,   a Texas corporation   as manager and agent for WHFST Real Estate Limited Partnership           By:  --------------------------------------------------------------------------------   Name:  --------------------------------------------------------------------------------   Title:      -------------------------------------------------------------------------------- TENANT: Legacy Partners L.P., a California limited partnership By:  -------------------------------------------------------------------------------- Name:  -------------------------------------------------------------------------------- Title:    --------------------------------------------------------------------------------   6 -------------------------------------------------------------------------------- BAYSIDE TOWERS  EXTENSION OPTION RIDER      This Extension Option Rider ("Extension Rider") is made and entered into by and between WHFST REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and LEGACY PARTNERS L.P., a California limited partnership ("Tenant"), and is dated as of the date of the Office Lease ("Lease") by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this Extension Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this Extension Rider are inconsistent with the terms of the Lease, the terms of this Extension Rider shall control.            1.     Option Right. Landlord hereby grants Tenant one (1) option to extend the Lease Term for all, but not less than all, of the Premises for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written Exercise Notice (as defined below) delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Exercise Notice, Tenant is not in monetary or material non-monetary default under the Lease and any applicable notice of such default has been delivered and any applicable cure period has expired. Upon the proper exercise of such option to extend, and provided that, as of the end of the initial Lease Term Tenant is not in monetary or material non-monetary default under the Lease beyond any applicable notice and cure period, the Lease Term shall be extended for the Option Term. The rights contained in this Extension Rider shall be personal to the original Tenant and may only be exercised by the original Tenant and any Permitted Affiliate or other assignee to which Tenant's entire interest in this Lease has been assigned pursuant to Article 14 (and not by any sublessee or other transferee of Tenant's interest in the Lease).            2.     Option Rent. The Annual Base Rent payable by Tenant during the Option Term (the "Option Rent") shall be equal to the "Fair Market Rental Rate" for the Premises. For purposes hereof, the "Fair Market Rental Rate" shall mean the rent at which tenants, as of the commencement of the Option Term will be leasing non-sublease, non-encumbered space on a net basis comparable in size, location and quality to the Premises for a comparable term, which comparable space is located in Comparable Buildings (defined below) taking into consideration all out-of-pocket monetary concessions and inducements generally being granted at such time, including any tenant improvement allowances provided for such space (but in determining any such tenant improvement allowance, the quality and quantity of tenant improvements in the Premises shall be taken into account and the value thereof deducted from such allowance), and also taking into consideration and requiring Tenant to provide for security or collateral for the Option Term in such amounts and of such types (such as, for example, a cash security deposit and/or a letter of credit), if any, as are generally being required by landlords in connection with such extensions and rental amounts and concessions for such comparable space by tenants of comparable net worth as Tenant. All other terms and conditions of the Lease shall apply throughout the Option Term; however, Tenant shall, in no event, have the option to extend the Lease Term beyond the Option Term described in Section 1 above.            3.     Exercise of Option. The option contained in this Extension Rider shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice to Landlord not less than fourteen (14) months prior to the expiration of the initial Lease Term stating that Tenant may be interested in exercising its option; (ii) Landlord, after receipt of Tenant's notice, shall deliver notice  H-1 -------------------------------------------------------------------------------- (the "Option Rent Notice") to Tenant not less than thirteen (13) months prior to the expiration of the initial Lease Term setting forth Landlord's good-faith determination of the Fair Market Rental Rate for the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the date (the "Exercise Date") which is the later of (A) the date occurring twelve (12) months prior to the expiration of the initial Lease Term, and (B) the date occurring thirty (30) days after Tenant's receipt of the Option Rent Notice, exercise the option by delivering written notice ("Exercise Notice") thereof to Landlord, and upon and concurrent with such exercise, Tenant may, at its option, object to Landlord's determination of the Fair Market Rental Rate for the Option Rent contained in the Option Rent Notice, in which case the parties shall follow the procedure and the Fair Market Rental Rate for the Option Term shall be determined as set forth in Section 4 below. If Tenant does not timely object to Landlord's determination of the Option Rent, Landlord's determination shall be conclusive and the arbitration procedures in Section 4 below shall not be applicable. Tenant's failure to deliver the Exercise Notice on or before the Exercise Date shall be deemed to constitute Tenant's waiver of its extension right hereunder.            4.     Determination of Fair Market Rental Rate. In the event Tenant timely objects in writing to the applicable Fair Market Rental Rate initially determined by Landlord, Landlord and Tenant shall attempt to agree upon the applicable Fair Market Rental Rate, using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) business days following Tenant's objection to the applicable Fair Market Rental Rate (the "Outside Agreement Date"), then each party shall submit to the other party a separate written determination of the applicable Fair Market Rental Rate within ten (10) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below; provided, however, that if the Fair Market Rental Rate determination submitted by Landlord is less than the Fair Market Rental Rate originally provided by Landlord in Landlord's Option Rent Notice, Tenant shall thereafter have five (5) business days to accept such determination as the Opti on Rent in which event the arbitration proceedings in Sections 4.1 through 4.6 below shall not apply. Failure of Tenant or Landlord to submit a written determination of the applicable Fair Market Rental Rate within such ten (10) business day period shall conclusively be deemed to be the non-determining party's approval of the applicable Fair Market Rental Rate submitted within such ten (10) business day period by the other party.                    4.1     Landlord and Tenant shall each appoint, one arbitrator who shall by profession be an independent real estate appraiser holding the professional designation as an MAI (or its equivalent) who has no financial interest in Landlord or Tenant and who shall have been active over the five (5) year period ending on the date of such appointment in the appraisal rental purposes of rentals of space in first-class office buildings in San Mateo County, California ("Comparable Buildings"). The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Fair Market Rental Rate is the closest to the actual Fair Market Rental Rate as determined by the arbitrators, taking into account the requirements of Section 2 of this Extension Rider. Each such arbitrator shall be appointed within thirty (30) days after the applicable Outside Agreement Date.                    4.2     The two (2) arbitrators so appointed shall within ten (10) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria as set forth hereinabove for qualification of the initial two (2) arbitrators, except that the third arbitrator shall not have been previously engaged by Landlord or Tenant for any purpose.       H-2 --------------------------------------------------------------------------------                     4.3     The three (3) arbitrators shall conduct a hearing within twenty (20) days after the appointment of the third arbitrator and within ten (10) days thereafter reach a decision as to which of the Landlord's or Tenant's submitted Fair Market Rental Rate is closest to the actual Fair Market Rental Rate, and the arbitrators shall use whichever of Landlord's or Tenant's submitted Fair Market Rental Rate is closest to the actual Fair Market Rental Rate to be paid during the Option Term and shall notify Landlord and Tenant thereof.                     4.4     The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.                    4.5     If either Landlord or Tenant fails to appoint an arbitrator within thirty (30) days after the Outside Agreement Date, and if such failure shall continue for an additional fifteen (15) days after written notice thereof is received by the non-appointing party, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant.                     4.6     If the two (2) arbitrators fail to agree upon and appoint a third arbitrator within the time period provided in Section 4.2 above, then the parties shall mutually select the third arbitrator. If Landlord and Tenant are unable to agree upon the third arbitrator within ten (10) days, then either party may, upon at least five (5) days' prior written notice to the other party, request the Presiding Judge of the San Mateo County Superior Court, acting in his private and nonjudicial capacity, to appoint the third arbitrator. Following the appointment of the third arbitrator, the panel of arbitrators shall within thirty (30) days thereafter reach a decision as to whether Landlord's or Tenant's submitted Fair Market Rental Rate shall be used and shall notify Landlord and Tenant thereof.                     4.7     The cost of the arbitrators and the arbitration proceeding shall be paid by Landlord and Tenant equally, except that each party shall pay for the cost of its own witnesses and attorneys. H-3
EXHIBIT 10.09 AMENDMENT #1 TO CAPACITY AGREEMENT EXODUS COMMUNICATIONS, INC. October 17, 2000         This is Amendment #1 to the Capacity Agreement between Global Crossing Bandwidth, Inc. f/k/a Frontier Communications of the West, Inc. (“Global Crossing”) and Exodus Communications, Inc. (“Exodus”), dated September 28, 2000, as amended (the “Agreement”).         1.  Except as otherwise stated, capitalized terms used herein have the same meaning as set forth in the Agreement.         2.  The “Initial Annual Maintenance Cost Payment Per MCU” column, identified in Schedule 2A of the Agreement, shall be modified for the Traffic Connections set out below. Traffic Connection Initial Annual Maintenance Cost Payment Per MCU (Amended Column) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Amsterdam to Stockholm to Berlin $[***] per STM-4 per annum Madrid to Milan to Munich $[***] per STM-4 per annum Berlin to Vienna to Munich $[***] per STM-4 per annum         All other terms and conditions of Schedule 2A remain the same.         3.  Exhibit D of the Agreement shall be deleted in its entirety and replaced with Amended Exhibit D, attached herewith.         4.  All revised rates are attached hereto and made a part hereof and will be effective on a go forward basis with Exodus’s first full Billing Cycle following the execution of this Amendment #1 by Global Crossing.         5.  The balance of the Agreement and any executed amendments or addenda thereto not modified by this Amendment #1 shall remain in full force and effect.         6.  This Amendment #1 is effective as of the date signed by Global Crossing below.        GLOBAL CROSSING BANDWIDTH, INC. F/K/A FRONTIER COMMUNICATIONS OF THE WEST, INC.   By:   /s/Anthony T. Sgroi      --------------------------------------------------------------------------------      Anthony T. Sgroi, Sr. Vice President North American Carrier Services   Date   October 30, 2000        EXODUS COMMUNICATIONS, INC.   By:   /s/Donald P. Casey      --------------------------------------------------------------------------------      Donald P. Casey President and COO   Date:   October 23, 2000 [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. --------------------------------------------------------------------------------   DELIVERY PERIODS AND MILEAGE AND RATE CONVERSION MATRIX I.  DELIVERY PERIODS:         Global Crossing will deliver the services and capacities set out in Paragraph A below within the periods set out below. Delivery will be from acceptance of a completed order by Global Crossing.         A.  SERVICE DELIVERY PERIODS:               OC-3 Fully Protected SONET  60 days following acceptance of completed order               OC-12 Fully Protected SONET  60 days following acceptance of completed order               2.5 Gbps Linear Wavelength  90 days following acceptance of completed order II.  MILEAGE CONVERSION MATRIX:         Total DS-0 Channel Miles:  [***]         For 9.953 Gbps or 2.488 Gbps Wavelength Services, the following conversion ratios and rates will apply. Global Crossing Bandwidth, Inc. represents that such rates and the pricing contained in Schedule 2A are no less favorable than the pricing described in Annex B of the Network Services, Marketing and Cooperation Agreement entered into as of September 27, 2000 between the Purchaser and Global Crossing Ltd. Service Conversion Ratio Net effective Rate per DS-0 Channel Mile 9.953 Gbps Linear Wavelength 1 times the DS-0 miles $[***] 2.488 Gbps Linear Wavelengths For City Pairs in Exhibit A 1 times the DS-0 miles $[***] 2.488 Gbps Linear Wavelength 1.20 times the DS-0 miles $[***]         For OC-3 or OC-12 SONET Services, the following conversion ratios and rates will apply: OC-12 Fully Protected SONET 3.96 times the DS-0 miles $[***] OC-3 Fully Protected SONET 5.28 times the DS-0 miles $[***]         For example, if Exodus orders an OC-12 SONET circuit on any City Pair, the DS-0 mile for such circuit will be multiplied by 3.96 and the product will be deducted from the Total Initial Channel Miles.         For OC-3 and OC-12 SONET Services ordered in excess of greater than 15% of the Total DS-0 Miles (being 860,284,327), the DS-0 channel mile rate will be as follows: Service Conversion Ratio Net effective Rate per DS-0 Channel Mile OC-12 Fully Protected SONET 4.8 $[***] OC-3 Fully Protected SONET 7.2 $[***] III.  FORECASTING         Within thirty (30) days after execution of this Agreement, the parties will establish mutually agreeable forecasting procedures. IV.  CIRCUIT CANCELLATION PENALTIES:         In the event that Exodus cancels an order for a circuit more than [***] days and less than [***] days prior to the agreed upon delivery date, Global Crossing will deduct from the Total Initial Channel Miles an amount equal to [***]% of the value of [***] month’s DS-0 channel miles for the cancelled circuit, unless Global Crossing has given notice that such circuit will be delivered late in accordance with Exhibit E Section I(C). [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. --------------------------------------------------------------------------------              In the event that Exodus cancels an order for a circuit within [***] days prior to the agreed upon delivery date, Global Crossing will deduct from the Total Initial Channels Miles an amount equal to [***] % of the value of [***] month’s DS-0 channel miles for the cancelled circuit; unless the canceled service is replaced with another service of equal or greater capacity and value and provided that such deduction shall only be made for the first [***] circuits cancelled in any [***] month period. [***] Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. --------------------------------------------------------------------------------  
QuickLinks -- Click here to rapidly navigate through this document EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is made effective October 10, 2000, by and between Jore Corporation, a Montana corporation ("Jore") and Mike Jore ("Employee").     NOW, THEREFORE, the parties hereto agree as follows: 1.  Employment.     Jore hereby agrees to continue to employ Employee as its Executive Vice President, and Employee hereby accepts such employment in accordance with the terms of this Agreement and the terms of employment applicable to employees of Jore. In the event of any conflict or ambiguity between the terms of this Agreement and terms of employment applicable to Jore employees in general, the terms of this Agreement shall control. 2.  Duties of Employee.     The duties of Employee shall include the performance of all of the duties typical of the office held by Employee as described in the bylaws of Jore, if applicable, and such other duties and projects as may be assigned by a superior officer of Jore, or the board of directors of Jore. Employee shall devote his full time productive time, ability and attention to the business of Jore and shall perform all duties in a professional, ethical and businesslike manner. Employee will not, during the term of this Agreement, directly or indirectly engage in any other business, either as an employee, employer, consultant, principal, officer, director, advisor, or in any other capacity, either with or without compensation, that would be in conflict with Employee's duties on Jore's behalf. 3.  Compensation.     A.  Base Compensation.  Employee will be paid compensation during this Agreement at a base salary of $200,000 per year, payable in installments according to Jore's regular payroll schedules.     B.  Incentive Compensation.  Employee will be paid such incentive compensation as may be agreed upon from time to time between Employee and Jore management. Unless otherwise provided herein, any bonus or other incentive compensation will be calculated on a calendar quarter basis, with the requirement Employee be employed on the last day of such quarter to qualify for the bonus. 4.  Benefits.     A.  Holidays, Vacation and Personal Days.  Employee will be entitled to paid holidays, vacation days, and personal days each calendar year, as set out in the Jore employee handbook, or, as to corporate officers, as set forth in Jore employee compensation guidelines as adopted and modified from time to time ("Jore's Compensation Guidelines"). Jore will notify Employee on or about the beginning of each calendar year with respect to the holiday schedule for the coming year. Vacation days will be scheduled in advance subject to requirements of Jore. Such holidays must be taken during the calendar year and cannot be carried forward into the next year.     B.  Life Insurance, Disability, and Medical Plan.  Jore agrees to include Employee in the group medical plan of Jore and, if applicable to the office of Employee pursuant to Jore's Compensation Guidelines, to provide voluntary life insurance and disability insurance for Employee in the amounts and under the terms and conditions set forth in Jore's Compensation Guidelines as in effect on the date hereof. Employee shall be responsible for payment of any federal or state income tax imposed upon these benefits.     C.  Expense Reimbursement.  Employee shall be entitled to reimbursement for all reasonable and customary expenses, including travel and entertainment, incurred by Employee in the performance of Page 1 -------------------------------------------------------------------------------- Employee duties. Employee will maintain records and written receipts as required by Jore's internal policies and reasonably requested by Jore to substantiate such expenses. Any anticipated out of the ordinary expenses must be pre-approved by senior management of Jore. 5.  Term and Termination.     A.  The Initial Term of this Agreement shall commence on the date hereof and it shall continue in effect for a period of five (5) years. Thereafter, the Agreement shall be renewed upon the mutual agreement of Employee and Jore for successive one-year terms, unless terminated in accordance herewith.     B.  This Agreement and Employee's employment may be terminated at Jore's discretion without cause during the Initial Term with 30 days prior written notice to Employee. If the termination is without cause, Jore shall pay to Employee base compensation through the date which is one hundred twenty (120) days from the date on which the termination is to be effective as per the timely delivered notice. In addition, Employee shall be entitled to a pro rata share of incentive compensation as provided in section 3.B. through and including the effective date of termination (but not including the period of continuing compensation under this subsection).     C.  This Agreement may be terminated by Employee at Employee's discretion by providing at least thirty (30) days prior written notice to Jore. In the event of termination by Employee pursuant to this subsection, Jore may immediately relieve Employee of all duties and immediately terminate this Agreement, provided that Jore shall pay Employee at the then applicable base salary rate to the termination date included in Employee original termination notice, but in no event in excess of thirty (30) days from the date Jore receives such notice. Any incentive compensation which has accrued through such date, but has not been paid, shall be forfeited by Employee in this event, and shall not be paid.     D.  In the event that Employee is in breach of any material obligation owed Jore under this Agreement, habitually neglects the duties to be performed under this Agreement, becomes permanently disabled and is no longer able to perform the essential functions of the position with reasonable accommodation, engages in any conduct which is dishonest, damages the reputation or standing of Jore, is convicted of a serious criminal act or engages in any act listed as cause for dismissal in the Jore Employee Handbook, then Jore may terminate this Agreement upon five (5) days notice to Employee. In event of termination of the agreement pursuant to this subsection, Employee shall be paid only at the then applicable base salary rate up to and including the date of termination. Employee shall not be paid any incentive compensation or other additional compensation, prorated or otherwise.     E.  In the event Jore is acquired, or is the non-surviving party in a merger, or sells all or substantially all of its assets, this Agreement shall not be terminated and Jore agrees to use its best efforts to ensure that the transferee or surviving entity is bound by the provisions of this Agreement. Page 2 -------------------------------------------------------------------------------- 6.  Notices.     Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services; If to Jore: Jore Corporation 45000 Highway 93 South Ronan, Montana 59864 Attention: General Counsel If to Employee: Mike Jore 45000 Highway 93 South Ronan, Montana 59864 7.  Final Agreement.     This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. Only a further writing that is duly executed by both parties may modify this Agreement. 8.  Governing Law.     This Agreement shall be construed and enforced in accordance with the laws of the state of Montana. 9.  Headings.     Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent. 10. Assignment.     Neither this Agreement nor any or interest in this Agreement may be assigned by Employee without the prior express written approval of Jore, which may be withheld by Jore at Jore's absolute discretion. Jore may assign or delegate all or any part of its rights or obligations under this Agreement to a direct or indirect subsidiary or parent or by merger, consolidation, sale or transfer of all or substantially all of its assets, provided any resulting assignee or transferee succeeds to the obligations of Jore hereunder, and provided that at least eighty percent (80%) of the ultimate ownership of such assignee or transferee immediately after such transfer or assignment is held or owned, directly or indirectly, by the same parties owning or holding immediately prior to the transfer or assignment. All references to Jore shall include any permitted assignee or successor to Jore. 11. Preparation of Agreement.     Employee acknowledges that this Agreement was prepared by attorneys representing Jore, and that the terms of this Agreement will have tax consequences to Employee. Employee has been advised to consult with an attorney and tax advisor of his choice before entering into this Agreement and has done so, or has waived the opportunity to do so. Employee acknowledges that he has not relied upon any legal or tax advice of Jore's attorneys in connection with this Agreement. Page 3 -------------------------------------------------------------------------------- 12. Severability.     If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. 13. Arbitration.     The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in Lake County, Montana, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act as arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator's expenses and administrative fees of arbitration.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Jore Corporation   Employee:   By:               --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Matt Jore   Mike Jore   President     Page 4 -------------------------------------------------------------------------------- QUICKLINKS EMPLOYMENT AGREEMENT
EXHIBIT 10.1 EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINENTAL AIRLINES, INC., a Delaware corporation ("Company"), and GORDON M. BETHUNE ("Executive"), and is dated and effective as of July 25, 2000 (the "Effective Date"). W I T N E S S E T H: WHEREAS, Company and Executive were parties to that certain Amended and Restated Employment Agreement dated as of November 15, 1995, as amended by Amendment to Employment Agreement dated as of April 19, 1996 and Amendment to Employment Agreement dated as of September 30, 1996 (as so amended, the "Old Agreement@); and WHEREAS , Air Partners, L.P., its partners and certain affiliates entered into an Investment Agreement dated as of January 25, 1998, as amended, with Northwest Airlines Corporation and its affiliate (the AInvestment Agreement@), which investment agreement provided for the acquisition by an affiliate of Northwest Airlines Corporation of beneficial ownership of the Class A common stock and warrants held by Air Partners, L.P.; and WHEREAS , the acquisition by an affiliate of Northwest Airlines Corporation of beneficial ownership of the Class A common stock held by Air Partners, L.P. contemplated by the Investment Agreement (the AAcquisition@) on November 20, 1998 constituted a Change in Control for purposes of the Company=s 1994 Incentive Equity Plan, as amended, the Company=s 1997 Stock Incentive Plan, as amended, the Company=s then existing Executive Bonus Program and the Old Agreement; and WHEREAS, Company and Executive executed that certain Amended and Restated Employment Agreement dated as of November 20, 1998 to amend, restate and supersede the Original Agreement in its entirety, as provided for therein, and such Amended and Restated Employment Agreement dated as of November 20, 1998 was amended by Amendment to Employment Agreement dated as of May 19, 1999 and Amendment to Employment Agreement dated as of September 16, 1999 (as so amended, the "Existing Agreement"); and WHEREAS , the Human Resources Committee of the Board of Directors of Company ("HR Committee") has deemed it advisable and in the best interests of Company and its stockholders to assure management continuity for Company and, consistent therewith, has authorized the execution, delivery and performance by Company of this Agreement; WHEREAS, in connection therewith, the parties desire to enter into this Agreement to replace and supersede the Existing Agreement in its entirety, effective as of the Effective Date; NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:   ARTICLE 1: EMPLOYMENT AND DUTIES 1.1 Employment; Effective Date. Company agrees to employ Executive and Executive agrees to be employed by Company, beginning as of the Effective Date (as hereinafter defined) and continuing for the period of time set forth in Article 2 of this Agreement, subject to the terms and conditions of this Agreement. 1.2 Positions. From and after the Effective Date, Company shall employ Executive in the positions of Chairman of the Board and Chief Executive Officer of Company, or in such other positions as the parties mutually may agree, and shall, for the full term of Executive's employment hereunder, cause Executive to be nominated for election as a director of Company and use its best efforts to secure such election. 1.3 Duties and Services. Executive agrees to serve in the positions referred to in paragraph 1.2 and, if elected, as a director of Company and to perform diligently and to the best of his abilities the duties and services appertaining to such offices as set forth in the Bylaws of Company in effect on the Effective Date, as well as such additional duties and services appropriate to such offices which the parties mutually may agree upon from time to time.   ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT 2.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for a five-year period beginning on the Effective Date. Said term of employment shall be extended automatically for an additional successive five-year period as of the fifth anniversary of the Effective Date and as of the last day of each successive five-year period of time thereafter that this Agreement is in effect; provided, however, that if, prior to the date which is six months before the last day of any such five-year term of employment, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the five-year term of employment during which such notice is given. 2.2 Company's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Company, acting pursuant to an express resolution of the Board of Directors of Company (the "Board of Directors"), shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons: (i) upon Executive's death; (ii) upon Executive's becoming incapacitated for a period of at least 180 days by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the material duties and services required of him hereunder on a full-time basis during such period; (iii) if, in carrying out his duties hereunder, Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct resulting in material economic harm to Company; (iv) upon the conviction of Executive for a felony or any crime involving moral turpitude; or (v) for any other reason whatsoever, in the sole discretion of the Board of Directors. 2.3 Executive's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Executive shall have the right to terminate his employment under this Agreement at any time for any of the following reasons: (i) the assignment to Executive by the Board of Directors or other officers or representatives of Company of duties materially inconsistent with the duties associated with the positions described in paragraph 1.2 as such duties are constituted as of the Effective Date, or the failure to elect or reelect Executive to any of the positions described in paragraph 1.2 or the removal of him from any such positions; (ii) a material diminution in the nature or scope of Executive's authority, responsibilities, or titles from those applicable to him as of the Effective Date, including a change in the reporting structure so that Executive reports to someone other than the Board of Directors; (iii) the occurrence of acts or conduct on the part of Company, its Board of Directors, or its officers, representatives or stockholders which prevent Executive from, or substantively hinder Executive in, performing his duties or responsibilities pursuant to this Agreement; (iv) Company requiring Executive to be permanently based anywhere outside a major urban center in Texas; (v) the taking of any action by Company that would materially adversely affect the corporate amenities enjoyed by Executive on the Effective Date; (vi) a material breach by Company of any provision of this Agreement which, if correctable, remains uncorrected for 30 days following written notice of such breach by Executive to Company, it being agreed that any reduction in Executive's then current annual base salary, or any reduction in Executive =s annual cash bonus opportunity as a percentage of such base salary from that percentage in effect on the Effective Date (i.e., 0% to 125% of base salary) or any material change in the frequency of payment thereof or the performance factors on which such bonus is based, shall constitute a material breach by Company of this Agreement; or (vii) for any other reason whatsoever, in the sole discretion of Executive. 2.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, it or he shall do so by giving written notice to the other party that it or he has elected to terminate Executive's employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.   ARTICLE 3: COMPENSATION AND BENEFITS 3.1 Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary equal to the greater of (i) $1,042,500.00 or (ii) such amount as the parties mutually may agree upon from time to time. Executive's annual base salary shall be paid in equal installments in accordance with Company's standard policy regarding payment of compensation to executives but no less frequently than semimonthly. 3.2 Bonus Programs and Restricted Stock Grant. (a) Cash Bonus Programs. Executive shall participate in each cash bonus program maintained by Company on and after the Effective Date (including, without limitation, any such program maintained for the year during which the Effective Date occurs) at a level which is not less than the maximum participation level made available to any Company executive (determined without regard to period of service or other criteria that might otherwise be necessary to entitle Executive to such level of participation); provided that Company shall at all times maintain Executive =s annual cash bonus opportunity as a percentage of his base salary in an amount which is at least as great as that in effect on the Effective Date (i.e., 0% to 125% of base salary) and shall not change in any material respect the payment frequency thereof or the performance factors on which such bonus is based. (b) Restricted Stock Grant. On the Effective Date, Company shall make a restricted stock award to Executive of 30,000 shares of Class B common stock of Company under Company's Incentive Plan 2000, which restricted stock award shall vest as to 1/3 of the shares on the first anniversary of the Effective Date, 1/3 of the shares on the second anniversary of the Effective Date, and 1/3 of the shares on the third anniversary of the Effective Date, or otherwise in accordance with the terms of the Incentive Plan 2000 (including any grant document thereunder) and the terms of this Agreement. 3.3 Life Insurance. During the period of this Agreement, Company shall maintain one or more policies of life insurance on the life of Executive providing an aggregate death benefit in an amount not less than the Termination Payment (as such term is defined in paragraph 4.7). Executive shall have the right to designate the beneficiary or beneficiaries of the death benefit payable pursuant to such policy or policies up to an aggregate death benefit in an amount equal to the Termination Payment, and may transfer ownership of such policy or policies (and any rights of Executive under this paragraph 3.3) to any life insurance trust, family trust or other trust. To the extent that Company's purchase of, or payment of premiums with respect to, such policy or policies results in compensation income to Executive, Company shall pay to Executive an additional payment (the "Policy Payment") in an amount such that after payment by Executive of all taxes imposed on Executive with respect to the Policy Payment, Executive retains an amount of the Policy Payment equal to the taxes imposed upon Executive with respect to such purchase or the payment of such premiums. If for any reason Company fails to maintain the full amount of life insurance coverage required pursuant to the preceding provisions of this paragraph 3.3, Company shall, in the event of the death of Executive while employed by Company, pay Executive's designated beneficiary or beneficiaries an amount equal to the sum of (1) the difference between the Termination Payment and any death benefit payable to Executive's designated beneficiary or beneficiaries under the policy or policies maintained by Company and (2) such additional amount as shall be required to hold Executive's estate, heirs, and such beneficiary or beneficiaries harmless from any additional tax liability resulting from the failure by Company to maintain the full amount of such required coverage. 3.4 Vacation and Sick Leave. During each year of his employment, Executive shall be entitled to vacation and sick leave benefits equal to the maximum available to any Company executive, determined without regard to the period of service that might otherwise be necessary to entitle Executive to such vacation or sick leave under standard Company policy. 3.5 Supplemental Executive Retirement Plan. (i) Base Benefit. Company agrees to pay Executive the deferred compensation benefits set forth in this paragraph 3.5 as a supplemental retirement plan (the "Plan"). The base retirement benefit under the Plan (the "Base Benefit") shall be in the form of an annual straight life annuity in an amount equal to the product of (a) 2.5% times (b) the number of Executive's credited years of service (as defined below) under the Plan (but not in excess of 30 years) times (c) the Executive's final average compensation (as defined below). For purposes hereof, Executive's credited years of service under the Plan shall be equal to the sum of (1) the number of Executive's years of benefit service with Company, calculated as set forth in the Continental Retirement Plan (the "CARP") beginning at January 1, 1995 ("Actual Years of Service"), (2) an additional four years of service for each one year of service credited to Executive pursuant to clause (1) of this sentence for the period beginning on January 1, 2000 and ending on December 31, 2004, and (3) if the Termination Payment becomes payable to Executive under this Agreement or if Executive's employment is terminated for a reason encompassed by paragraphs 2.2(i) or 2.2(ii), that number of additional years of service as is equal to (X) 28 years minus (Y) five times the number of full calendar years which have occurred during the period beginning January 1, 2000 and ending on the earlier of (i) the date that the Termination Payment under this Agreement first becomes payable to Executive or (ii) December 31, 2004. For purposes hereof, Executive's final average compensation shall be equal to the greater of (A) $1,042,500.00 or (B) the average of the five highest annual cash compensation amounts (or, if Executive has been employed less than five years by Company, the average over the full years employed by Company) paid to Executive by Company during the consecutive ten calendar years immediately preceding Executive's termination of employment at retirement or otherwise. For purposes hereof, cash compensation shall include base salary plus cash bonuses (including any amounts deferred (other than Stay Bonus amounts described below) pursuant to any deferred compensation plan of the Company), but shall exclude (i) any cash bonus paid on or prior to March 31, 1995, (ii) any Stay Bonus paid to Executive pursuant to that certain Stay Bonus Agreement between Company and Executive dated as of April 14, 1998, (iii) any Termination Payment or Existing Severance paid to Executive under this Agreement, (iv) any payments received by Executive under Company's Officer Retention and Incentive Award Program, (v) any proceeds to Executive from any awards under any option, stock incentive or similar plan of Company, and (vi) any cash bonus paid under a long term incentive plan or program adopted by Company. Executive shall be vested immediately with respect to benefits due under the Plan. (ii) Offset for CARP Benefit. Any provisions of the Plan to the contrary notwithstanding, the Base Benefit shall be reduced by the actuarial equivalent (as defined below) of the pension benefit, if any, paid or payable to Executive from the CARP. In making such reduction, the Base Benefit and the benefit paid or payable under the CARP shall be determined under the provisions of each plan as if payable in the form of an annual straight life annuity beginning on the Retirement Date (as defined below). The net benefit payable under this Plan shall then be actuarially adjusted based on the actuarial assumptions set forth in paragraph 3.5(vii) for the actual time and form of payments. (iii) Normal and Early Retirement Benefits. Executive's benefit under the Plan shall be payable in equal monthly installments beginning on the first day of the month following the Retirement Date (the "Normal Retirement Benefit"). For purposes hereof, "Retirement Date" is defined as the later of (a) the date on which Executive attains (or in the event of Executive's earlier death, would have attained) age 60 or (b) the date of Executive's retirement from employment with Company. Notwithstanding the foregoing, if Executive's employment with Company is terminated, for a reason other than death, on or after the date Executive attains age 55 or is credited with 10 Actual Years of Service and prior to the Retirement Date, then Executive shall be entitled to elect to commence to receive Executive's benefit under the Plan as of the first day of any month coinciding with or next following Executive's termination of employment, or as the first day of any subsequent month preceding the Retirement Date (an "Early Retirement Benefit"); provided, however, that (1) written notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, (2) each payment under an Early Retirement Benefit shall be reduced to the extent necessary to cause the value of such Early Retirement Benefit (determined without regard to clause (3) of this proviso) to be the actuarial equivalent of the value of the Normal Retirement Benefit (in each case based on the actuarial assumptions set forth in paragraph 3.5(vii) and adjusted for the actual time and form of payments), and (3) each payment under an Early Retirement Benefit that is made prior to the Retirement Date shall be reduced by an additional 10% of the amount of such payment as initially determined pursuant to clause (2) of this proviso. The HR Committee may, in its sole and absolute discretion, waive all or any part of the reductions contemplated in clauses (2) and/or (3) of the proviso of the preceding sentence. (iv) Form of Retirement Benefit. If Executive is not married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive in the form of a single life annuity for the life of Executive. If Executive is married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive, at the written election of Executive made at least 15 days prior to the first payment of benefits under the Plan, in either (1) the form of a single life annuity for the life of Executive, or (2) the form of a joint and survivor annuity that is actuarially equivalent to the benefit that would have been payable under the Plan to Executive if Executive was not married on such date, with Executive's spouse as of the date benefit payments commence being entitled during such spouse's lifetime after Executive's death to a benefit equal to 50% of the benefit payable to Executive during their joint lifetimes. If Executive fails to make such election, Executive will be deemed to have elected a joint and survivor annuity. (v) Death Benefit. Except as provided in this paragraph 3.5(v), no benefits shall be paid under the Plan if Executive dies prior to the date Executive's benefit commences pursuant to paragraph 3.5(iii). In the event of Executive's death prior to the commencement of Executive's benefit pursuant to paragraph 3.5(iii), Executive's surviving spouse, if Executive is married on the date of Executive's death, will receive a single life annuity consisting of monthly payments for the life of such surviving spouse determined as follows: (a) if Executive dies on or before reaching the Retirement Date, the death benefit such spouse would have received had Executive terminated employment on the earlier of Executive's actual date of termination of employment or Executive's date of death, survived until the Retirement Date, elected a joint and survivor annuity and began to receive Executive's Plan benefit beginning immediately at the Retirement Date, and died on the day after the Retirement Date; or (b) if Executive dies after reaching the Retirement Date, the death benefit such spouse would have received had Executive elected a joint and survivor annuity and begun to receive Executive's Plan benefit beginning on the day prior to Executive's death. Payment of such survivor annuity shall begin on the first day of the month following the later of (1) Executive's date of death or (2) the Retirement Date; provided, however, that if Executive was eligible to elect an Early Retirement Benefit as of the date of Executive's death, then Executive's surviving spouse shall be entitled to elect to commence to receive such survivor annuity as of the first day of the month next following the date of Executive's death, or as the first day of any subsequent month preceding the Retirement Date. Notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, and each payment of such survivor annuity shall be reduced based on the principles used for the reductions described in clauses (2) and (3) of the proviso to the third sentence of paragraph 3.5(iii). (vi) Unfunded Benefit. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation. Further, it is the intention of Company that the Plan be unfunded for purposes of the Internal Revenue Code of 1986, as amended, and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of Company. Executive understands that he must rely upon the general credit of Company for payment of benefits under the Plan. Company shall establish a "rabbi" trust to assist Company in meeting its obligations under the Plan. The trustee of such trust shall be a nationally-recognized and solvent bank or trust company that is not affiliated with Company. Company shall transfer to the trustee money and/or other property determined in the sole discretion of the HR Committee based on the advice of the Actuary (as defined below) on an as-needed basis in order to assure that the benefit payable under the Plan is at all times fully funded. The trustee shall pay Plan benefits to Executive and/or Executive's spouse out of the trust assets if such benefits are not paid by Company. Company shall remain the owner of all assets in the trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) Company ever becomes insolvent. Neither Executive nor any beneficiary of Executive shall have any preferred claim to, any security interest in, or any beneficial ownership interest in any assets of the trust. Company has not and will not in the future set aside assets for security or enter into any other arrangement which will cause the obligation created to be other than a general corporate obligation of Company or will cause Executive to be more than a general creditor of Company. (vii) Actuarial Equivalent. For purposes of the Plan, the terms "actuarial equivalent", or "actuarially equivalent" when used with respect to a specified benefit shall mean the amount of benefit of the referenced different type or payable at the referenced different age that can be provided at the same cost as such specified benefit, as computed by the Actuary and certified to Executive (or, in the case of Executive's death, to his spouse) by the Actuary. The actuarial assumptions used under the Plan to determine equivalencies between different forms and times of payment shall be the same as the actuarial assumptions then used in determining benefits payable under the CARP. The term "Actuary" shall mean the individual actuary or actuarial firm selected by Company to service its pension plans generally or if no such individual or firm has been selected, an individual actuary or actuarial firm appointed by Company and reasonably satisfactory to Executive and/or Executive's spouse. (viii) Medicare Payroll Taxes. Company shall indemnify Executive on a fully grossed-up, after-tax basis for any Medicare payroll taxes (plus any income taxes on such indemnity payments) incurred by Executive in connection with the accrual and/or payment of benefits under the Plan. 3.6 Additional Disability Benefit. If Executive shall begin to receive long-term disability insurance benefits pursuant to a plan maintained by Company and if such benefits cease prior to Executive's attainment of age 65 and while Executive remains disabled, then Company shall immediately pay Executive upon the cessation of such benefits a lump-sum, cash payment in an amount equal to the Termination Payment. If Executive receives payment of a Termination Payment pursuant to the provisions of Article 4, then the provisions of this paragraph 3.6 shall terminate. If Executive shall be disabled at the time his employment with Company terminates and if Executive shall not be entitled to the payment of a Termination Payment pursuant to the provisions of Article 4 upon such termination, then Executive's right to receive the payment upon the occurrence of the circumstances described in this paragraph 3.6 shall be deemed to have accrued as of the date of such termination and shall survive the termination of this Agreement. 3.7 Other Perquisites. During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment: (i) Automobile - Company will provide an automobile (including replacements therefor) of Executive's choice for Executive's use on the same terms as its current practices relating to the choice and use of automobiles by its Chief Executive Officer. If the automobile is leased, Company agrees to take such actions as may be necessary to permit Executive, at his option, to acquire title to any automobile subject to such a lease at the completion of the lease term by Executive paying the residual payment then owing under the lease. If Executive's employment terminates (other than as a result of the reasons encompassed by paragraphs 2.2 (iii) or (iv)), then Company (1) if the automobile is leased, will continue to make all payments under the lease and permit Executive (or Executive's estate, as applicable) to use the automobile during the remainder of such lease and will, at the conclusion of the lease, cause the title to the automobile to be transferred to Executive (or Executive's estate) without cost to Executive (or Executive's estate), or (2) if the automobile is owned by Company, transfer title to the automobile to Executive (or Executive's estate, as applicable), without cost to Executive (or Executive's estate). (ii) Business and Entertainment Expenses - Subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related purposes, including dues and fees to industry and professional organizations, costs of entertainment and business development, and costs reasonably incurred as a result of Executive's spouse accompanying Executive on business travel. Company shall also pay on behalf of Executive the expenses of one athletic club selected by Executive. (iii) Parking - Company shall provide at no expense to Executive a reserved parking place convenient to Executive's headquarters office and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice. (iv) Other Company Benefits - Executive and, to the extent applicable, Executive's family, dependents and beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly-situated Company employees. Such benefits, plans and programs may include, without limitation, profit sharing plan, thrift plan, annual physical examinations, health insurance or health care plan, life insurance, disability insurance, pension plan, pass privileges on Continental Airlines, Flight Benefits and the like. Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally; provided, however, that Company shall not change, amend or discontinue Executive =s Flight Benefits without his consent. ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION 4.1 By Expiration. If Executive's employment hereunder shall terminate upon expiration of the term provided in paragraph 2.1 hereof, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of his employment, except that (A) the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and (B) if such termination shall result from Company's delivery of the written notice described in paragraph 2.1, then Company shall (i) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days after such termination, (ii) cause all Awards made to Executive under Company's Officer Retention and Incentive Award Program ("Retention Program") to vest immediately upon such termination, (iii) cause Company to pay to Executive, at the same time as other Payment Amounts with respect to Awards are paid to other participants under Company's Long Term Incentive Performance Award Program ("LTIP"), all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of a Qualifying Event with respect to Executive in connection with a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (iv) pay Executive on or before the effective date of such termination a lump-sum, cash payment in an amount equal to the Termination Payment, (v) provide Executive with Outplacement, Office and Related Services (as such term is defined in paragraph 4.7 and for the time periods described therein), and (vi) pay any amounts owed but unpaid to Executive under any plan, policy or program of Company as of the date of termination at the time provided by, and in accordance with the terms of, such plan, policy or program. 4.2 By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, and: (i) if such termination shall be for any reason other than those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i); and (ii) if such termination shall be for a reason encompassed by paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days (or such longer period as provided for under the circumstances in applicable option awards) after such termination, (2) cause all Awards made to Executive under the Retention Program to vest immediately upon such termination, (3) cause Company to pay to Executive (or Executive's estate), at the same time as Payment Amounts with respect to Awards are paid to other participants under the LTIP, all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of Executive's death or Disability after a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (4) provide Executive (or his designated beneficiary or beneficiaries) with the benefits contemplated under paragraph 3.3 or paragraph 3.6, as applicable, and (5) perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i). 4.3 By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and, if such termination shall be pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1. 4.4 Certain Additional Payments by Company. Notwithstanding anything to the contrary in this Agreement, if any payment, distribution or provision of a benefit by Company to or for the benefit of Executive, whether paid or payable, distributed or distributable or provided or to be provided pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to an excise or other special additional tax that would not have been imposed absent such Payment (including, without limitation, any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended), or any interest or penalties with respect to such excise or other additional tax (such excise or other additional tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Taxes imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment (taking into account any similar gross-up payments to Executive under any stock incentive or other benefit plan or program of Company) equal to the Excise Tax imposed upon the Payments. Company and Executive shall make an initial determination as to whether a Gross-up Payment is required and the amount of any such Gross-up Payment. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company and Executive) within ten business days after the receipt of such claim. Company shall notify Executive in writing at least ten business days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with such action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim or Company determines not to contest such claim, then Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. 4.5 Payment Obligations Absolute. Company's obligation to pay Executive the amounts and to make the arrangements provided in this Article 4 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 Company (including its subsidiaries and affiliates) may have against him or anyone else. All amounts payable by Company shall be paid without notice or demand. Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Article 4, and, except as provided in paragraph 4.7 with respect to Continuation Coverage, the obtaining of any such other employment (or the engagement in any endeavor as an independent contractor, sole proprietor, partner, or joint venturer) shall in no event effect any reduction of Company's obligations to make (or cause to be made) the payments and arrangements required to be made under this Article 4. 4.6 Liquidated Damages. In light of the difficulties in estimating the damages upon termination of this Agreement, Company and Executive hereby agree that the payments and benefits, if any, to be received by Executive pursuant to this Article 4 shall be received by Executive as liquidated damages. Payment of the Termination Payment and the Existing Severance pursuant to paragraphs 4.1, 4.2 or 4.3 shall be in lieu of any severance benefit Executive may be entitled to under any severance plan or policy maintained by Company. 4.7 Certain Definitions and Additional Terms. As used herein, the following capitalized terms shall have the meanings assigned below: (i) "Continuation Coverage" shall mean the continued coverage of Executive and his eligible dependents under Company's welfare benefit plans available to executives of Company who have not terminated employment (or the provision of equivalent benefits), including, without limitation, medical, health, dental, life insurance, disability, vision care, accidental death and dismemberment, and prescription drug, at no greater cost to Executive than that applicable to a similarly situated Company executive who has not terminated employment; provided, however, that the coverage to Executive (or the receipt of equivalent benefits) shall be provided under one or more insurance policies so that reimbursement or payment of benefits to Executive thereunder shall not result in taxable income to Executive, and provided further that the coverage to Executive under a particular welfare benefit plan (or the receipt of equivalent benefits) shall be suspended during any period that Executive receives comparable benefits from a subsequent employer, and shall be reinstated upon Executive ceasing to so receive comparable benefits and notifying Company thereof; A Existing Severance@ shall mean the sum of five million sixty two thousand five hundred dollars ($5,062,500), which sum represents the severance payable to Executive upon termination of employment by him after a Change in Control (as defined in the Old Agreement) caused by the Acquisition under the Old Agreement; (iii) "Flight Benefits" shall mean flight benefits on each airline operated by the Company or any of its affiliates or any successor or successors thereto (the "CO system"), consisting of the highest priority space available flight passes for Executive and Executive's eligible family members (as such eligibility is in effect on May 18, 1999), a Universal Air Travel Plan (UATP) card (or, in the event of discontinuance of the UATP program, a similar charge card permitting the purchase of air travel through direct billing to the Company or any successor or successors thereto (a "Similar Card")) in Executive's name for charging on an annual basis up to the applicable Annual Travel Limit (as hereinafter defined) with respect to such year in value (valued identically to the calculation of imputed income resulting from such flight benefits described below) of flights (in any fare class) on the CO system for Executive, Executive's spouse, Executive's family and significant others as determined by Executive, Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive's spouse's names for use on the CO system, a membership for Executive and Executive's spouse in the Company's President's Club (or any successor program maintained in the CO system) and payment by the Company to Executive of an annual amount (not to exceed in any year the Annual Gross Up Limit (as hereinafter defined) with respect to such year) sufficient to pay, on an after tax basis (i.e., after the payment by Executive of all taxes on such amount), the U.S. federal, state and local income taxes on imputed income resulting from such flights (such imputed income to be calculated during the term of such Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare, or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law) or resulting from any other flight benefits extended to Executive as a result of Executive's service as an executive of the Company; "Outplacement, Office and Related Services" shall mean (1) outplacement services, at Company's cost and for a period of twelve months beginning on the date of Executive's termination of employment, to be rendered by an agency selected by Executive and approved by the Board of Directors (with such approval not to be unreasonably withheld), (2) appropriate and suitable office space at the Company =s headquarters (although not on its executive office floor) or at a comparable location in downtown Houston for use by Executive, together with appropriate and suitable secretarial assistance, at Company=s cost and for a period of ten years beginning on the date of Executive=s termination of employment, (3) a reserved parking place convenient to the office so provided and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice, at Company=s cost and for as long as Executive retains a residence in Houston, Texas, and (4) other incidental perquisites (such as free or discount air travel, car rental, phone or similar service cards) currently enjoyed by Executive as a result of his position, to the extent then available for use by Executive, for Executive=s lifetime or a shorter period if such perquisites become unavailable to the Company for use by Executive; and "Termination Payment" shall mean an amount equal to three times the sum of (1) Executive's annual base salary pursuant to paragraph 3.1 in effect immediately prior to Executive's termination of employment hereunder and (2) an amount equal to 125% of the amount described in the foregoing clause (1). As used for purposes of Flight Benefits, with respect to any year, the term "Annual Travel Limit" shall mean an amount (initially $50,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Company's average fare per revenue passenger for its jet operations (excluding regional jets) with respect to the applicable year as reported in its Annual Report on Form 10-K (or, if not so reported, as determined by the Company's independent auditors) (the "Average Fare") for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $50,000 annually (adjusted in accordance with clauses (i) and (ii) above) of flights relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in such flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Travel Limit would be increased by 15% to $57,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Travel Limit described in this paragraph. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Gross Up Limit" shall mean an amount (initially $10,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Average Fare for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $10,000 annually (adjusted in accordance with clauses (i) and (ii) above) of tax gross up relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Gross Up Limit would be increased by 15% to $11,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Gross Up Limit described in this paragraph. As used for purposes of Flight Benefits, a year may consist of twelve consecutive months other than a calendar year, it being the Company's practice as of May 18, 1999 for purposes of Flight Benefits for a year to commence on December 1 and end on the following November 30 (for example, the twelve-month period from December 1, 1998 to November 30, 1999 is considered the year 1999 for purposes of Flight Benefits); provided that all calculations for purposes of clause (i) in the prior two paragraphs shall be with respect to fiscal years of the Company. As used for purposes of Flight Benefits, the term "affiliates" of the Company means any entity controlled by, controlling, or under common control with the Company, it being understood that control of an entity shall require the direct or indirect ownership of a majority of the outstanding capital stock of such entity. No tickets issued on the CO system in connection with the Flight Benefits may be purchased other than directly from the Company or its successor or successors (i.e., no travel agent or other fee or commission based distributor may be used), nor may any such tickets be sold or transferred by Executive or any other person, nor may any such tickets be used by any person other than the person in whose name the ticket is issued. Executive agrees that, after receipt of an invoice or other accounting statement therefor, he will promptly (and in any event within 45 days after receipt of such invoice or other accounting statement) reimburse the Company for all charges on his UATP card (or Similar Card) which are not for flights on the CO system and which are not otherwise reimbursable to Executive under the provisions of paragraph 3.7(ii) hereof, or which are for tickets in excess of the applicable Annual Travel Limit. Executive agrees that the credit availability under Executive's UATP card (or Similar Card) may be suspended if Executive does not timely reimburse the Company as described in the foregoing sentence or if Executive exceeds the applicable Annual Travel Limit with respect to a year; provided, that, immediately upon the Company's receipt of Executive's reimbursement in full (or, in the case of exceeding the applicable Annual Travel Limit, beginning the next following year and after such reimbursement), the credit availability under Executive's UATP card (or Similar Card) will be restored. The sole cost to Executive of flights on the CO system pursuant to use of Executive's Flight Benefits will be the imputed income with respect to flights on the CO system charged on Executive's UATP card (or Similar Card), calculated throughout the term of Executive's Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law, and reported to Executive as required by applicable law. With respect to any period for which the Company is obligated to provide the tax gross up described above, Executive will provide to the Company, upon request, a calculation or other evidence of Executive's marginal tax rate sufficient to permit the Company to calculate accurately the amount to be paid to Executive. Executive will be issued a UATP card (or Similar Card), Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive spouse's names, a membership card in the Company's Presidents Club (or any successor program maintained in the CO system) for Executive and Executive's spouse, and an appropriate flight pass identification card, each valid at all times during the term of Executive's Flight Benefits. ARTICLE 5: MISCELLANEOUS 5.1 Interest and Indemnification. If any payment to Executive provided for in this Agreement is not made by Company when due, Company shall pay to Executive interest on the amount payable from the date that such payment should have been made until such payment is made, which interest shall be calculated at 3% plus the prime or base rate of interest announced by Chase Bank of Texas N.A. (or any successor thereto) at its principal office in Houston, Texas (but not in excess of the highest lawful rate), and such interest rate shall change when and as any such change in such prime or base rate shall be announced by such bank. If Executive shall obtain any money judgment or otherwise prevail with respect to any litigation brought by Executive or Company to enforce or interpret any provision contained herein, Company, to the fullest extent permitted by applicable law, hereby indemnifies Executive for his reasonable attorneys' fees and disbursements incurred in such litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay prejudgment interest on any money judgment obtained by Executive from the earliest date that payment to him should have been made under this Agreement until such judgment shall have been paid in full, which interest shall be calculated at the rate set forth in the preceding sentence. 5.2 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company to : Continental Airlines, Inc. 1600 Smith, Dept. HQSEO Houston, Texas 77002 Attention: General Counsel If to Executive to : Mr. Gordon M. Bethune 3340 Del Monte Houston, Texas 77019 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 5.3 Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. 5.4 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 5.5 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 5.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 5.7 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally. 5.8 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 5.9 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. 5.10 Successors. This Agreement shall be binding upon and inure to the benefit of Company and any successor of the Company, including without limitation any person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Except as provided in the preceding sentence or in paragraph 3.3 (regarding assignment of life insurance benefits), this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. 5.11 Term. This Agreement has a term co-extensive with the term of employment as set forth in paragraph 2.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to or upon such termination. 5.12 Entire Agreement. Except as provided in (i) the benefits, plans, and programs referenced in paragraph 3.7(iv) and any awards under the Company's stock incentive plans or programs, LTIP, Retention Program, Executive Bonus Performance Award Program or similar plans or programs, and (ii) separate agreements governing Executive's flight benefits relating to other airlines, this Agreement, as of the Effective Date, will constitute the entire agreement of the parties with regard to the subject matter hereof, and will contain all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Effective as of the Effective Date, the Existing Agreement is hereby terminated and without any further force or effect. Any modification of this Agreement shall be effective only if it is in writing and signed by the party to be charged. 5.13 Deemed Resignations. Any termination of Executive's employment shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, and an automatic resignation of Executive from the Board of Directors and from the board of directors of any affiliate of Company, and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company's or such affiliate's designee or other representative. 5.14 Executive Bonus Program and certain Change in Control Matters. Executive agrees that the payment to Executive of the Existing Severance hereunder will not be deemed to be Ain connection with circumstances which would permit such Participant to receive severance benefits pursuant to any contract of employment between such Participant and the Company or any of its subsidiaries@ within the meaning of clause (d) of the last sentence of Section 7 of the Company=s Executive Bonus Performance Award Program, as in effect on the date hereof. Executive agrees that any recapitalization, conversion, reclassification or similar transaction involving Class A common stock of Company owned by Northwest Airlines Corporation or its affiliates, or any acquisition by Company of Class A common stock owned by Northwest Airlines Corporation or its affiliates (whether or not involving other outstanding shares of Class A common stock), which results in a person who is an Institutional Investor (as defined in that certain Rights Agreement dated November 20, 1998, as amended by First Amendment to Rights Agreement dated as of February 8, 2000, between Company and Harris Trust and Savings Bank, as in effect on the date hereof) as of the date hereof and as of the date of any such recapitalization, conversion, reclassification, acquisition or similar transaction being or becoming the beneficial owner of securities of Company sufficient to otherwise trigger a Change in Control pursuant to clause (aa) of Section 12 (c) of Company's Incentive Plan 2000, as in effect on the date hereof, shall not constitute a Change in Control for purposes of this Agreement, or for purposes of Company's stock incentive plans or programs, Long Term Incentive Performance Award Program, Officer Retention and Incentive Award Program, Executive Bonus Performance Award Program or similar plans or programs.   *******       IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.   CONTINENTAL AIRLINES, INC.     By: Name: Jeffery A. Smisek Title: Executive Vice President "EXECUTIVE"     GORDON M. BETHUNE     APPROVED:   _______________________________ Thomas J. Barrack, Jr. Chair, Human Resources Committee
Exhibit 10-39   ENERGY EAST CORPORATION DEFERRED COMPENSATION PLAN - DIRECTOR SHARE PLAN   1.     Establishment and Effective Date of the Plan.         Energy East Corporation (hereinafter called "Energy East") hereby establishes a deferred compensation plan (hereinafter called the "Plan") and is the Plan Sponsor. The Plan will permit directors of Energy East who participate in the Director Share Plan (the "Share Plan") and who elect to participate herein to defer receipt of payments that otherwise would be due at the time specified in Article VII.B of the Share Plan. The Plan is effective September 6, 2000, and will continue in effect from year to year thereafter unless previously terminated or modified by Energy East. Any capitalized term that is used herein and not defined herein shall have the meaning given to it in the Share Plan. 2.     Participation and Election by a Director.         All directors of Energy East who participate in the Share Plan are entitled to participate in the Plan. Election to participate in the Plan shall be evidenced by the execution and delivery of a deferred compensation agreement (the "Agreement") in the form attached hereto.         Except as otherwise provided herein, any executed Agreement that covers quarterly grants of Phantom Shares (and related Dividend Phantom Shares) must be delivered to Energy East prior to the later of (i) January 1st of the calendar year in which the grants are to be made and (ii) the 31st day following the day during such calendar year that the director becomes a participant in the Share Plan in his capacity solely as an Energy East Director. A Director of Energy East who (i) commences service as a Director of Energy East (or first becomes eligible to receive grants of Phantom Shares as a Director of Energy East) during a calendar year, (ii) immediately before commencing such service (or becoming eligible for grants of Phantom Shares) served as a director of New York State Electric & Gas Corporation ("NYSEG"), and (iii) was participating in a comparable deferred compensation plan of NYSEG shall be deemed, as appropriate, to have elected, prior to January 1 of that calendar year, to participate in this Plan on terms comparable to the terms under which he participated in the deferred compensation plan of NYSEG. 3.     Plan Administrator.         The Plan Administrator is Energy East. 4.     Continuing Effectiveness of Elections.         Once a director has made an election to defer amounts due with respect to the quarterly grants of Phantom Shares (and related Dividend Phantom Shares), the deferral election shall apply to amounts that are received with respect to all quarterly grants of Phantom Shares (and related Divided Phantom Shares) that are attributable to service on or after the date specified in the Agreement. However, a director may elect to terminate deferral by executing and delivering to Energy East a Notice of Termination of Election (a "Notice"), in which event the deferral election shall not apply to amounts that are received with respect to any quarterly grants of Phantom Shares (and related Dividend Phantom Shares) that are made in a calendar year that commences after the delivery to Energy East of the Notice. Such a director may re-elect to have deferral apply by executing and delivering to Energy East a new Agreement, in which case deferral shall be applicable to amounts attributable to quarterly grants of Phantom Shares (and related Dividend Phantom Shares) that are made in calendar years that commence subsequent to the calendar year in which the new Agreement is executed and delivered to Energy East. 5.     Payment of Amounts Deferred.         After the date the director ceases to serve as a director of Energy East for any reason ("Service Termination Date"), the accumulated amount deferred by a director, with interest thereon from the tenth day of the calendar month next following the calendar month in which the Service Termination Date occurs, shall be paid to the director in a lump sum or in up to ten yearly installments that are in such percentages as the director shall have selected. Such election must be made at the time that the director elects for the first time to participate in the Plan. A director may change, but only with Energy East's consent, his election of payment terms by executing and delivering to Energy East a new payment terms election. However, no such change shall be effective during the one-year period beginning with the day the director executes a new payment terms election. If, during such one-year period, the director becomes entitled to receive a payment or payments under the Plan pursuant to the director's last effective payment terms election, said last effective payment terms election shall remain in full force and effect and the new election shall be null and void. Only one payment terms election shall be effective for a director at any time. 6.     Other Provisions.         Energy East reserves the right to terminate or modify the Plan by action of the Board of Directors of Energy East. Any such termination or modification shall not affect rights previously accrued. A director's rights and benefits under the Plan may not be assigned, pledged or encumbered by the director or the estate or beneficiary of the director. 7.     Funding.         There shall be no funding of any amounts to be paid pursuant to this Plan; provided, however, that Energy East, in its discretion, may establish a trust to pay such amounts, which trust shall be subject to the claims of Energy East's creditors in the event of Energy East's bankruptcy or insolvency; and provided, further, that Energy East shall remain responsible for the payment of any such amounts which are not so paid by any such trust. A director shall have the status of a general unsecured creditor of Energy East with respect to such payments, and a director's rights to the payments shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the director or the director's beneficiary.             (As Amended and Restated Effective September 6, 2000) ENERGY EAST CORPORATION DEFERRED COMPENSATION AGREEMENT - DIRECTOR SHARE PLAN (Article VI. Quarterly Grants)                       AGREEMENT made ____________________, between Energy East Corporation, (hereinafter called the "Company") and __________________________ residing at __________ _________________________ (hereinafter called the "Director").                     WITNESSETH that, in consideration of the mutual covenants, and promises herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:                     1.      With respect to the quarterly grants of Phantom Shares pursuant to Article VI of the Company's Director Share Plan and related Dividend Phantom Shares (as defined in said plan) (such quarterly grants are referred to herein as "Article VI Grants" and said plan is referred to herein as the "Share Plan") for service on or after _______ __, ____, the Company shall defer hereunder the payment that otherwise would be due at the time specified in Article VII.B of the Share Plan, it being understood that the Director may elect, by delivering, not less than 10 days prior to January 1 of any year, a Notice of Termination of Election to the Company, to have deferral cease with respect to Article VI Grants received in that, or any subsequent, calendar year.                     2.      Any amounts deferred hereunder, together with amounts equal to the prime interest rate from time to time established by The Chase Manhattan Bank, N.A., or successor-in-interest, on short-term borrowings and compounded semi-annually on the aggregate of amounts theretofore deferred hereunder, shall be paid to the Director, or the beneficiary designated by the Director in the event of the Director's death, in a lump sum within one year or in installments over a period of ______ years (in the percentages and at the times specified in the tabulation annexed hereto) following the date the Director ceases to serve as a director of the Company ("Service Termination Date"). The period and amounts of such payments may be changed only in accordance with the provisions of Section 5 hereof. On or shortly after January 1 of each year that commences after the Service Termination Date the Director ceases to serve as a director of the Company, the Company shall furnish the Director with a statement showing the aggregate amount deferred hereunder and the accumulated interest thereon.                     3.      In the event of the Director's death, the total accumulated amount deferred hereunder and interest thereon, or any remaining balance, shall be paid as herein provided, or over any remaining balance of the period selected, to _________ the designated beneficiary, or if such designated beneficiary shall predecease the Director, to the Director's estate. If such designated beneficiary shall survive the Director and die thereafter, any such remaining balance shall be paid over the remainder of the period selected by the Director to the estate of such designated beneficiary.                     4.      This agreement, and the Director's rights or interests herein and to amounts deferred hereunder, shall not be assigned, pledged or otherwise encumbered by the Director, or by the beneficiary or estate of the Director.                     5.      The Director may change, but only with the Company's consent, the Director's election of payment terms by executing and delivering to the Company a new payment terms election. However, no such change shall be effective during the one-year period beginning on the day the Director executes the new payment terms election. If, during such one-year period, the Director becomes entitled to receive a payment or payments under the Plan pursuant to the Director's last effective payment terms election, said last effective payment terms election shall remain in full force and effect and the new election shall be null and void.                     6.     The Company reserves the right, upon written notice to the Director, to terminate this agreement as of January 1 of any year pursuant to action theretofore taken by the Company's Board of Directors; provided that such termination shall not affect the right of the Director, or the designated beneficiary or estate of the Director to receive payment of the total accumulated amount theretofore deferred.                     7.      Any notice given under this agreement must be given by certified or registered mail to the respective party at the address set forth herein, or such substituted address as may be designated in any notice sent in accordance with this provision. The address for the Company is: Corporate Secretary Energy East Corporation P.O. Box 12904 Albany, New York  12212-2904                     8. This agreement is made pursuant to the Deferred Compensation Plan - Director Share Plan maintained by the Company, a copy of which has been delivered to the Director prior to the execution hereof and which is on file at the Company's corporate offices in Binghamton, New York.                     IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed as of the day and year first above written.   ENERGY EAST CORPORATION By:                                                                 (Title)                                                                       Director                 ENERGY EAST CORPORATION Deferred Compensation Plan - Director Share Plan Pay-back Schedule Initial Election I, _________________________, request that, beginning the ____________ month                                                                                                       (1st - 12th) immediately following the date of my ceasing to serve on the Board of Directors of Energy East Corporation, I be paid [monthly/quarterly/annually] for __________ year(s) the following yearly                                                      (circle one)                      (1 - 10) percentages: lst year ___________% 6th year __________% 2nd year __________% 7th year __________% 3rd year __________% 8th year __________% 4th year __________% 9th year __________% 5th year __________% 10th year __________%           This initial election is, and will be, effective with respect to all Deferred Compensation Agreements under the Deferred Compensation Plan - Director Share Plan of Energy East Corporation.                                                                           Director Date                                             ENERGY EAST CORPORATION Deferred Compensation Plan - Director Share Plan Pay-back Schedule Change in Election I, _________________________, request that, beginning the ____________ month                                                                                                        (1st - 12th) immediately following the date of my ceasing to serve on the Board of Directors of Energy East Corporation, I be paid [monthly/quarterly/annually] for ________ year(s) the following yearly                                                    (circle one)                        (1 - 10) percentages: lst year ___________% 6th year __________% 2nd year __________% 7th year __________% 3rd year __________% 8th year __________% 4th year __________% 9th year __________% 5th year __________% 10th year __________%           This change in payment election is, and will be, effective with respect to all Deferred Compensation Agreements under the Deferred Compensation Plan - Director Share Plan of Energy East Corporation and is made pursuant to Section 5 of any such agreements.                                                                       Director Date                                 Accepted by Energy East Corporation:                                                                      Vice President Date                                               CHANGE OF BENEFICIARY FORM (Deferred Compensation Plan - Director Share Plan)      I hereby designate                                            as beneficiary under all of my Deferred Compensation Agreements under the Deferred Compensation Plan - Director Share Plan of Energy East Corporation, superseding all beneficiary designation(s) previously made by me.                                                                       Director Date                                   Receipt Acknowledged by Energy East Corporation:                                                                      Vice President Date                                  
Exhibit 10.68   AMENDMENT NO. 2 TO AMENDED, RESTATED AND CONSOLIDATED MASTER LEASE OF LAND AND IMPROVEMENTS      THIS AMENDMENT NO. 2 TO AMENDED, RESTATED AND CONSOLIDATED MASTER LEASE OF LAND AND IMPROVEMENTS (this “Amendment”), dated as of August 9, 2000, is entered into by and between:                 (1)     ADOBE SYSTEMS INCORPORATED, a Delaware corporation (“Tenant”); and                 (2)     SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation (“Landlord”). RECITALS      A.     Tenant and Landlord are parties to that certain Amended, Restated and Consolidated Master Lease of Land and Improvements, dated as of August 11, 1999, as amended by Amendment No. 1 dated as of October 8, 1999 (the “Lease”).      B.     In connection with the Lease, Landlord entered into a Participation Agreement, dated as of August 11, 1999, with Tenant, certain financial institutions from time to time parties thereto (the “ Rent Purchasers”) and ABN AMRO Bank N.V., as agent for the Rent Purchasers (in such capacity, “Administrative Agent”), and a Rent Purchase Agreement, dated as of August 11, 1999, with the Rent Purchasers and Administrative Agent, pursuant to which the Rent Purchasers purchased an interest in the Lease from Landlord.      C.     Tenant has requested that the indebtedness covenant in the Lease be amended and Landlord is willing so to amend the Lease upon the terms and subject to the conditions set forth in this Amendment. AGREEMENT      NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Tenant and Landlord hereby agree as follows:       1.      Definitions, Interpretation. All capitalized terms defined above and elsewhere in this Amendment shall be used herein as so defined. Unless otherwise defined herein, all other capitalized terms used herein shall have the respective meanings given to those terms Appendix A to the Lease. The rules of construction set forth in Appendix A to the Lease shall, to the extent not inconsistent with the terms of this Amendment, apply to this Amendment and are hereby incorporated by reference. --------------------------------------------------------------------------------      2.      Amendment to Lease. Subject to the satisfaction of the conditions set forth in Paragraph 4 below, the Lease is hereby amended as follows:               (a)     Clause (iii) of Section 7.1(b) of the Lease is amended and restated in its entirety as follows:                        (iii)     The initial and each subsequent Rental Period selected by Tenant for each Portion shall be one (1),               two (2), three (3), six (6), nine (9) or twelve months; provided, however, that (A) no Rental Period shall end               after the Expiration Date; (B) no Rental Period shall be longer than one (1) month if a Default has occurred and               is continuing at the time the Notice of Rental Period Selection is required to be delivered in accordance with               this  Section 7.1(b); and (C) each Rental Period for which Tenant fails to make a selection by delivering a               Notice of Rental Period Selection in accordance with Section 7.1(b) shall be one (1) month.               (b)     Clause (x) of Section 21.21(a) of the Lease is relettered clause (xi) and a new clause (x) is added to      Section 21.21(a) as follows:                        “(x)     Indebtedness of Tenant under a credit agreement, dated as of August 9, 2000, among Tenant, the               financial institutions from time to time parties thereto as lenders, and ABN AMRO Bank N.V. as administrative                agent for such lenders, providing for a revolving credit facility convertible into term loans in a maximum                aggregate principal amount not to exceed $100,000,000, and any initial or successive refinancings of such                Indebtedness provided that (A) the principal amount of any such refinancing does not exceed $100,000,000               and (B) the material terms and provisions of such refinancing (including maturity, prepayment and default                provisions) are no less favorable to Landlord, the Rent Purchasers and Administrative Agent than the               Indebtedness being refinanced; and”               (c)     Item 1 of Exhibit F to the Lease is amended and restated in its entirety as follows:               “1.     Credit Agreement, dated as of August 11, 1999, among Tenant, as Borrower, certain financial institutions                         from time to time parties thereto, as Lenders, and ABN AMRO Bank N.V., as Administrative Agent,                         providing credit facilities in the aggregate principal amount of $100,000,000”      3.      Representations and Warranties. Tenant hereby represents and warrants to Landlord, the Rent Purchasers and Administrative Agent that the following are true and correct on the date of this Amendment and that, after giving effect to the amendments set forth in Paragraph 2 above, the following will be true and correct on the Effective Date (as defined below): 2 --------------------------------------------------------------------------------               (a)     The representations and warranties of Tenant set forth in Section 21.18 of the Lease and in the other Operative Documents are true and correct in all material respects as if made on such date (except for representations  and warranties expressly made as of a specified date, which shall be true as of such date); and               (b)     No Default has occurred and is continuing. (Without limiting the scope of the term “Operative Documents,” Tenant expressly acknowledges in making the representations and warranties set forth in this Paragraph 3 that, on and after the date hereof, such term includes this Amendment.)      4.      Effective Date. The amendments effected by Paragraph 2 above shall become effective on August 9, 2000 (the “Effective Date”), subject to receipt by Landlord and Administrative Agent on or prior to the Effective Date of the following, each in form and substance satisfactory to Landlord and Administrative Agent and their respective counsel:               (a)     The Consent to Amendment duly executed by Majority Rent Purchasers;               (b)     This Amendment duly executed by Tenant and Landlord; and               (c)     Such other evidence as Landlord or Administrative Agent may reasonably request to establish the accuracy and completeness in all material respects of the representations and warranties and the compliance with the terms and conditions contained in this Amendment and the other Operative Documents.      5.      Effect of this Amendment. On and after the Effective Date, each reference in the Lease and the other Operative Documents to the Lease shall mean the Lease as amended hereby. Except as specifically amended above, (a) the Lease and the other Operative Documents shall remain in full force and effect and are hereby ratified and affirmed and (b) the execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power, or remedy of Landlord, the Rent Purchasers or Administrative Agent, nor constitute a waiver of any provision of the Lease or any other Operative Document.      6.      Miscellaneous.               (a)     Counterparts. This Amendment may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes.               (b)     Headings. Headings in this Amendment are for convenience of reference only and are not part of the  substance hereof.              (c)     Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. [Signature pages follow] 3 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, Tenant and Landlord have caused this Amendment to be executed as of the day and year first above written.   TENANT:   ADOBE SYSTEMS INCORPORATED     By: /s/ MURRAY J. DEMO -------------------------------------------------------------------------------- Name: Murray J. Demo -------------------------------------------------------------------------------- Title: Sr. Vice President & CFO --------------------------------------------------------------------------------   LANDLORD:   SUMITOMO BANK LEASING AND FINANCE, INC.     By: /s/ WILLIAM M. GINN -------------------------------------------------------------------------------- Name: William M. Ginn -------------------------------------------------------------------------------- Title: Chairman and CEO --------------------------------------------------------------------------------   5 --------------------------------------------------------------------------------
EXHIBIT 10.24 ASSET PURCHASE AGREEMENT AGREEMENT made as of the 13 day of October, 2000, by and between WPI Instruments, Inc., a New Hampshire business corporation located at 850 Perimeter Road, Manchester, New Hampshire 03103 ("WPI Instruments"), WPI Magnetec, Inc., a New Hampshire business corporation located at 850 Perimeter Road, Manchester, New Hampshire 03103 ("WPI Magnetec"), and Crompton Modutec (Barbados) Limited a Barbados corporation with a principal place of business at Newton Industrial Park, Christ Church, Barbados (the "Barbados Subsidiary") (WPI Instruments, WPI Magnetec and the Barbados Subsidiary are collectively referred to herein as "Sellers"), and Jewell Instruments, LLC, a Delaware limited liability company located at 850 Perimeter Road, Manchester, New Hampshire 03103 ("Buyer"). WHEREAS, Sellers are engaged in the business of manufacturing and distributing, inter alia, panel meters, avionics components, inertial sensors and precision solenoids (hereinafter the "Business") presently conducted at the real properties located at 850 Perimeter Road, Manchester, New Hampshire, 114 Allard Drive, Manchester, New Hampshire, and at Newton Industrial Estate, Christ Church, Barbados; and WHEREAS, Sellers desire to sell and Buyer desires to acquire the Business and substantially all of its assets, together with the liabilities thereof, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in order to consummate said purchase and sale and in consideration of the mutual agreements set forth herein, the parties hereby agree as follows: 1. PURCHASE AND SALE OF ASSETS 1.1 Assets to be Acquired. On the date hereof (the "Closing"), Sellers have sold, transferred and delivered to Buyer, free and clear of any liens or other encumbrances (except Permitted Encumbrances, as hereafter defined in Section 1.3), Sellers' Business and all the assets, inventories and properties of Sellers, tangible and intangible, and all of Sellers' goodwill and the exclusive right to the use of the name of each Seller as all or part of a trade or corporate name, but excluding each Seller's corporate entity and its minute and stock record books, related corporate records, tax returns, and the assets identified in Section 1.2. The foregoing assets and properties are hereinafter referred to collectively as the "Acquired Assets." The Acquired Assets shall consist of (i) those assets reflected on each Seller's fixed asset and equipment listing, a copy of each such listing being attached as Exhibit A hereto, together with (ii) such other assets of Sellers relating exclusively to the Business not reflected on said asset and equipment listing and not otherwise herein excluded. Subject to the foregoing, the Acquired Assets shall include, but not be limited to, the following assets owned by Sellers on the date of Closing (the "Closing Date"): A. All inventory, including work in progress and spare parts ("Inventory"); B. All furniture, fixtures, and equipment; C. All real estate leases, supplier contracts, vendor contracts, customer contracts, purchase orders, and other commitments and agreements related to the Business (collectively, "Contracts"); D. All rights to the trade names (including a license to use the name "WPI Magnetec"), trademarks, domain names, patents and other intellectual property rights (including any trade secrets or other confidential information) used exclusively in the Business (including but not limited to the intellectual property set forth on Schedule 2.10 hereof); E. All rights to promotional materials; and F. All customer lists and other business records, and all transferable licenses, permits, restrictive covenants, contract rights, claims and other rights related to the Business. Failure to specify any of the Acquired Assets in the foregoing subsections shall not affect or impair Sellers' obligation to convey, or Buyer's right to acquire, the same hereunder. 1.2 Items Not Included in Assets to be Acquired. The Acquired Assets shall not include cash on hand and notes receivable of Sellers. 1.3 Assumption of Liabilities by Buyer. The Buyer expressly agrees to assume and agrees to discharge in the ordinary course of business the liabilities, obligations and expenses relating to the Business which are set forth on Schedule 1.3 attached hereto, including but not limited to all warranty obligations and all obligations under the Contracts (collectively, the "Permitted Encumbrances"). The Acquired Assets shall not include, and the Buyer shall not be deemed to have assumed, the following liabilities: (i) Liabilities incurred by Sellers in connection with the operation of the Business prior to the Closing (including inter-company loans), except as expressly set forth in Schedule 1.3(i) attached hereto; (ii) Liabilities incurred by Sellers in connection with this Agreement and the transactions provided for herein, including, without limitation, counsel and accountant's fees; (iii) Taxes incurred by the Sellers, whether due prior to or subsequent to the Closing, and whether or not arising in the ordinary course of the Sellers' Business; and (iv) Liabilities in connection with or relating to all actions, suits, claims, proceedings, demands, losses, liabilities, damages, deficiencies and expenses (whether or not arising out of third party claims) arising prior to the Closing. The assumption of the liabilities relating to the Permitted Encumbrances by the Buyer hereunder shall not enlarge any rights of third parties under Contracts with the Sellers, and nothing contained herein shall prevent the Buyer from contesting in good faith any third party liabilities relating to the Permitted Encumbrances. 1.4 Purchase Price and Payment. (a) The purchase price paid by the Buyer hereunder shall be $9,635,916 (the "Base Purchase Price"), adjusted in accordance with the provisions of Subsections 1.4(c) and (d) below (as so adjusted, the "Final Purchase Price"). (b) At the Closing, Buyer will deliver to the Sellers a Promissory Note in the principal face amount of One Million Dollars ($1,000,000), to be in the form attached hereto as Exhibit B (the "Note"). Payments under the Note shall be based on a six (6) year amortization schedule commencing on the first day of the fourteenth (14th) month after the date thereof. During the first thirteen (13) months of the term of the Note, no payments shall be made under the Note and interest shall accrue on the unpaid balance at the annual rate of twelve (12%) percent. In the thirteenth (13th) month of such term, Sellers shall be entitled to a lump sum payment of all the interest then accrued. From and after the thirteenth (13th) month until the final payment is made on the Maturity Date (as defined in the Note), interest shall accrue at a yearly rate of nine percent (9%). In addition, regular payments of principal and interest under the Note will commence in the fourteenth (14th) month and shall be made monthly thereafter with a final balloon payment due on the Maturity Date which shall be the fourth anniversary date of the Note. The Note shall be secured by a lien on the Acquired Assets and Buyer hereby grants a security interest in and to the Acquired Assets to Sellers, subject and subordinate to a first lien on the Acquired Assets granted by Buyer to its senior institutional lender. (c) The Base Purchase Price shall be adjusted on a dollar-for-dollar basis to reflect any change in the value of certain assets of the Sellers as of the Closing Date as set forth below: (i) To the extent that accounts receivable net of bad debt reserves are greater than or less than $3,287,519 (the bad debt reserves as of the Closing Date will be $62,500); (ii) To the extent that prepaid assets of the Sellers are greater than or less than $94,408; and (iii) To the extent that deposits of Sellers are greater than or less than $75,300. (d) The Base Purchase Price shall be reduced in an amount equal to the value on the Closing Date of: (i) All trade payables of the Sellers assumed by the Buyer at the Closing; (ii) Deferred rent expenses, equipment loans, and capital leases reflected on the balance sheet of the Sellers; (iii) Any amounts accrued prior to the Closing Date in respect of utilities, wages (and other similar obligations of the Sellers, to the extent assumed and not otherwise paid at the Closing by Buyer) and rent, and any other operating expenses of the Sellers, including those items described in Schedule 1.4(d) hereto ("Accrued Expenses"), to the extent that such items are not paid with funds provided by Sellers; provided, however, that no reduction shall be made for Accrued Expenses which relate to the operation of the Business after the Closing. 1.5 Post-Closing Adjustments. (a) The Buyer shall have one hundred and twenty (120) days after the Closing Date (the "Adjustment Period") to make any claims for adjustments to the Final Purchase Price based upon the final determination of the adjustments set forth in Subsections 1.4(c) and (d) above. Buyer shall deliver to Sellers, prior to the termination of the Adjustment Period, an accounting by Buyer for all items except Inventory ("Adjustment Items") set forth in said Subsections at the Closing (the AAccounting@). Seller shall have thirty (30) days from the date of receipt of the Accounting to contest any of the amounts set forth therein. If the parties are unable to agree on the Accounting by the end of this thirty (30) day period, a neutral accountant shall be selected by the parties, whose determination shall be binding upon Buyer and Sellers. Failure of Buyer to deliver the Accounting to Seller prior to the end of the Adjustment Period, or to include within such Accounting any Adjustment Items, shall constitute final acceptance by Buyer of all adjustments made at Closing. (b) Buyer and Sellers agree that the value of the Inventory as of the Closing is $5,500,000, and that such value shall not be adjusted post-Closing. (c) If during the Adjustment Period, Buyer has any claims against Sellers arising under this Agreement or any ancillary document, Buyer shall first satisfy such claims by setoff against the Note following notice to Sellers of the amount and basis for such claim (a "Claim Notice"). If the Buyer shall not within thirty (30) days after forwarding a Claim Notice to Sellers, receive a written objection (a "Claim Objection") to such Claim Notice signed by all Sellers or their legal representatives, the Buyer shall reduce the outstanding principal amount of the Note by an amount equal to the claim amount contained in such Claim Notice. The interest accrual shall be reduced accordingly from and after the date of the Claim Notice. If the Sellers shall timely serve the Buyer with a Claim Objection, Buyer shall hold the claim amount in abeyance pending resolution (whether before or after expiration of the Adjustment Period) of such claim, whether by written agreement of the parties or by a final judgment of a court of competent jurisdiction, and the accrual of interest and payments due and owing under the Note shall continue as if no Claim Notice was filed. If the resolution results in the upholding in whole or in part the Buyer's Claim Notice then the interest accruals and the monthly payments due under the Note shall be adjusted accordingly and any resulting credits due the Buyer for over accrual of interest or excess payments of principal shall be taken dollar for dollar against the next monthly installments due under the Note. 1.6 [Reserved.] 1.7 Note Adjustments. Payments due under the Note shall be reduced, on a dollar for dollar basis, to take into account any of the following: (a) Any adjustment to the Final Purchase Price required by Section 1.5 above; and (b) Any amount due to the Buyer under Section 7.1, Indemnification by Sellers. 1.8 Time and Place of Closing. The Closing shall be deemed to be held on the date first above written, and shall be held at the office of counsel for the Buyer (Sherin and Lodgen LLP, 100 Summer Street, Boston, MA 02110) or at such other place as may be fixed by mutual agreement of Buyer and Sellers. Upon Closing, the risk of loss shall be deemed to pass to the Buyer, and the Buyer shall have rights to all income and profits earned after said date. 1.9 Transfer of Acquired Assets. At the Closing, Sellers shall deliver or cause to be delivered to Buyer good and sufficient instruments of transfer which ratify and confirm the transfer to Buyer made herein of title to all the Acquired Assets. Such instruments of transfer (a) shall be in the form and will contain the warranties, covenants and other provisions (not inconsistent with the provisions hereof) which are usual and customary for transferring the type of property involved under the laws of the jurisdictions applicable to such transfers, (b) shall be in form and substance satisfactory to Buyer and its counsel, and (c) shall effectively vest in Buyer good and marketable title to all the Acquired Assets free and clear of all liens, restrictions and encumbrances except for the Permitted Encumbrances. 1.10 Assignment of Permitted Encumbrances. At the Closing, Sellers shall assign to Buyer, and Buyer shall ratify and confirm its assumption of the Permitted Encumbrances. Where necessary, the consent of the party holding any such lien or encumbrance shall be provided in writing in a form satisfactory to Buyer's counsel at the Closing. 1.11 Delivery of Records and Contracts. At the Closing, Sellers shall deliver or cause to be delivered to Buyer all of Sellers' Contracts (including without limitation non- competition agreements), with such assignments thereof and consents to assignments as are necessary to assure Buyer of the full benefit of the same. At the Closing, Sellers will deliver to Buyer Sellers' Business records, books and other data relating to the assets and operations of the Business (except corporate records and other property of Sellers excluded under Section 1.1), and Sellers shall take all requisite steps to put Buyer in actual possession and operating control of the assets and Business of Sellers. Thereafter, Buyer shall afford to Sellers and their accountants and attorneys reasonable access to the books and records of Sellers delivered to Buyer under this Section and shall permit Sellers, at Sellers' expense, to make extracts and copies therefrom, for the purposes of (i) preparing such tax returns of Sellers or Sellers' stockholders as may be required after the Closing, (ii) preparing financial statements of Sellers, and (iii) responding to any government or administrative inquiries, investigations or audits of Sellers or Sellers' stockholders. Buyer shall retain the books and records of Sellers delivered to Buyer under this Section for a period of three (3) years after the Closing. 1.12 Further Assurances. Sellers from time to time after the Closing at the request of Buyer and without further consideration, shall execute and deliver such further instruments of transfer and assignment and shall take such other action as Buyer may reasonably request to more effectively transfer and assign to, and vest in, Buyer each of the Acquired Assets. Sellers shall cooperate with Buyer to permit Buyer to enjoy Sellers' rating and benefits under the workers compensation laws and unemployment compensation laws of applicable jurisdictions, to the extent permitted by such laws. Nothing herein shall be deemed a waiver by Buyer of its right to receive at the Closing an effective assignment of each of the leases, contracts, commitments or rights of Sellers as otherwise set forth in this Agreement. 1.13 Allocation of Purchase Price. The allocation of the Base Purchase Price shall be as follows: Instruments Magnetec Barbados Combined Inventory $ 4,408,902.00 $ 307,746.00 $ 783,352.00 $ 5,500,000.00 Accounts Receivable $ 3,175,190.00 $ 112,329.00 $ 3,287,519.00 Equipment --- --- --- Fixed Assets $ 506,748.00 $ 85,993.00 $ 85,948.00 $ 678,689.00 Intellectual Property --- --- --- Deposits and other Prepaid Items $ --- $ $ 169,708.00 Total $ 7,551,183.00 $ 506,068.00 $ 887,389.00 $ 9,635,916.00 To the extent permitted by law, Sellers and Buyer hereby covenant and agree that they will not take any position on any income tax return or before any governmental agency charged with the collection of any tax, or in any judicial proceeding relating hereto, that is in any way inconsistent with the allocations agreed upon pursuant to this Section. Buyer and Sellers also each agree to file I.R.S. Form 8594 consistently with the foregoing. 1.14 Sales and Transfer Taxes. All sales and transfer taxes, fees and duties under applicable law incurred in connection with this Agreement or the transactions contemplated hereby will be borne and paid by the party obligated by law to pay such taxes, fees or duties. 1.15 Financial Statements. Until the Note is paid in full, Buyer shall deliver to Sellers the same financial information within the same time period required by Buyer's senior secured lender, such documents to include: (i) annual audited consolidated and consolidating financial statements; (ii) quarterly interim consolidated and consolidating financial statements; (iii) monthly accounts receivable aging reports; (iv) monthly inventory reports; and (v) copies of such other documents as the Sellers may reasonably request from time to time. 2. REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers represent and warrant as follows: 2.1 Organization and Qualification of Seller. WPI Instruments and WPI Magnetec are each corporations duly organized, validly existing, and in good standing under the laws of the State of New Hampshire and with full power and authority to own or lease its assets and to conduct its business in the places where such business is currently conducted. Neither WPI Instruments nor WPI Magnetec is required to be licensed or qualified to conduct its business in any other jurisdiction. The Barbados Subsidiary is a corporation duly organized, validly existing, and in good standing under the laws of Barbados and with full power and authority to own or lease its assets and to conduct its business in the places where such business is currently conducted. The Barbados Subsidiary is not required to be licensed or qualified to conduct its business in any other jurisdiction. 2.2 Subsidiaries; Equity Ownership. Other than as set forth on Schedule 2.2 hereof, Sellers have no subsidiaries, nor do they own any securities issued by any other business organization or governmental authority except U.S. Government Securities, bank certificates of deposit and money market accounts acquired as short term investments in the ordinary course of its business. Sellers do not own or have any direct or indirect interest in or control over any corporation, partnership, joint ventures or entity of any kind, except as set forth in Schedule 2.2. 2.3 Authorized Stock. The authorized, issued, and outstanding shares of capital stock of each Seller are as set forth on the Secretaries' Certificates attached hereto as Schedule 2.3. The current officers and directors of each Seller are also set forth on Schedule 2.3. The shares of each Seller's stock are validly authorized and issued, fully paid and nonassessable and free and clear of all liens, claims, and encumbrances of every kind and nature. There are no voting agreements, trusts, proxies or other agreements, instruments or undertakings with respect to the voting of Sellers' capital stock to which Sellers or any of the stockholders are a party. 2.4 Corporate Records. Certified copies of each Seller's Articles of Incorporation, Bylaws, and minutes have been delivered to Buyer and the stock book of each Seller has been made available to Buyer and Buyer has had an opportunity to review such documents. 2.5 Authority of Sellers. Each Seller has full right, authority and power to enter into this Agreement and each agreement, document and instrument to be executed and delivered by Sellers pursuant to this Agreement (collectively, "Sellers' Ancillary Documents"), and to carry out the transactions contemplated hereby. The execution, delivery and performance by Sellers of this Agreement and Sellers' Ancillary Documents have been duly authorized by all necessary action of each Seller and its directors and stockholders, and no other action on the part of any Seller or its stockholders is required in connection therewith. This Agreement and each of Sellers' Ancillary Documents constitute, or when executed and delivered will constitute, valid and binding obligations of the Sellers enforceable in accordance with their terms, subject to laws of general application affecting creditor's rights. The execution, delivery and performance by Sellers of this Agreement and each of Sellers' Ancillary Documents: (i) does not and will not violate any provision of the Articles of Incorporation, Bylaws or other charter documents of any Seller; (ii) does not and will not violate any laws of the United States, or any state or other jurisdiction applicable to Sellers, or require Sellers to obtain any approval, consent or waiver of, or make any filing with, any person or entity (governmental or otherwise) that has not been obtained or made; and (iii) does not and will not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of any indenture or loan or credit agreement or any other agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which any Seller is a party or by which the property of any Seller is bound or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charges or encumbrance on any of the Acquired Assets, except as specifically identified on Schedule 2.5. 2.6 Leased Real Property. All of the real property leased by Sellers as tenants or lessees is identified on Schedule 2.6 (collectively referred to herein as the "Leased Real Property"). Sellers hereby make the following representations and warranties with respect to the Leased Real Property: (a) The copies of the leases of the Leased Real Property (collectively, the "Leases") delivered by Sellers to Buyer and the information with respect to each of the Leases set forth in Schedule 2.6 are complete, accurate, true and correct as of the date hereof. Except as set forth in Schedule 2.6: (i) each of the Leases is in full force and effect and has not been modified, amended or altered, in writing or otherwise; (ii) to the knowledge of Sellers, all obligations of the landlords or lessors under the Leases which have accrued have been performed, no landlord or lessor is in default under any Lease, and no fact or circumstance presently exists which, with notice or the passage of time, or both, would give rise to a default by landlord; (iii) to the knowledge of Sellers, all obligations of the tenants or lessees under the Leases which have accrued have been performed, Sellers are not in default under any Lease, and no fact or circumstance presently exists which, with notice or the passage of time, or both, would give rise to a default by any Seller; and (iv) Sellers have obtained the consent of each landlord or lessor under any Lease where consent is required to transfer the Leased Real Property to Buyer, and upon obtaining such consent, no such transfer will of itself give any landlord or lessor under any Lease any right or remedy to which it would not otherwise be entitled under said Lease, including, without limitation, any right to declare a default thereunder. (b) Sellers hold good, clear, marketable, valid and enforceable leasehold interests in the Leased Real Property pursuant to the Leases, subject only to the right of reversion of the landlord or lessor under the Leases. (c) Except as set forth on Schedule 2.6, to the knowledge of Sellers, there are no material defects in the physical condition of any improvement constituting a part of the Leased Real Property. (d) To the knowledge of Sellers, Sellers have received no notice from any governmental authority of any violation of any law, ordinance, regulation, license, permit or authorization issued with respect to any of the Leased Real Property that has not been corrected, and to the knowledge of Sellers no such violation now exists which would have an adverse effect on the operation or value of any of the Leased Real Property. 2.7 Financial Statements. (a) Each Seller has delivered to Buyer its financial statements for its fiscal years ending 1998 and 1999, copies of which are attached as Schedule 2.7 hereto. Said financial statements are true and complete, have been prepared in accordance with generally accepted accounting principles consistently applied during the periods covered thereby, and as of the dates thereof present a true and complete statement of Sellers' financial condition, assets and liabilities and results of operations. (b) To the knowledge of Sellers, since the entry date of the last financial statements delivered to Buyer, there has not been (i) any change in each Sellers' financial condition, assets and liabilities, or Business, other than changes in the ordinary course of business which are not individually or in the aggregate materially adverse, (ii) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting any Seller's properties or Business, or (iii) any other event or condition of any character which materially and adversely affects any Seller's Business or prospects. (c) Except as set forth on Schedule 2.7, all of Sellers' tax returns (federal, state, local and other) which are required to have been filed have been accurately prepared and timely filed and the amounts due thereon have been paid, all according to law, and there is no reason to believe that there will be any increase in tax liability shown on said returns, nor any interest or penalties related thereto. 2.8 Title to Acquired Assets. The Sellers have good and marketable title to all the Acquired Assets (except as since sold or otherwise disposed of for full value and in the ordinary course of business), none of which are subject to security interests, mortgages, pledges, liens or other encumbrances, except the Permitted Encumbrances and those liens which shall be discharged contemporaneously with the Closing Date. 2.9 Condition of Equipment, Furniture and Fixtures. Buyer acknowledges that Sellers have given Buyer ample opportunity to inspect the equipment, furniture and fixtures of Sellers being purchased hereunder by Buyer and that Buyer has conducted such inspections to the extent desired. Buyer acknowledges and agrees that, except as expressly warranted or represented herein, the Acquired Assets are being purchased "as is" and "with all faults." 2.10 Intellectual Property. To the knowledge of Sellers, Sellers have the exclusive ownership of, or exclusive right to use, all patents, copyrights, trade secrets, trademarks, or other proprietary rights (including domain names) (collectively "Intellectual Property") used in the Business as presently conducted, including but not limited to those set forth on Schedule 2.10 hereof and a license to use the name "WPI Magnetec" from TransAct Technologies Incorporated, a Connecticut corporation (successor by merger to Magnetec Corporation). There are no claims or demands of any other person pertaining to the Intellectual Property and no proceedings are pending or, to the knowledge of Sellers, threatened which challenge, or would challenge, the rights of Sellers in respect thereof. Sellers have the right to use all customer lists, designs, processes, computer software, systems, or other information required for or incident to the Business as presently conducted. 2.11 Contracts. Attached as Schedule 2.11 is a list of all presently existing Contracts having a contract price equal to or exceeding $50,000, to which any Seller is a party or by which it is bound and which Buyer will be assuming. All such instruments are valid and enforceable in accordance with their terms and, to the knowledge of Sellers, Sellers have complied with all the provisions of such Contracts and are not in default thereunder, and Sellers are not aware of any defaults by the other parties thereto. Sellers have furnished to Buyer, and Buyer acknowledges receipt of, complete copies of such documents, and except as set forth on Schedule 2.11, Sellers have obtained any required consents of the other parties to such Contracts to the transfer thereof to Buyer hereunder, including but not limited to a novation of any government contracts. Sellers have provided to Buyer, and Buyer acknowledges receipt of, a list of customer purchase orders to be filled after the Closing. 2.12 Litigation. Other than as set forth on Schedule 2.12, there is no litigation, or judicial or administrative actions or proceedings pending or, to the knowledge of Sellers, threatened against or relating to any Seller, its properties or its Business, nor to the knowledge of Sellers is there any basis for any such action, or for any governmental investigation relative to Sellers, their properties or their Business, which, either individually or in the aggregate, would have a material adverse effect on the Business, or on the properties, prospects, or operations of the Business, or which might prevent or hinder the consummation of the transactions contemplated by this Agreement. 2.13 Warranty or Other Claims. There are no existing or, to the knowledge of Sellers, threatened product liability, warranty or similar claims against Sellers, or, to the knowledge of Sellers, any facts upon which a material claim of such nature could be based. 2.14 Employee Benefit Plans. (a) Sellers currently sponsor or contribute to the employee benefit plans listed in Schedule 2.14. (b) Each Seller (i) has satisfied all respective contribution obligations in respect of each employee benefit plan, and (ii) is and has at all times been in compliance in all material respects with all applicable provisions of the federal Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"), with respect to each such plan. No employee benefit plan or trust created thereunder has at no time incurred any accumulated funding deficiency (as such term is defined in Section 302 of ERISA), whether or not waived. (c) None of the Sellers nor any employee benefit plan thereof, or any trust created thereunder or any trustee or administrator thereof, has engaged in any prohibited transaction (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) that would subject any person to the penalty or tax on such transactions imposed by Section 502 of ERISA or 4975 of the Code. As used in this Section 2.14, the term "employee benefit plan" shall have the meaning specified in Section 3 of ERISA. (d) Sellers shall treat the Closing as a qualifying event (as such term is defined in Section 603 of ERISA) with respect to any employees thereof not hired by Buyer. Buyer and Sellers agree that if Sellers terminate Sellers' group health plan within thirty-six (36) months after Closing, Buyer shall be responsible for COBRA coverage to all M&A qualified beneficiaries (as such term is defined in Proposed Treasury Regulation Section; 54.4980B-9). 2.15 [Reserved] 2.16 Disclosure. No representation or warranty by Sellers in this Agreement, nor any statement or certificate furnished or to be furnished to Buyer pursuant hereto or in connection with the transactions contemplated hereby, contains any untrue statement of a material fact, or omits a material fact necessary to make the statements contained therein not misleading. There are no facts known to Sellers which presently or may in the future have a material adverse effect on the Business, or on the properties, prospects, or operations of the Business. 2.17 Agreements with Employees. Except as set forth in Schedule 2.17, Sellers are not subject to any written or oral agreements with their employees which are not terminable at will by Sellers. 2.18 Survival of Representations and Warranties. The representations and warranties set forth in this Section 2 will survive the Closing Date for a period of eighteen (18) months, except for representations and warranties with respect to taxes, environmental matters, and employee benefits, which shall survive the Closing Date for a period of three (3) years. 2.19 No Broker. No agent, broker or other person acting pursuant to Sellers' authority shall be entitled to make any claim against Buyer for any commission or finder's fee in connection with this Agreement. Sellers have engaged McFarland, Dewey ; Co., LLC, as a broker in connection herewith, whose fee Sellers agree to pay in accordance with the existing agreement between Sellers and such broker. 2.20 [Reserved] 2.21 Powers of Attorney. Neither Sellers nor any stockholder have granted powers of attorney which are presently outstanding. 2.22 Permits. Schedule 2.22 lists all permits, registrations, licenses, franchises, certifications and other approvals required from federal, state or local authorities for Sellers to conduct the Business. Sellers have obtained all such approvals, which are valid and in full force and effect, and is operating in compliance therewith. 2.23 Environmental Matters. (a) Except as set forth in Schedule 2.23, to the knowledge of Sellers, (i) Sellers have never generated, transported, used, stored, treated, disposed of, or managed any Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined below) has ever been spilled, released, or disposed of at any site presently or formerly owned, operated, leased or used by Sellers, or has been located in the soil or groundwater at any such site; (iii) no Hazardous Material has ever been transported from any site presently or formerly owned, operated, leased or used by Sellers for treatment, storage or disposal at any other place; (iv) Sellers do not presently own, operate, lease, or use, nor have they previously owned, operated, leased or used, any site on which underground storage tanks are or were located; and (v) no lien has ever been imposed by any governmental agency on any property, facility, machinery or equipment owned, operated, leased or used by Sellers in connection with the presence of any Hazardous Material. (b) Except as set forth in Schedule 2.23, (i) To the knowledge of Sellers, Sellers are not liable under, nor have they committed any violations of, any Environmental Laws (as hereinafter defined) with respect to the Leased Real Property; (ii) To the knowledge of Sellers, all property owned, operated, leased or used by Seller, and any facilities and operations thereon, are presently in compliance with all applicable Environmental Laws; (iii) Sellers have never entered into or been subject to any judgment, consent decree, compliance order or administrative order with respect to any environmental or health and safety matter, or received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim with respect to any environmental or health and safety matter, or the enforcement of any Environmental Law; and (iv) Sellers have no knowledge or reason to know that any of the items enumerated in clause (iii) of this Subsection will be forthcoming. (c) Except as set forth in Schedule 2.23 hereto, no site owned, operated, leased or used by Sellers contains any asbestos or asbestos-containing PCBs, or any urea formaldehyde foam insulation. (d) Sellers have provided to Buyer copies of all documents, records and information available to Sellers concerning any environmental or health and safety matter relevant to Sellers, whether generated by Seller or others including, without limitation, environmental audits, environmental risk assessments, site assessments, documentation regarding off-site disposal of Hazardous Materials, spill control plans, and reports, correspondence, permits, licenses, approvals, consents and other authorizations related to environmental or health and safety matters issued by any governmental agency. (e) For purposes of this Section 2.23, (i) "Hazardous Material" shall mean and include any hazardous waste, hazardous material, hazardous substance, petroleum product, oil, toxic substance, pollutant, contaminant or other substance which may pose a threat to the environment or to human health or safety, as defined or regulated under any Environmental Law; (ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or regulated under any Environmental Law; and (iii) "Environmental Law" shall mean any federal, state or local environmental or health and safety-related law, regulation, rule, or ordinance. 2.24 Non-Competition/Non-Solicitation Agreements. Sellers have not entered into non-competition and/or non-solicitation agreements with any of their employees, including any employees who will be hired by the Buyer at the Closing. 2.25 Knowledge. For purposes of this Agreement, the phrase "to the knowledge of Sellers" or words of similar import shall mean to the actual knowledge of the following officers of Sellers: the President, Treasurer and director of each of WPI Instruments, WPI Magnetec and the Barbados Subsidiary. 3. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants as follows: 3.1 Organization/Good Standing. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the full right, power and authority to enter into this Agreement, to execute and deliver this Agreement and each agreement, document and instrument to be executed and delivered by Buyer pursuant to this Agreement (collectively, "Buyer's Ancillary Documents"), and to carry out the terms and conditions hereof and thereof applicable to Buyer. 3.2 Authorization. The execution, delivery and performance by Buyer of this Agreement and Buyer's Ancillary Documents have been duly authorized by all necessary action of Buyer and its members and managers, and no other actions on the part of Buyer or its members or managers, and no approvals or consents of any other persons, are required in connection herewith. 3.3 No Broker. No agent, broker or other person acting pursuant to Buyer's authority will be entitled to make any claim against Sellers for any commission or finder's fee in connection with this Agreement. Buyer has engaged the Axiom Capital Group, Inc. as a broker in connection herewith, whose fee the Buyer agrees to pay in accordance with the existing agreement between the Buyer and such broker. 3.4 Binding Obligation of Buyer. This Agreement and all of Buyer's Ancillary Documents constitute the valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, subject to laws of general application affecting creditor's rights. To the best of Buyer's knowledge, neither the execution and delivery of this Agreement, or Buyer's Ancillary Documents, nor the consummation of the transactions contemplated hereby or thereby will (i) violate any provision of the Certificate of Formation or Operating Agreement of the Buyer; (ii) result in the breach of any material agreement or instrument to which the Buyer is a party which would give rise to a liability of or claim for damages against the Buyer; (iii) violate any judgment, order, injunction, decree, or award against or binding upon the Buyer; or (iv) constitute a violation of any existing applicable law or regulation of the State of Delaware or the federal securities laws. 3.5 Membership Interest. The membership interests of the Buyer are held as set forth on the certificate attached hereto as Schedule 3.4. The current managers and members of the Buyer are also set forth on Schedule 3.4. The Buyer's membership interests are authorized and issued, fully paid and nonassessable, and free and clear of all liens, claims, and encumbrances of every kind and nature. 3.6 Company Records. Certified copies of the Buyer's Certificate of Formation, Operating Agreement, and Action by Consent of Members authorizing this transaction have been delivered to Sellers and the Buyer's limited liability company documents have been made available to Sellers and Sellers have had an opportunity to review such documents. 3.7 Litigation. There is no litigation, or judicial or administrative actions, suits, proceedings, claims, or investigations pending or, to the knowledge of the Buyer, threatened against or affecting the Buyer or any of its properties or assets which, either individually or in the aggregate, might have an adverse effect on the business, properties, assets, or condition of the Buyer or which might prevent or hinder the consummation of the transactions contemplated by this Agreement. 3.8 Disclosure. No representation or warranty by Buyer in this Agreement, nor any statement or certificate furnished or to be furnished to Sellers pursuant hereto or in connection with the transactions contemplated hereby, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein not misleading. 3.9 Survival of Representations and Warranties. The representations and warranties set forth in this Section 3 will survive the date of this Agreement for a period of eighteen (18) months. 4. EMPLOYEES 4.1 Employment by Buyer. The parties contemplate that all persons currently employed by Sellers ("Employees") will, on or promptly after the Closing, be hired by Buyer in substantially the same positions and on substantially the same terms and conditions upon which they are currently employed by Sellers. The parties agree that in the event any Employee currently employed by the Barbados Subsidiary is not so hired by Buyer, or is offered a position of employment with Buyer on terms and conditions different from those under which he or she is currently employed by the Barbados Subsidiary, and such Employee as a result becomes entitled to a severance payment under the Barbados Severance Payment Act (CAP 355A of the Laws of Barbados), Buyer shall be solely responsible for such payment as and when due in accordance with such Act. 5. [Reserved] 6. CONDITIONS TO CLOSING 6.1 Conditions to the Obligations of Buyer. The obligation of Buyer to pay for the Acquired Assets is subject to the fulfillment or waiver prior to or at Closing (in Buyer's sole discretion) of each of the following conditions: (a) Representations, Warranties and Covenants. The representations and warranties of the Sellers are true and complete in all respects, and Sellers have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by Sellers at the Closing. (b) [Reserved] (c) Consents. Buyer has received all necessary consents by the parties to any Contracts to which Sellers are a party which are being assigned to Buyer as part of the Acquired Assets or from any third party (whose consent is, in the opinion of counsel for Buyer, required to effectuate such transfer) including consent to transfer the license to use the name "WPI Magnetec", in form and substance satisfactory to counsel for Buyer. (d) Consent of Landlord. With respect to each Lease, Sellers have received any necessary consents in writing of the landlord to the assignment of the current Lease agreement between Sellers and the landlord to Buyer, as evidenced by an assignment of lease in a form satisfactory to Buyer, together with an estoppel certificate from each landlord, or Buyer has successfully renegotiated the current Lease with the landlord. (e) Sellers have received the consents or releases of all lenders contemplated by this Agreement. (f) [Reserved] (g) Each Seller has changed its name effective on or prior to the Closing Date, thereby eliminating all references to the trade names sold to Buyer under this Agreement. (h) Delivery of Closing Documents. Sellers have delivered or caused to be delivered to Buyer: (1) Appropriate instruments, including bills of sale and assignments, in form and substance satisfactory to counsel for Buyer, transferring and conveying to Buyer, free and clear of any lien or encumbrance except for Permitted Encumbrances, good and marketable title to the Acquired Assets. (2) All consents required to be obtained by Sellers pursuant to this Agreement. (3) A certificate by an officer of each Seller as to (i) the truth, accuracy and completeness of such Seller's representations and warranties hereunder, and (ii) the full and complete performance by Sellers of their obligations hereunder. (4) A certificate duly executed by the Secretary of each Seller as to the due adoption of resolutions of the stockholders and the Board of Directors of such Seller authorizing (i) the transactions contemplated of Sellers by this Agreement, and (ii) the officers of Sellers to do all acts and deeds necessary or appurtenant to the transactions contemplated of Sellers hereby. (5) Certificates from the New Hampshire Secretary of State and the appropriate governmental agency in Barbados as to the legal existence and good standing of each Seller. (6) Each Seller has ordered a certificate of tax good standing from the New Hampshire Department of Revenue Administration or the appropriate governmental agency in Barbados. In addition, each Seller has delivered a Treasurer's Certificate in a form satisfactory to Buyer. (7) Such other documents relating to the transactions contemplated by this Agreement, including originals of all Contracts assigned to Buyer pursuant to this Agreement, as required in this Agreement or as Buyer may reasonably request, or as may be reasonably requested by Buyer=s senior and junior lenders. 6.2 [Reserved] 6.3 Conditions to the Obligation of Sellers. The obligation of Sellers to deliver the items set forth in Section 6.1 is subject to the fulfillment or waiver prior to or at Closing (in Sellers' sole discretion), of the following conditions: (a) Representations, Warranties and Covenants. The representations and warranties of Buyer are true and complete in all respects, and Buyer has performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. (b) Delivery of Closing Documents. Buyer has delivered to Sellers: (1) The amount of the Final Purchase Price as defined in Section;1.4, less the principal amount of the Note payable to the Sellers by FedWire in accordance with wiring instructions provided to Buyer. (2) The Note, Security Agreement, Uniform Commercial Code Financing Statements and the Subordination Agreement. (3) A certificate of the members of Buyer authorizing (i) the transactions contemplated of Buyer by this Agreement, and (ii) the managers of Buyer to do all acts and deeds necessary or appurtenant to the transactions contemplated of Buyer hereby. (4) A certificate from the Delaware Secretary of State, dated within thirty (30) days of the date hereof, as to the legal existence and good standing of Buyer. (5) A certificate by an officer or member of Buyer as to (i) the truth, accuracy and completeness of Buyer's representations and warranties hereunder, and (ii) the full and complete performance by Buyer of its obligations hereunder. (6) An instrument or instruments duly executed by Carlo Carluccio terminating all of his agreements with Sellers and any affiliates thereof. (7) Such other documents relating to the transactions contemplated by this Agreement as required in this Agreement or as Seller may reasonably request. 7. INDEMNIFICATION 7.1 Indemnification by Sellers. Sellers will jointly and severally indemnify, defend and hold harmless Buyer, its managers, members, employees, subsidiaries and affiliates, from and against any damages, liabilities, losses, taxes, fines, penalties, costs, and expenses (including, without limitation, reasonable attorneys fees) of any kind or nature whatsoever (whether or not arising out of third-party claims and including all amounts paid in investigation, defense, or settlement of the foregoing pursuant to this Section 7.1) which may be sustained or suffered by any of them arising out of or based upon any of the following matters: (a) misrepresentation, omission, breach of warranty, or nonfulfillment of any covenant on the part of Sellers under this Agreement or under any certificate or other instrument furnished to Buyer hereunder; (b) liabilities, commitments, obligations, disputes, unlawful acts, practices or conduct of the Sellers which shall have arisen or which relate to the period on or prior to the Closing, other than the Permitted Encumbrances, and other than liabilities, obligations and expenses assumed by Buyer hereunder; and (c) any liability of Sellers for their taxes, including without limitation any taxes owed to the government of Barbados. 7.2 Indemnification by Buyer. Buyer will indemnify, defend and hold harmless Sellers, their directors, officers, employees, agents, subsidiaries and affiliates, from and against any damages, liabilities, losses, taxes, fines, penalties, costs and expenses (including without limitation reasonable attorneys' fees) of any kind or nature whatsoever (whether or not arising out of third-party claims and including all amounts paid in investigation, defense or settlement of the foregoing pursuant to this Section 7.2) which may be sustained or suffered by any of them arising out of or based upon any of the following matters: (a) misrepresentation, omission, breach of warranty, or nonfulfillment of any covenant on the part of Buyer under this Agreement or under any certificate or other instrument furnished to Sellers hereunder; (b) liabilities, commitments, obligations, disputes, unlawful acts, practices or conduct of the Buyer which shall have arisen or which relate to the period after the Closing; (c) any failure by Buyer to perform and discharge any liabilities assumed by Buyer pursuant to this Agreement; and (d) any liability of Buyer for its taxes. 7.3 Defense of Claims. (a) Promptly after receipt of a written claim by any third party upon Buyer or Sellers (a "Claim") for which indemnity may be sought from the other party (the "Indemnifying Party") hereunder, the party so served (the "Indemnified Party") shall notify the Indemnifying Party of the receipt of such written claim. In such instance, the Indemnifying Party shall have the right, but not the obligation, to assume and control the settlement thereof prior to commencement of suit, or litigation, as the case may be, of the Claim with counsel of its choice reasonably satisfactory to the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party in writing of its decision to assume control of the settlement thereof prior to commencement of suit, or litigation, as the case may be, promptly but in no event later than fifteen (15) days after the Indemnified Party has given notice thereof to the Indemnifying Party. (b) If the Indemnifying Party elects to assume the defense of the third party Claim in accordance with (a) above, neither the Indemnified Party nor the Indemnifying Party shall consent to the entry of any judgment or enter into any settlement with respect to such Claim without the prior written consent of the other party, such consent not to be unreasonably withheld. If the Indemnifying Party assumes the defense of the Claim, the Indemnified Party may retain separate co-counsel at its sole cost and expense and may in such manner participate in such defense. The Indemnified Party shall in any event cooperate in the defense of the Claim at the expense of the Indemnifying Party. (c) If the Indemnifying Party elects not to assume the defense of the litigation in accordance with (a) above, the Indemnified Party may defend against and consent to the entry of any judgment or enter into any settlement with respect to the Claim or action in any manner it reasonably deems appropriate after consultation with the Indemnifying Party. The Indemnifying Party in such instance shall reimburse the Indemnified Party for the costs of defending the Claim, including but not limited to reasonable attorneys' fees and expenses. (d) If the Buyer is the Indemnified Party, the Claim amount (the "Claim Amount") and any costs incurred by the Buyer in defending the third party Claim shall first be satisfied by setoff against the Note. Following notification to the Sellers of any such Claim, Buyer shall hold the Claim Amount in abeyance pending resolution thereof by written agreement of the parties or a final judgment of a court of competent jurisdiction, during which time the accrual of interest and payments due and owing under the Note shall continue as if no Claim was filed. If the resolution results in a settlement or judgment against the Buyer, then the interest accruals and the monthly payments due under the Note shall be adjusted accordingly, and any resulting credits due the Buyer for over accrual of interest or excess payments of principal shall be taken dollar for dollar against the next monthly installments due under the Note. 7A. LIMITATION OF LIABILITY Notwithstanding anything to the contrary in this Agreement, Sellers' maximum liability under this Agreement for indemnification, claims or causes of action ("Claims") asserted by Buyer, including but not limited to Claims for breaches of the representations and warranties of Sellers set forth herein, shall be limited in the aggregate to (i) an amount equal to the Final Purchase Price in total with respect to all Claims for breaches of the representations and warranties of Sellers arising under (A) Section 2.14 with respect to employee benefit plans, (B) Section 2.7(c) with respect to taxes, and (C) Section 2.23 with respect to environmental matters, and (ii) an amount equal to ten percent (10%) of the Final Purchase Price in total with respect to all other Claims; provided, however, that in no event shall Sellers be liable to Buyer for individual Claims of less than ten thousand dollars ($10,000); and provided further that in no event shall Sellers be liable to Buyer in any respect or in any amount until the value of all Claims equals or exceeds fifty thousand dollars ($50,000), in which event Sellers (subject to the minimum Claim requirement above) shall be liable only to the extent that any damages arising from such Claims exceed such amount. 8. NON-COMPETITION In consideration for the execution of this Agreement, neither Sellers nor their Affiliates (including any member of the WPI Group of Companies) shall, prior to the fifth anniversary of the Closing Date, directly or indirectly engage in any activity which is the same as, similar to, or competitive with the Business. In addition, Sellers shall assign their rights in and to the Non-Competition Agreements with John Allard and Mike Allard to the Buyer at the Closing. (a) For purposes of this Section 8, the phrase "directly or indirectly" shall include, but not be limited to, any of the following actions by Sellers or their affiliates, except to the extent that such actions are done for or on behalf of Buyer: (i) carrying on or engaging in any such business or activity as a principal or on its own account, or solely or jointly with others as a director, officer, agent, employee, security holder, consultant, partner, trustee or beneficiary of a trust, or stockholder or limited partner; except that the Sellers may acquire as passive investors up to five percent (5%) of the capital stock of a company whose stock is traded on a national securities exchange or in over-the-counter markets; or (ii) carrying on or engaging in negotiations with respect to the acquisition or disposition of any such business or activity in any capacity; or (iii) lending credit or money for the purpose of establishing or operating any such business activity; or (iv) giving advice to any other person, firm, association, corporation or other entity engaging in any such business or activity; or lending or allowing the skill, knowledge or experience of Sellers or their affiliates to be used in any such business or activity. (b) For purposes of this Section 8, the term "affiliate" shall mean singly and collectively, any Person (meaning any individual, corporation, association, partnership, trust, limited liability company, unincorporated association, business or other legal entity) which, directly or indirectly, is in control of, is controlled by, or is under common control with either Seller, as well as the legal representative, successor or assignee of any such entity. For purposes of this definition, a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power to either (i) vote 10% of more of the securities having ordinary voting power for the election of directors of the Person controlled, or (ii) direct or cause the direction of the management and policies of the Person controlled, whether such power arises by contract or otherwise. Notwithstanding the foregoing, the term "Affiliate" shall not include Sunrise Capital Partners, L.P., or any affiliate thereof other than WPI Group, Inc. and its subsidiaries. (c) Sellers acknowledge that it shall cause Buyer serious and irreparable injury and cost if the Sellers were to violate the provisions of Subsection 8(a) and that money damages would not be a sufficient remedy for any such breach. Accordingly, in the event of a breach thereof by any Seller, and in addition to any other remedy provided herein or by law or in equity, Buyer shall be entitled to appropriate equitable relief, including injunctive relief and specific performance, in any court of competent jurisdiction. In addition, Buyer shall be entitled to its costs and reasonable attorneys' fees in connection with any successful enforcement of its rights hereunder. (d) Sellers shall not at any time hereafter divulge, communicate or disclose to a third party, or otherwise use to the detriment of Buyer, or misuse in any way, directly or indirectly, any confidential information, trade secret, business secret (including, without limitation, any customer list, data records, financial information, personnel information or any other information constituting a trade or business secret) (collectively, the "Confidential Information") concerning the Business, the Acquired Assets or Buyer, except as required by law or to the extent such Confidential Information becomes publicly known other than by breach of this Agreement by Sellers. 9. [Reserved] 10. GENERAL 10.1 Bulk Sales Law. The parties hereby waive compliance with the requirements of any applicable bulk sales, fraudulent conveyance or other law for the protection of creditors in connection with the transactions contemplated hereby. 10.2 Notice to Clients. Buyer and Sellers shall jointly prepare a notice to customers to be mailed immediately following the Closing indicating a change of ownership and directing invoices for services rendered prior to the Closing to be sent as designated by Sellers in such notice. 10.3 [Reserved] 10.4 Representations. All statements contained in any certificate or other instrument delivered by or on behalf of a party hereto in connection with the transactions contemplated hereby shall be deemed representations and warranties of such party. 10.5 Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of the successors and assigns of the parties hereto. 10.6 Governing Law. This Agreement is being delivered and is intended to be performed in the State of New Hampshire, and shall be construed and enforced in accordance with the substantive laws of that state without regard to its choice of law principles. 10.7 Notices. All notices and other communications hereunder shall be in writing, and shall be deemed duly given if made by hand delivery or by mail (certified, return receipt), or by overnight delivery, or by facsimile or electronic mail (e-mail) transmission, if delivered to a party at its address set forth below: SELLERS: John W. Powers WPI Group, Inc. 1155 Elm Street Manchester, NH 03101 Facsimile: (603) 627-3150 E-mail address: [email protected] With a copy to counsel for Sellers: William V. A. Zorn, Esq. James T. Lombardi, Esq. McLane, Graf, Raulerson and Middleton, PA City Hall Plaza 900 Elm Street P.O. Box 326 Manchester, NH 03105 Facsimile: (603) 625-5650 E-mail address: [email protected] BUYER: Carlo I. Carluccio Jewell Instruments LLC 850 Perimeter Road Manchester, NH 03103 Facsimile: (888) 522-7398 E-mail address: [email protected] With a copy to counsel for Buyer: Gary M. Markoff, Esq. C. Forbes Sargent III, Esq. Sherin and Lodgen LLP 100 Summer Street 28th Floor Boston, MA 02110 Facsimile: (617) 646-2222 E-mail address: [email protected] or at such other address as a party shall have furnished to the other party in writing at least ten (10) days prior to the sending of such notice. Any such notice shall be deemed to have been received on the date of hand delivery, the date set forth in the U.S. Postal Service postage prepaid, return receipt requested, or the date of delivery shown on the records of Federal Express or other nationally recognized overnight delivery service, as applicable, or the date of delivery by facsimile or electronic mail transmission. 10.8 [Reserved] 10.9 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties relating to the subject matter hereof and merges all prior discussions and negotiations between them, including the Letter of Intent between the parties dated June 24, 2000. This Agreement may not be amended in any respect except by a written amendment expressly referring to this Agreement and executed by the parties to be bound thereby. 10.10 Multiple Counterparts. This Agreement shall be executed simultaneously in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Each party shall receive one original counterpart. 10.11 Headings. The subject headings of the paragraphs and sections of this Agreement are included for purposes of convenience only and shall not affect the construction or interpretation of any of its provisions. 10.12 Press Releases. No press releases or public disclosure, either written or oral, of the transactions contemplated by this Agreement shall be made by any party to this Agreement without the prior knowledge and written consent of all other parties hereto, except to the extent that such disclosure is required by law. 10.13 Disclosure. The parties acknowledge and agree that for purposes of this Agreement and all exhibits, schedules, and other attachments hereto (collectively, "Attachments"), any disclosure made by either party for any purpose hereof, whether made in the body of the Agreement or in any Attachment, shall be deemed a disclosure for any and all other purposes hereof. [Signatures Appear on Following Page] IN WITNESS WHEREOF, the parties have duly executed this Agreement as a sealed instrument on the day first above written. SELLERS WPI Instruments, Inc. Witness: /s/James T. Lombardi By: /s/ John W. Powers Print Name: John W. Powers Its: Treasurer Duly Authorized COMMONWEALTH OF MASSACHUSETTS Suffolk, ss _________________, 2000 Then personally appeared the above named ______________________, _____________ of WPI Instruments, Inc., and acknowledged the foregoing instrument to be the free act and deed of WPI Instruments, Inc., before me Notary Public: My commission expires: WPI Magnetec, Inc. Witness: /s/James T. Lombardi By: /s/ John W. Powers Print Name: John W. Powers Its: Treasurer Duly Authorized COMMONWEALTH OF MASSACHUSETTS Suffolk, ss _________________, 2000 Then personally appeared the above named ______________________, _____________ of WPI Magnetec, Inc., and acknowledged the foregoing instrument to be the free act and deed of WPI Magnetec, Inc., before me Notary Public: My commission expires: Crompton Modutec (Barbados) Limited Witness: /s/James T. Lombardi By: /s/ John W. Powers Print Name: John W. Powers Its: Treasurer Duly Authorized COMMONWEALTH OF MASSACHUSETTS Suffolk, ss _________________, 2000 Then personally appeared the above named ______________________, _____________ of Crompton Modutec (Barbados) Limited, and acknowledged the foregoing instrument to be the free act and deed of Crompton Modutec (Barbados) Limited, before me Notary Public: My commission expires: BUYER Jewell Instruments, LLC Witness: /s/James T. Lombardi By: /s/ Carlo I. Carluccio Print Name: Carlo I. Carluccio Its: Manager Duly Authorized COMMONWEALTH OF MASSACHUSETTS Suffolk, ss _________________, 2000 Then personally appeared the above named Carlo I. Carluccio of Jewell Instruments, LLC, and acknowledged the foregoing instrument to be the free act and deed of Jewell Instruments, LLC, before me Notary Public: My commission expires:
EXHIBIT 10.4 ASSIGNMENT AND BILL OF SALE KNOW ALL MEN BY THESE PRESENTS:             WHEREAS, by Assignment and Bill of Sale dated July 15, 1999, effective May 1, 1999, recorded at Conveyance Book 400, Page 547 of the records of Allen Parish, Louisiana and Conveyance Book 693, Page 504 of the records of Beauregard Parish, Louisiana, (the "Prior Assignment") Gladstone Resources, Inc. whose address is 3500 Oak Lawn, Suite 590, Dallas, TX 75219 (hereinafter referred to as "Assignor"), acquired from Humphrey Oil Interests, L. P. certain interests in the Oil and Gas Leases more particularly described on Exhibit "A" attached hereto and made a part hereof (the "Subject Interests"); and             WHEREAS, Gladstone Resources, Inc.'s name has now been changed to Gladstone Energy, Inc., and the state of incorporation for said corporation has been changed from Washington to Delaware.             NOW, THEREFORE, Assignor, for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, does hereby assign, transfer, sell and convey unto:   Bagwell No. 6 Family L. P. P. O. Box 50010 Amarillo, TX 79105 12.2448980%   G. R. Partners, Inc. 4625 Greenville Avenue Suite 101 Dallas, TX 75206   8.1632653%   Humphrey Children's Trust Sheila Irons, Trustee 3500 Oak Lawn Avenue Suite 590, LB 49 Dallas, TX 75219   9.5918367%                            30.0000000%   (hereinafter collectively referred to as "Assignee"), their heirs, successors and assigns, in the amounts set forth opposite their names, an undivided 30.000% of all right, title and interest acquired by Assignor through the Prior Assignment in and to the oil and gas leases as set out in Exhibit "A" attached hereto and reference to which is hereby made.             This Assignment and Bill of Sale is made subject to all terms and conditions of the Prior Assignment, and further made subject to that certain Purchase and Sale Agreement between Assignor and Assignee dated the 30th day of August, 2000.             This Assignment is made without warranty of title, either express or implied, except as to those claiming by, through or under Assignor.             Assignor hereby agrees to execute the necessary documents and to do all things necessary or convenient to the full consummation of the transfer of the leases and units effectuated hereby, including the completion, execution and delivery of any and all transfer orders, division orders, or other instruments in writing required or requested by the purchaser(s) of production for the full consummation of the transfer of the leases and units effectuated hereby.             All provisions, exceptions, conditions and covenants contained in this Assignment and Bill of Sale shall be binding on Assignor and Assignee, their respective heirs, personal representatives, successors and assigns, and shall run with the interest herein conveyed.             IN WITNESS WHEREOF, this Assignment and Bill of Sale is executed this   31st   day of           August          , 2000; effective, however, on the 1st day of August, 2000. ATTEST:                                                                                  GLADSTONE ENERGY, INC.                /s/ Sheila Irons                                  Sheila Irons, Secretary By:         /s/ Johnathan M. Hill                                              Johnathan M. Hill, President     STATE OF TEXAS               COUNTY OF DALLAS                   This instrument was acknowledged before me on this   31st day of     August    , 2000, by Johnathan M. Hill as President of Gladstone Energy, Inc.                  /s/ Phillip C. Wilson                                                               Notary Public                                                             EXHIBIT "A"   ATTACHED TO AND MADE A PART OF THAT CERTAIN ASSIGNMENT FROM GLADSTONE ENERGY, INC, AS "ASSIGNOR", AND BAGWELL NO. 6 FAMILY L. P. ET AL, AS "ASSIGNEE", DATED TO BE EFFECTIVE AS OF AUGUST 1, 2000.   ALLEN AND BEAUREGARD PARISHES, LOUISIANA RIGHTHAND CREEK FIELD   1. Oil and Gas Leases       1 . That certain Oil, Gas and Mineral Lease, dated August 1, 1991, by and between Cavenham Energy Resources Division, Hanson Natural Resources Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 328 under Entry No. 360470 of the records of Allen Parish, Louisiana; and that certain Partial Release of Oil, Gas and Mineral Lease, dated August 28, 1996, recorded in Conveyance Book 362, Pages 390-401, under Entry No. 383641 of the records of Allen Parish. In accordance with the terms of the lease, said release covering 20.01 acres lying outside of the surface boundaries of the U WX RD SU, and all depths and horizons less and except (1) fifty (50') feet above and one hundred (100') feet below the Upper Wilcox Sand, Reservoir D, defined as being that oil and gas bearing interval encountered between the depths of 10,962 feet and 11,310 feet (electrical log measurements) in the Brechtel Energy Corporation-Cavenham Energy Resources No. I Well, located in Section 29, Township 5 South, Range 7 West, Right Hand Creek Field, Allen Parish, Louisiana; and (2) fifty (50') feet above and one hundred (100') feet below the stratigraphic equivalent of the Cockfield/Sparta Sand, defined as being that oil and gas bearing interval encountered between the depths of 8,500 feet and 8,800 feet (electrical log measurements) in the Brechtel Energy Corporation-Cavenharn Energy Resources No. 2 Well, located in Section 30, Township 5 South, Range 7 West, Right Hand Creek Field, Allen Parish, Louisiana.         2. That certain Oil, Gas and Mineral Lease, dated January 22, 1993, by and between Crosby Land & Resources, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 335 under Entry No. 365937 of the records of Allen Parish, Louisiana.         3. That certain Oil, Gas and Mineral Lease, dated March 16, 1993, by and between W. G. Ragley Lumber Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 338 under Entry No. 367740 of the records of Allen Parish, Louisiana; Less and Except those lands released by that certain Partial Release of Oil, Gas and Mineral Lease, recorded June 24, 1994 in Conveyance Book 344 under Entry No. 372223 of the records of Allen Parish, Louisiana.         4. That certain Oil, Gas and Mineral Lease, dated June 22, 1993, by and between Crosby Land & Resources, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 343 under Entry No. 371071 of the records of Allen Parish, Louisiana.         5. That certain Oil and Gas Lease and Limited Royalty Deed, dated May 5, 1994, by and between W. G. Ragley Lumber Company, as Lessor and Brechtel Energy Corporation, as Lessee, which a memorandum of such lease is recorded in Conveyance Book 344 under Entry No. 372225 of the records of Allen Parish, Louisiana.       Exhibit "A" Page 1 of 3             6. That certain Oil, Gas and Mineral Lease, dated May 5, 1994, by and between Powell Lumber Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 344 under Entry No. 372224 of the records of Allen Parish, Louisiana.         7. That certain Oil, Gas and Mineral Lease, dated August 1, 1994, by and between Crosby Land & Resources, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 345 under Entry No. 372683 of the records of Allen Parish, Louisiana; and in Conveyance Book 595 under Entry No. 397116 of the records of Beauregard Parish, Louisiana.         8. That certain Oil, Gas and Mineral Lease, dated September 23, 1997, by and between Thelma Ray Sills Trull, et al, as Lessor and Rio Grande Offshore, Ltd., as Lessee, recorded in Conveyance Book 372 under Entry No. 390,444 of the records of Allen Parish, Louisiana.         9. That certain Oil, Gas and Mineral Lease, dated December 20, 1994, by and between Norman Paul Morin, et al, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 602 under Entry No. 381853 of the records of Beauregard Parish, Louisiana.         10. That certain Oil, Gas and Mineral Lease, dated December 20, 1994, by and between Gilles R. Morin, et ux, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 602 under Entry No. 381854 of the records of Beauregard Parish, Louisiana.         11. That certain Oil, Gas and Mineral Lease dated December 28, 1994, by and between Cavenham Energy Resources Division, Hanson Natural Resources Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 348 under Entry No. 374879 of the records of Allen Parish, Louisiana.         12. That certain Oil, Gas and Mineral Lease dated February 6, 1995, by and between W. G. Ragley Lumber Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 349 under Entry No. 375361 of the records of Allen Parish, Louisiana; and in Conveyance Book 602 under Entry No. 382235 of the records of Beauregard Parish, Louisiana. Said lease was amended by that certain Act of Correction, effective February 6, 1995, and recorded in Conveyance Book 355 under Entry No. 378556 of the records of Allen Parish, Louisiana; and in Conveyance Book 612 under Entry No. 385872 of the records of Beauregard Parish, Louisiana.         13. Intentionally Left Blank         14. That certain Oil, Gas and Mineral Lease dated April 3, 1995, by and between Crosby Land & Resources, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 604 under Entry No. 382726 of the records of Beauregard Parish, Louisiana.         15. That certain Oil, Gas and Mineral Lease dated May 17, 1995, by and between W. G. Ragley Lumber Company, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 351 under Entry No. 376661 of the records of Allen Parish, Louisiana .         16. That certain Oil and Gas Lease and Limited Royalty Deed dated May 17, 1995, by and between Powell Lumber Company, as Lessor and Brechtel Energy       Exhibit "A" Page 2 of 3             Corporation, as Lessee, and a memorandum of such lease is recorded in Conveyance Book 351, under Entry No. 376662 of the records of Allen Parish, Louisiana.         17. Intentionally Left Blank         18. That certain Oil, Gas and Mineral Lease dated July 24, 1996, by and between Temple-Inland Forest Products Corporation, as Lessor and Brechtel Energy Corporation, as Lessee, recorded in Conveyance Book 361 under Entry No. 383008 of the records of Allen Parish, Louisiana.         19. That certain Oil, Gas and Mineral Lease dated August 23, 1983, by and between W. G. Ragley Lumber Company, as Lessor and Ballard Exploration Company, Inc., as Lessee, recorded in Conveyance Book 261 under Entry No. 309041 of the records of Allen Parish, Louisiana.         20. That certain Oil, Gas and Mineral Lease dated August 23, 1983, by and between Crosby Chemicals, Inc., as Lessor and Ballard Exploration Company, as Lessee, recorded in Conveyance Book 261 under Entry No. 309040 of the records of Allen Parish, Louisiana.         21. That certain Oil, Gas and Mineral Lease dated August 16, 1983, by and between Ben H. Hinchee, Jr., et al, as Lessor and Ballard Exploration Company, as Lessee, recorded in Conveyance Book 261 under Entry No. 309039 of the records of Allen Parish, Louisiana.         22. That certain Oil, Gas and Mineral Lease dated August 27, 1983, by and between Warren D. Hinchee, et ux, as Lessor and Ballard Exploration Company, Inc., as Lessee, recorded in Conveyance Book 262 under Entry No. 309336 of the records of Allen Parish, Louisiana.         23. That certain Oil, Gas and Mineral Lease dated July 5, 1979, by and between International Paper Company, as Lessor and IP Petroleum Company, Inc., as Lessee, recorded in Conveyance Book 229 under Entry No. 277544 of the records of Allen Parish, Louisiana.         24. That certain Oil, Gas and Mineral Lease dated March 4, 1980, by and between Roxie Morgan Sills, et al, as Lessor and Charlie A. Hudson, as Lessee, recorded in Conveyance Book 233 under Entry No. 283482 of the records of Allen Parish, Louisiana.         25. That certain Oil, Gas and Mineral Lease dated August 19, 1997, by and between Crosby Land & Resources, as Lessor, and Rio Grande Offshore, Ltd.. as Lessee, recorded in Conveyance Book 661 under Entry No. 401208 of the records of Beauregard Parish, Louisiana.         26. That certain Oil and Gas Lease and Limited Royalty Deed dated March 17, 1997, by and between W. G. Ragley Lumber Company, as Lessor, and Rio Grande Offshore, Ltd., as Lessee, and a memorandum of such lease is recorded in Conveyance Book 661 under Entry No. 401208 of the records of Beauregard Parish, Louisiana.         27. That certain Oil, Gas and Mineral Lease dated July 24, 1997, by and between Crosby Land & Resources, as Lessor, and Rio Grande Offshore, Ltd., as Lessee, recorded in Conveyance Book 371 under Entry No. 389,358 of the records of Allen Parish, Louisiana.       Exhibit "A" Page 3 of 3      
  Exhibit 10(ee)   FIRST UNION LOAN AGREEMENT First Union National Bank 300 Main Street Stamford, Connecticut 06904 (Hereinafter referred to as the "Bank") Farmstead Telephone Group, Inc. 22 Prestige Park Circle East Hartford, Connecticut 06108 (Individually and collectively "Borrower") This Loan Agreement ("Agreement") is entered into September 27, 2000, by and between Bank and Borrower. This Agreement applies to the loan or loans (individually and collectively, the "Loan") evidenced by one or more promissory notes dated September 27, 2000 or other notes subject hereto, as modified from time to time (whether one or more, the "Note") and all Loan Documents. The terms "Loan Documents" and "Obligations," as used in this Agreement, are defined in the Note. Relying upon the covenants, agreements, representations and warranties contained in this Agreement, Bank is willing to extend credit to Borrower upon the terms and subject to the conditions set forth herein, and Bank and Borrower agree as follows: AVAILABILITY. Notwithstanding anything to the contrary contained herein, the aggregate outstanding principal balance of Advances (as defined in the Note) (the "Total Outstandings") at any one time shall not exceed the lesser of $8,000,000.00 or the Borrowing Base (as hereinafter defined). In the event that the Total Outstandings at any time exceeds the Borrowing Base, Borrower shall pay to Bank the amount of such excess immediately upon receipt by Borrower of written notice that the Borrowing Base has been exceeded. REPRESENTATIONS. Borrower represents that from the date of this Agreement and until final payment in full of the Obligations: Accurate Information. All information now and hereafter furnished to Bank is and will be true, correct and complete in all material respects. Any such information relating to Borrower's financial condition will accurately reflect Borrower's financial condition as of the date(s) thereof, (including all contingent liabilities of every type), and Borrower further represents that its financial condition has not changed materially or adversely since the date(s) of such documents. Authorization; Non-Contravention. The execution, delivery and performance by Borrower and any guarantor, as applicable, of this Agreement and other Loan Documents to which it is a party are within its power, have been duly authorized as may be required and, if necessary, by making appropriate filings with any governmental agency or unit and are the legal, binding, valid and enforceable obligations of Borrower and any guarantors; and do not (i) contravene, or constitute (with or without the giving of notice or lapse of time or both) a violation of any provision of applicable law, a violation of the organizational documents of Borrower or any guarantor, or a default under any agreement, judgment, injunction, order, decree or other instrument binding upon or affecting Borrower or any guarantor, (ii) result in the creation or imposition of any lien (other than the lien(s) created by the Loan Documents) on any of Borrower's or any guarantor's assets, or (iii) give cause for the acceleration of any obligations of Borrower or any guarantor to any other creditor. Asset Ownership. Borrower has good and marketable or leasehold title to all of the properties and assets reflected on the balance sheets and financial statements supplied Bank by Borrower, and all such properties and assets are free and clear of mortgages, security deeds, pledges, liens, charges, and all other encumbrances, except as otherwise disclosed to Bank by Borrower in writing and approved by Bank ("Permitted Liens"). To Borrower's knowledge, no default has occurred under any Permitted Liens and no claims or interests adverse to Borrower's present rights in its properties and assets have arisen. <PAGE> 1 Discharge of Liens and Taxes. Borrower has duly filed, paid and/or discharged all taxes or other claims which may become a lien on any of its property or assets, except to the extent that such items are being appropriately contested in good faith and an adequate reserve for the payment thereof is being maintained. Sufficiency of Capital. Borrower is not, and after consummation of this Agreement and after giving effect to all indebtedness incurred and liens created by Borrower in connection with the Note and any other Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. Section 101(32). Compliance with Laws. Borrower is in compliance in all material respects with all federal, state and local laws, rules and regulations applicable to its properties, operations, business, and finances, including, without limitation, any federal or state laws relating to liquor (including 18 U.S.C. Section 3617, et seq.) or narcotics (including 21 U.S.C. Section 801, et seq.) and/or any commercial crimes; all applicable federal, state and local laws and regulations intended to protect the environment; and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if applicable. Organization and Authority. Each corporate or limited liability company Borrower and/or guarantor, as applicable, is duly created, validly existing and in good standing under the laws of the state of its organization, and has all powers, governmental licenses, authorizations, consents and approvals required to operate its business as now conducted. Each corporate or limited liability company Borrower and/or guarantor, as applicable, is duly qualified, licensed and in good standing in each jurisdiction where qualification or licensing is required by the nature of its business or the character and location of its property, business or customers, and in which the failure to so qualify or be licensed, as the case may be, in the aggregate, could have a material adverse effect on the business, financial position, results of operations, properties or prospects of Borrower or any such guarantor. No Litigation. There are no pending or threatened suits, claims or demands against Borrower or any guarantor that have not been disclosed to Bank by Borrower in writing, and approved by Bank. ERISA. Each employee pension benefit plan, as defined in ERISA, maintained by Borrower meets, as of the date hereof, the minimum funding standards of ERISA and all applicable regulations thereto and requirements thereof, and of the Internal Revenue Code of 1986, as amended. No "Prohibited Transaction" or "Reportable Event" (as both terms are defined by ERISA) has occurred with respect to any such plan. AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final payment in full of the Obligations, unless Bank shall otherwise consent in writing, Borrower will: Access to Books and Records. Allow Bank, or its agents, during normal business hours and upon reasonable advance notice, access to the books, records and such other documents of Borrower as Bank shall reasonably require, and allow Bank to make copies thereof at Bank's expense. Accounts Payable Aging. Deliver to Bank, from time to time hereafter but not less than monthly within 10 days of the end of each such period, a detailed payables report including aging of payables by total, vendor names and addresses, a reconciliation statement, and the original date of each invoice. Accounts Receivable Aging. Deliver to Bank, from time to time hereafter but not less than monthly within 10 days of the end of each such period, a detailed receivables report including totals, customer names and addresses, a reconciliation statement, and the original date of each invoice. Business Continuity. Conduct its business in substantially the same manner and locations as such business is now and has previously been conducted. Certificate of Full Compliance From Accountant. Deliver to Bank, with the annual audited financial statements required herein, a certification by Borrower's independent certified public accountant that Borrower is in full compliance with the financial covenants in the Loan Documents. Compliance with Other Agreements. Comply with all terms and conditions contained in this Agreement, and any other Loan Documents, and swap agreements, if applicable, as defined in the 11 U.S.C. Section 10 1. Estoppel Certificate. Furnish, within 15 days after request by Bank, a written statement duly acknowledged of the amount due under the Loan and whether offsets or defenses exist against the Obligations. Insurance . Maintain adequate insurance coverage with respect to its properties and business against loss or damage of the kinds and in the amounts customarily insured against by companies of established reputation engaged in the same or similar businesses including, without limitation, commercial general liability insurance, workers compensation insurance, and business interruption insurance; all acquired in such amounts and from such companies as Bank may reasonably require. Inventory Reports. Deliver to Bank, from time to time hereafter but not less than monthly within 10 days of the end of each such period, an inventory report showing individual values for raw materials, work-in-progress, finished products and any inventory obsolescence. Additionally, on a semi-annual basis, Borrower shall submit a slow moving inventory report to Bank. Management Letter. Borrower shall deliver to Bank within 120 days after the <PAGE> 2 close of each fiscal year, its Management Letter, in form and substance acceptable to Bank, prepared by Borrower's independent certified public accountant. Maintain Properties. Maintain, preserve and keep its property in good repair, working order and condition, ordinary wear and tear excepted making all needed replacements, additions and improvements thereto, to the extent allowed by this Agreement. Non-Default Certificate From Borrower. Deliver to Bank, with the Financial Statements required below, a certificate signed by Borrower, in the form attached hereto as Exhibit A, if Borrower is an individual, or by a principal financial officer of Borrower warranting that no "Default" as specified in the Loan Documents nor any event which, upon the giving of notice or lapse of time or both, would constitute such a Default, has occurred and demonstrating Borrower's compliance with the financial covenants contained herein. Notice of Default and Other Notices. (a) Notice of Default. Furnish to Bank immediately upon becoming aware of the existence of any condition or event which constitutes a Default (as defined in the Loan Documents) or any event which, upon the giving of notice or lapse of time or both, may become a Default, written notice specifying the nature and period of existence thereof and the action which Borrower is taking or proposes to take with respect thereto. (b) Other Notices. Promptly notify Bank in writing of (i) any material adverse change in its financial condition or its business; (ii) any default under any material agreement, contract or other instrument to which it is a party or by which any of its properties are bound, or any acceleration of the maturity of any material indebtedness owing by Borrower; (iii) any material adverse claim against or affecting Borrower or any part of its properties; (iv) the commencement of, and any material determination in, any litigation with any third party or any proceeding before any governmental agency or unit affecting Borrower; and (v) at least 30 days prior thereto, any change in Borrower's name or address as shown above, and/or any change in Borrower's structure. Other Financial Information. Deliver promptly such other information regarding the operation, business affairs, and financial condition of Borrower which Bank may reasonably request. Payment of Debts. Pay and discharge when due, and before subject to penalty or further charge, and otherwise satisfy before maturity or delinquency, all obligations, debts for borrowed money, taxes, and liabilities for borrowed money of whatever nature or amount, except those which Borrower in good faith disputes. Reports and Proxies. Deliver to Bank, promptly, a copy of all financial statements, reports, notices, and proxy statements, sent by Borrower to stockholders, and all regular or periodic reports required to be filed by Borrower with any governmental agency or authority. NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and until final payment in full of the Obligations, unless Bank shall otherwise consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal year without the prior written consent of Bank. Change of Control. Make or suffer a change of ownership that effectively changes control of Borrower. Encumbrances. Create, assume, or permit to exist any mortgage, security deed, deed of trust, pledge, lien, charge or other encumbrance on any of its assets, whether now owned or hereafter acquired, other than: (i) security interests required by the Loan Documents; (ii) liens for taxes contested in good faith; (iii) liens accruing by law for employee benefits; (iv) purchase money security interests; or (v) Permitted Liens. Guarantees. Guarantee or otherwise become responsible for obligations of any other person or entity other than the endorsement of checks and drafts for collection in the ordinary course of business. Default on Other Contracts or Obligations. Default on any material contract with or obligation when due to a third party or default in the performance of any obligation to a third party incurred for money borrowed. Government Intervention. Permit the assertion or making of any seizure, vesting or intervention by or under authority of any government by which the management of Borrower or any guarantor is displaced of its authority in the conduct of its respective business or its such business is curtailed or materially impaired. Judgment Entered. Permit the entry of any monetary judgment or the assessment against, the filing of any tax lien against, or the issuance of any writ of garnishment or attachment against any property of or debts due Borrower in an amount in excess of $100,000.00 which is not discharged or execution is not stayed within 30 days of entry. Prepayment of Other Debt. Retire any long-term debt entered into prior to the date of this Agreement at a date in advance of its legal obligation to do so. Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its capital stock, except that, provided no Event of Default shall have occurred and be continuing (and provided the same shall not cause or result in an Event of Default), Borrower shall have the right to repurchase up to $250,000.00 of outstanding Farmstead Telephone Group, Inc. common stock without the prior approval of the Bank. Cross-Default. Borrower shall not default in payment or performance of any of its obligations under any other loans, contracts, or agreements with Bank or Bank's affiliates, nor permit any of Borrower's <PAGE> 3 subsidiaries or affiliates, any of its general partners or the holder(s) of its majority ownership interests, to default under any loans, contracts, or agreements, with Bank or its affiliates. ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 90 days after the close of each fiscal year, audited financial statements reflecting its operations during such fiscal year, including, without limitation, a balance sheet, profit and loss statement and statement of cash flows, with supporting schedules; all on a consolidated and consolidating basis with respect to Borrower and its Subsidiaries, Affiliates and parent or holding company, as applicable, and in reasonable detail, prepared in conformity with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. If audited statements are required, all such statements shall be examined by an independent certified public accountant acceptable to Bank. The opinion of such independent certified public accountant shall not be acceptable to Bank if qualified due to any limitations in scope imposed by Borrower or any other person or entity. Any other qualification of the opinion by the accountant shall render the acceptability of the financial statements subject to Bank's approval. Periodic Financial Statements. Borrower shall deliver to Bank unaudited management-prepared quarterly financial statements including, without limitation, a balance sheet, profit and loss statement and statement of cash flows, with supporting schedules, as soon as available and in any event within 45 days after the close of each such period; all in reasonable detail and prepared in conformity with generally accepted accounting principles, applied on a basis consistent with that of the preceding year. Such statements shall be certified as to their correctness by a principal financial officer of Borrower and in each case, if audited statements are required, subject to audit and year-end adjustments. TAX RETURNS. Borrower shall deliver to Bank, within 30 days of filing, complete copies of federal and state tax returns, as applicable, together with all schedules thereto, each of which shall be signed and certified by Borrower to be true and complete copies of such returns. In the event an extension is filed, Borrower shall deliver a copy of the extension within 30 days of filing. FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date hereof until final payment in full of the Obligations, unless Bank shall otherwise consent in writing (which consent shall not be unreasonably withheld), using the financial information for Borrower, its subsidiaries, affiliates and its holding or parent company, as applicable: Funds Flow Coverage Ratio. Borrower shall maintain a Funds Flow Coverage Ratio of not less than 1.20 to 1.00. This covenant shall be calculated quarterly, on a rolling four quarters basis. "Funds Flow Coverage Ratio" shall mean the sum of earnings before interest, taxes, depreciation and amortization divided by the sum of all current maturities of long term debt and capital lease obligations plus interest plus income taxes. Tangible Net Worth. Borrower shall, at all times, maintain a Tangible Net Worth of not less than $6,000,000.00. "Tangible Net Worth" shall mean total assets minus total liabilities. For purposes of this computation, the aggregate amount of any intangible assets of Borrower including, without limitation, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, and brand names, shall be subtracted from total assets, and total liabilities shall include debt fully subordinated to Bank on terms and conditions acceptable to Bank. Total Liabilities to Tangible Net Worth Ratio. Borrower shall, at all times, maintain a ratio of Total Liabilities to Tangible Net Worth of not more than 1.50 to 1.00. "Total Liabilities" shall mean all liabilities of Borrower, excluding debt fully subordinated to Bank on terms and conditions acceptable to Bank, and including capitalized leases and all reserves for deferred taxes and other deferred sums appearing on the liabilities side of a balance sheet of Borrower, in accordance with generally accepted accounting principles applied on a consistent basis. . Special Performance. In the event that (i) the Funds Flow Coverage Ratio shall equal or exceed 2.00 to 1.00 and the Total Liabilities to Tangible Net Worth Ratio shall be equal to or less than 1.00 to 1.00, in each case concurrently for two (2) consecutive quarters, then the interest rate accruing on the Loan shall be reduced to the LIBOR Market Interest Rate plus two (2.00%) percentage points per annum. Deposit Relationship. Borrower shall maintain its primary depository account and cash management account with Bank. Optional Hedge. Borrower shall have the option to hedge the floating interest expense on up to $2,500,000.00 of permanent borrowings as more particularly set forth in the Note. Leases. Without the prior written consent of the Bank (which consent shall not be unreasonably withheld), Borrower shall not incur, create, or assume any direct or indirect liability for the payment of rent or otherwise, under any lease or rental <PAGE> 4 arrangement (excluding capitalized leases) if immediately thereafter the sum of such lease or rental payments to be made by Borrower during any 12-month period is increased by $150,000.00 in the aggregate. Loans and Advances. Borrower shall not, during any fiscal year, make loans or advances, excepting ordinary course of business travel and expense advances, advances against employee draws, sales commissions and bonuses, to any person or entity in excess of $150,000.00 in the aggregate outstanding at any time. Limitation on Debt. Borrower shall not, directly or indirectly, create, incur, assume or become liable for any additional indebtedness, whether contingent or direct, if, giving effect to such additional debt on a pro forma basis causes the aggregate amount of Borrower's debt, excluding obligations to Bank, to exceed $1,000,000.00. Dividends. Borrower shall not, during any fiscal year, declare or pay dividends or make other distributions to its shareholders without the prior written consent of the Bank. BORROWING BASE. "Borrowing Base" means 75.00% of the net amount of Eligible Accounts, plus 50.00% of the value of Eligible Inventory, provided that the Eligible Inventory portion of the Borrowing Base shall not exceed $2,000,000.00 (less the amount of any Reserves required by Bank). "Eligible Account" means an account receivable not more than 90 days from the date of the original invoice (120 days for receivables due from Lucent and Avaya) that arises in the ordinary course of Borrower's business and meets the following eligibility requirements: (a) the sale of goods or services reflected in such account is final and such goods and services have been delivered or provided and accepted by the account debtor and payment for such is owing; (b) the invoices comprising an account are not subject to any claims, returns or disputes of any kind; (c) the account debtor is not insolvent; (d) the account debtor has its principal place of business in the United States or the account receivable is assured by either a Letter of Credit or credit insurance acceptable to Bank; (e) the account debtor is not an Affiliate of Borrower and is not a supplier to Borrower and the account is not otherwise exposed to risk of set-off, provided that if an account debtor is also a supplier, the net account receivable balance from such account debtor shall be an eligible account; (f) not more than 50% of the original invoices owing Borrower by the account debtor are more than 90 days from the date of the original invoice; and (g) the account is not subject to any lien prior to the lien of Bank. "Eligible Inventory" means inventory of new and boxed refurbished telephone equipment and related communications products sold by the Borrower in the ordinary course of its business in Borrower's possession that is held for use or sale in the ordinary course of Borrower's business and is not unmerchantable or obsolete and is subject to a first priority perfected security interest in favor of Bank. The value of the inventory will be determined by Bank and will be valued at average cost. ("Reserves" means such amounts as may be required by Bank, at any time and from time to time without prior notice to Borrower, which Bank deems to be adequate to reserve against outstanding letters of credit, outstanding banker's acceptances, Borrower's obligations to Bank or its affiliates or any guaranties or other contingent debts of Borrower.) Required Reports. Borrower shall certify to Bank by the 10th day of each month, the amount of Eligible Accounts and the value of Eligible Inventory as of the first day of each month, on forms required by Bank, together with all detail and supporting documents requested by Bank. Bank may at any time and from time to time, during Borrower's normal business hours upon reasonable advance notice, enter upon any business premises of Borrower and audit Borrower's accounts and inventory. Bank's determination of the amount of Eligible Accounts and the value of Eligible Inventory shall at all times be indisputable and deemed correct absent manifest error. Borrower, at all times, shall cooperate with Bank by providing Bank information and access to Borrower's premises upon reasonable advance notice and business records and shall be courteous to Bank's agents. CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any advances pursuant to this Agreement are subject to the following conditions precedent: Additional Documents. Receipt by Bank of such additional supporting documents as Bank or its counsel may reasonably request, including without limitation (a) detailed projections for fiscal year 2000; (b) six (6) month interim financial statement for the period ended June 30, 2000; and (c) Last twelve (12) months of Borrower's borrowing base certificates submitted to its current lender. Opinion of Counsel. On or prior to the date of any extension of credit hereunder, Bank shall have received a written opinion of the counsel of Borrower acceptable to Bank. Operating Documents. On or prior to the date of any borrowing hereunder, Bank shall have received from Borrower a copy of Borrower's by-laws, certified as to completeness and accuracy by an <PAGE> 5 appropriate officer of such Borrower. Charter Documents. Bank shall have received from Borrower a copy of Borrower's Certificate of Incorporation and all other charter documents of Borrower, certified by the Secretary of the State of Delaware. ERISA. Each employee pension benefit plan, as defined in ERISA, maintained by Borrower, as of the date hereof, the minimum funding standards of ERISA and all applicable regulations thereto and requirements thereof, and of the Internal Revenue Code of 1986, as amended. No "Prohibited Transaction" or Reportable Event" (as both terms are defined by ERISA) has occurred with respect to any such plan. Certificate of Good Standing. Bank shall have received from Borrower a certificate of the Secretary of the State of Delaware as to its good standing. Certificate of Incumbency. Bank shall have received from Borrower a certificate of an appropriate officer of Borrower as to the incumbency and signatures of the officers of Borrower executing the Loan Documents. SPECIAL PROVISION REGARDING SUBSIDIARY. Sale/Advance. On the date hereof Borrower holds all of the issued and outstanding shares in a corporation known as FTG Venture Corp. (the "Subsidiary") which Subsidiary is presently inactive. With respect to the Subsidiary, Borrower has advised the Bank that it intends to: (i) change the name of the Subsidiary to TriNetworks, Inc; (ii) sell 50% of the issued and outstanding shares in the Subsidiary to an unrelated third party; and (iii) advance the sum of up to $250,000.00 to the Subsidiary in the form of either a combination of debt or equity. So long as no Event of Default shall have occurred and be continuing, the Bank consents to the foregoing. Exclusion from Financial Covenants. From the date hereof through December 31, 2001, the financial performance and financial results of the Subsidiary shall not be included in the calculation of the Financial Covenants set forth herein. On January 1, 2002, this exclusion shall ipso facto lapse and terminate. CONNECTICUT PREJUDGMENT REMEDY WAIVER. EACH BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS REPRESENTED BY THIS AGREEMENT ARE COMMERCIAL TRANSACTIONS AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ANY RIGHTS TO NOTICE OF AND HEARING ON PREJUDGMENT REMEDIES UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES OR OTHER STATUTES AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES THE BANK'S ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER. IN WITNESS WHEREOF , Borrower and Bank, on the day and year first written above, have caused this Agreement to be executed under seal.     Farmstead Telephone Group Inc.         By: ____________________________________(SEAL) Robert G. LaVigne, Executive Vice President and Chief Financial Officer           First Union National Bank         By: ____________________________________(SEAL) Patricia S. Gaudreau, Vice President <PAGE> 6 EXHIBIT A NON-DEFAULT CERTIFICATE In accordance with the terms of the Loan Documents dated September 27, 2000 by and between First Union National Bank and Farmstead Telephone Group, Inc. ("Borrower"), I hereby certify that: 1. I am a principal financial officer of Borrower;     2. The enclosed financial statements are prepared in accordance with generally accepted accounting principles;     3. No Default (as defined in the Loan Documents) or any event which, upon the giving of notice or lapse of time or both, would constitute such a Default, has occurred.     4. Borrower is in compliance with the Financial Covenant(s) set forth in the Loan Documents, as demonstrated by the calculations contained in the Covenant Compliance Certificate attached hereto as Schedule 1.   _______________________________ Name: Robert G. LaVigne Title: Executive Vice President and Chief Financial Officer <PAGE> 7
EXHIBIT 10.(iii)F EMPLOYMENT AGREEMENT          THIS AGREEMENT is made effective as of August 1, 2000 by and between Robert W. Honse (hereafter "Executive") and Farmland Industries, Inc., a Kansas cooperative corporation (together with all affiliates, the "Company").         WHEREAS, Executive has been designated as the Company’s President and Chief Executive Officer, effective September 1, 2000;         NOW, THEREFORE, it is hereby agreed as follows:          1. Employment. The Company hereby agrees to employ Executive as its Chief Executive Officer effective September 1, 2000, and Executive hereby agrees to accept employment with the Company in such position upon the terms and conditions set forth in this Agreement.         2. Period of Employment; Termination of Agreement. The period of employment as Chief Executive Officer shall commence on September 1, 2000 and continue for a rolling three (3) year period until written notice on non-extension is provided by either party. In no event, will such term be automatically extended beyond Executive’s 65th birthday. Executive’s employment may be earlier terminated by either party subject to the rights and obligations of the parties set forth herein.          3. Position, Duties, Responsibilities. Executive shall be employed as the Chief Executive Officer. Executive shall exercise such authority and perform such duties and services, consistent with such position, as may be assigned to him from time to time by the Board of Directors (the "Board").          4. Devotion of Time and Best Efforts. Except for vacations and absences due to temporary illness, Executive shall devote his full time, best efforts and undivided attention and energies during his employment to the performance of his duties and to advance the Company’s interests, as determined by the Board. During his employment, Executive shall not, without the prior approval of the Board, be engaged in any other business activity which conflicts with the duties of Executive hereunder, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. Executive may continue his current civic and charitable activities and his current service on various boards.          5. Compensation and Benefits.            (a) Base Salary. The Company shall pay Executive an initial "Base Salary" at the rate of Five Hundred Eighty One Thousand, Two Hundred and Twenty-Four Dollars ($581,224) per year. The Board shall annually review the amount of Base Salary. Such review and any increase shall occur on the current customary schedule. Any such upward adjustment shall not require a written amendment to this Agreement.           (b) Other Compensation and Employee Benefits. During the term of this employment hereunder 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 in this Agreement shall preclude the company from terminating or amending any such plan or program in its sole discretion.           (c) Business Expenses. The Company shall bear such ordinary and necessary business expenses incurred by executive in performing his duties hereunder as the Company determined from time to time, provided that Executive accounts promptly for such expenses to the Company in the manner prescribed from time to time by the Company.          6. Early Termination. This Agreement may be terminated prior to its scheduled expiration as follows:            (a) Death. Executive's employment shall terminate upon Executive's death.            (b) Termination by the Company.                (1) Request for Resignation. The Company, by action of the Board, may request Executive's resignation at any time and for any reason whatsoever, without cause, effective in accordance with the delivery of a written request for resignation to Executive. Executive agrees to immediately tender his resignation upon receipt of any such request.                (2) For Cause. The Company, by action of the Board, may terminate the Executive's employment at any time for Cause, effective upon delivery of written notice of termination to Executive. If such termination by the Company is asserted to be for Cause, such termination notice shall state the grounds that the Board claims constitute Cause. As used herein, "Cause" shall mean (a) willful misconduct by Executive which is damaging or detrimental to the business and affairs of the Company, monetarily or otherwise, as determined by the Board in the exercise of its good faith business judgment; (b) a material breach of this Agreement by Executive, (c) chronic alcoholism or any other form of substance addiction on the part of Executive, (d) the commission by Executive of any act involving fraud or dishonesty or moral turpitude, (e) the indictment for, being bound over for trial following a preliminary hearing, or the conviction of Executive of, any criminal act in either a state or federal court proceeding, or (f) willful refusal to implement policies promulgated by the Board.                (3) Disability. The Company, by action of the Board, may terminate the Executive's employment if Executive sustains a disability which is serious enough that Executive is not able to perform the essential functions of Executive's job, 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 for purpose of this Agreement if Executive qualifies, because of illness or incapacity, to begin receiving disability income insurance payments under the long-term disability income insurance policy that the Company maintains for the benefit of Executive. If there is no such policy in effect at the date of Executive's potential disability, or if Executive does not qualify for such payments, Executive shall nevertheless be presumed to have such a disability if Executive is substantially incapable of performing Executive's duties for a period of more than twelve (12) weeks.            (c) Termination by Executive.                (1) Voluntary Resignation. Executive may terminate the Employment Period and Executive's employment at any time and for any reason whatsoever, effective upon delivery of written notice of resignation to the Company.                (2) Good Reason Resignation. Executive may terminate the Employment Period and resign his employment at any time for Good Reason, effective upon delivery of written notice of resignation to the Company. If such resignation by Executive is asserted to be for "Good Reason," such resignation and notice shall state the grounds that Executive claims constitute Good Reason. As used herein "Good Reason" shall mean a material breach of this Agreement by the Company, which breach is not cured within thirty (30) days of the Company's receipt of notice of such breach, or a demotion such that Executive does not serve as the Chief Executive Officer of the Company.          7. Post-Termination Payments by the Company.            (a) Resignation Requested by Company or Resignation for Good Reason. In the event that Executive's employment is terminated prior to expiration of the term by the Company through a Request for Resignation or by Executive for Good Reason, and the Executive:           (1) signs (and does not rescind, as allowed by law) a Release of Claims in a form satisfactory to the Company which assures, among other things, that Executive will not commence any type of litigation or other claims as a result of his employment or termination of employment; and            (2) honors all of Executive's other obligations as required by this Agreement; the Company will provide Executive severance benefits ("Severance Benefits") as follows:   (i) a severance payment equal to Executive's then existing Base Salary through the unexpired portion of the term of this Agreement;   (ii) additional severance in the form of pro-rata payouts under any variable compensation plan, long-term incentive program or other bonus arrangements then in effect;   (iii) vested benefits under the Company-sponsored pension plan, 401(k) plan, SERP, and deferred compensation plan, in accordance with the terms and conditions of such plans;   (iv) if such termination occurs prior to Executive attaining the age of sixty-two (62), the Company shall pay Executive the difference between the retirement benefit he would have received under the Company-sponsored retirement plan had he retired at age sixty-two (62) and the retirement benefit he would receive under such plan based on his date of termination of employment;   (v) if such termination occurs prior to August 31, 2005, the Company shall also provide Executive the following continued employment benefits (or their equivalent) through August 31, 2005 on the same terms generally available to other senior officers: life insurance, health and dental insurance, and other non-pension, non-retirement benefits then generally provided to senior officers of the Company;   (vi) Executive may continue to have family coverage under the Company-sponsored medical plan until he reaches age 65, becomes eligible for Medicare or becomes eligible for coverage by another group plan, but Executive shall be responsible for paying the retiree premium rate for such coverage.            (b) Termination by Reason of Death or Disability, Termination by the Company for Cause or Termination by Executive Through Voluntary Resignation. If Executive's employment is terminated prior to expiration of the term by reason of the Executive's death or disability, by the Company for Cause, or by Executive as a Voluntary Resignation, Executive shall be entitled only to his rights (a) to receive the unpaid portion of this 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 his variable or incentive compensation for each full or partial year (on a pro rata basis) during which he was employed, to the extent earned and accrued, pursuant to the terms and conditions of the applicable compensation plan(s), (e) to receive vested benefits under the Company's pension plan, 401(k) plan, SERP, deferred compensation or other benefit plans in which the Executive has participated, all to the extent and in accordance with the terms of such plans, and (f) to continue certain health insurance at his expense pursuant to COBRA.            (c) Sole Source of Payments. The post-termination payments provided herein shall be in lieu of all other compensation, or other payments or consideration of any kind under any contract, plan program or practice related to Executive's employment.          8. Nonrenewal of Agreement. The Company may elect not to renew this Agreement, and thereby to terminate Executive's employment hereunder without any severance obligations, upon at lest three (3) year's prior written notice of non-extension to Executive.         9. Consulting. If Executive qualifies for Severance Benefits under Paragraph 7(a), Executive agrees to make himself available to the Company as needed to consult for a period of one year following termination of employment. Executive shall be available to consult up to an average of forty (40) hours per month. Executive shall be entitled to reasonable compensation for his time in providing such consulting services and to reimbursement of his out of pocket expenses.          10. Other Executive Obligations. Executive agrees that the following provisions will apply throughout Executive's period of employment 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 the Company'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 the Company or its business or employees, acquired during the period of his employment by the Company; (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 the Company, 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 term of his employment 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 two (2) years, Executive will not directly or indirectly engage in or carry on a business that is in direct competition with any significant business unit of the Company as conclusively determined by the Board of Directors. 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 the Company as conclusively determined by the Board of Directors.            (d) Cooperation in Claims. For an unlimited period following his period of employment, at the request of the Company, Executive will cooperate with the Company with respect to any claims or lawsuits by or against the Company 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 the Company, or with their attorneys or agents. The Company 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 the Company.            (e) Remedies. The parties recognize and agree that, because any breach by Executive of the provisions of this Paragraph 10 would result in damages difficult to ascertain, the Company shall be entitled to injunctive and other equitable relief to prevent a breach or threatened breach of the provisions of this Paragraph 10. Accordingly, the parties specifically agree that the Company shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Paragraph 10 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 the Company, and given the terms of this Agreement, the restrictions and remedies set forth in Paragraph 10 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 the Company's action in not enforcing a particular breach of any part of Paragraph 10 will not prevent the Company from enforcing any other breaches that the Company discovers, and shall not operate as a waiver by the Company against any future enforcement of a breach.          11. Notices. Notices hereunder shall be in writing and shall be delivered personally or sent return receipt requested and postage prepaid, addressed as follows: c/o Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 If to the Company: Chairman of the Board c/o Corporate Secretary 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          12. 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.          13. 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.          14. 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.          15. 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.         16. 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.         17. 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 a member of the Board upon authorization of the Board to do so.         IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date set forth above. EXECUTIVE FARMLAND INDUSTRIES, INC. _/s/ROBERT W. HONSE___ By: __/S/ALBERT SHIVELY____________ Robert W. Honse Albert Shivley, Chairman of the Board of Directors By: _/S/JODY BEZNER________________ Jody Bezner, Vice-Chairman of the Board of Directors
EXHIBIT 10.3 NOTE September 15, 2000 Minneapolis, Minnesota $20,000,000     The undersigned, for value received, promises to pay to the order of LaSalle Bank National Association (the "Bank") at the principal office of LaSalle Bank National Association (the "Agent") in Chicago, Illinois the aggregate unpaid amount of all Loans made to the undersigned by the Bank pursuant to the Credit Agreement referred to below (as shown on the schedule attached hereto (and any continuation thereof) or in the records of the Bank), such principal amount to be payable on the dates set forth in the Credit Agreement.     The undersigned further promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America.     This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Credit Agreement, dated as of September 15, 2000 (as amended or otherwise modified from time to time, the "Credit Agreement"; terms not otherwise defined herein are used herein as defined in the Credit Agreement), among the undersigned, certain financial institutions (including the Bank) and the Agent, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or its due date accelerated.     This Note is made under and governed by the laws of the State of Minnesota applicable to contracts made and to be performed entirely within such State.     Fargo Electronics, Inc.           By:   /s/ GARY R. HOLLAND    -------------------------------------------------------------------------------- Gary R. Holland --------------------------------------------------------------------------------     Title: President and CEO -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Exhibit 10 First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan . Plan Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A . Summary Description . . . . . . . . . . . . . . . . . . . . . . . . . B . How to Exercise Your Stock Options . . . . . . . . . . . . C August 31, 2000   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan * * * * * PLAN DOCUMENT August 31, 2000           First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan Plan Document Table of Contents Section 1 - Establishment, Purpose and Effective Date of Plan ....................................................... 1 1.1 - Establishment ............................................................................................................... 1 1.2 - Purpose ......................................................................................................................... 1 1.3 - Effective Date .............................................................................................................. 1 Section 2 - Definitions ...................................................................................................................... 1 Section 3 - Eligibility ........................................................................................................................ 2 Section 4 - Shares of Common Stock Available .............................................................................. 2 4.1 - Number ........................................................................................................................ 2 4.1 - Unused Stock ............................................................................................................... 2 4.3 - Adjustment in Capitalization ....................................................................................... 2 Section 5 - Director Options ............................................................................................................. 2 5.1 - Grant and Eligibility .................................................................................................... 2 5.2 - Director Option Agreement ......................................................................................... 3 5.3 - Tax Status ..................................................................................................................... 3 5.4 - Option Price and Payment ........................................................................................... 3 5.5 - Vesting and duration of Options .................................................................................. 3 5.6 - Delivery of Certificate ................................................................................................. 3 Section 6 - Coordination with 1989 Omnibus Stock and Incentive Plan ......................................... 4 6.1 - Change in Control ........................................................................................................ 4 6.2 - Limited Transferability of Operations Beneficiary Designations ................................ 4 Section 7 - Amendment and Termination ......................................................................................... 4 Section 8 - Miscellaneous ................................................................................................................. 4 8.1 - Rights of Directors ....................................................................................................... 4 8.2 - Indemnification ............................................................................................................ 4 8.3 - Requirements of Law ................................................................................................... 5 8.4 - Governing Law ............................................................................................................ 5 8.5 - Administration ............................................................................................................. 5     FIRST MIDWEST BANCORP, INC. AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' 1997 STOCK OPTION PLAN Plan Document Section 1. Establishment, Purposes and Effective Date of Plan 1.1 Establishment. First Midwest Bancorp, Inc., a Delaware corporation, hereby amends and restates the "NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN" (the "Plan"). The Plan provides for the grant of nonqualified stock options to the Company's Non-Employee Directors. 1.2 Purposes. The purpose of the Plan is to advance the interests of the Company and its stockholders by augmenting the Company's traditional compensation program for Non-Employee Directors with awards of nonqualified stock options, thereby increasing their stake in the future growth and prosperity of the Company, and furthering the Directors' identity of interest with those of the Company's stockholders. By thus compensating Non-Employee Directors, the Company seeks to attract, retain, compensate and motivate those highly competent individuals whose judgment, initiative, leadership, and efforts are important to the success of the Company. 1.3 Effective Date. The effective date of this Amended and Restated Plan is February 16, 2000. Section 2. Definitions As used herein, the following terms shall have the meanings hereinafter set forth: (a) "Board" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Common Stock" or "Share" means the Common Stock, par value $.01 per share, of the Company or such other class of shares or other securities as may be applicable pursuant to the provisions of subsection 4.3. (d) "Company" means First Midwest Bancorp, Inc., a Delaware corporation. (e) "Director Options" means options granted hereunder to Non-Employee Directors. (f) "Effective Date" means February 16, 2000, the date on which the Plan was approved by the Board. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" means, as to any date, the average of the highest and lowest prices of a share of Common Stock as reported in the consolidated tape of the NASDAQ Stock Market. In the event there are no transactions reported for such date, the Fair Market Value shall be determined as of the immediately preceding date on which such prices of Common Stock are so quoted. (i) "Grant Date" means, with respect to the annual grant of Directors Options described in Section 5.1(a) means with respect to each individual who is a Non-Employee Director, the date of the first regularly-scheduled Board meeting held in each calendar year (generally in February), beginning with the first Board meeting held in 2000. With respect to any individual who first becomes a Non-Employee Director after the date of the first Board meeting held in 2000, the date the individual first becomes a Non-Employee Director shall also be a Grant Date. In addition, Grant Date shall mean any other date on which a Director Option is granted to a Non-Employee Director pursuant to Section 5.1(b). (j) "Non-Employee Director", with respect to the grant of Directors Options hereunder, means any person who is a member of the Board and who is not, as of the Grant Date, an employee of the Company or any of its subsidiaries. A Non-Employee Director who, with the approval of the Board of Directors, enters into a"Continuing Participant Agreement" with the Company effective upon such person ceasing to be a member of the Board shall continue to be deemed to be a Non-Employee Director for purposes of the Plan and shall not be deemed to incur a cessation of directorship during the term of such "Continuing Participant Agreement" [Adopted by Amendment dated June 21, 2000]. Section 3. Eligibility Each Non-Employee Director as of the Effective Date and each person who becomes a Non-Employee Director after the Effective Date shall be eligible to participate in the Plan. Section 4. Shares of Common Stock Available 4.1 Number. The total number of shares of Common Stock of the Company subject to issuance under the Plan, and subject to adjustment upon occurrence of any of the events indicated in subsection 4.3, may not exceed 225,000. The Shares to be delivered under the Plan may consist, in whole or in part, of authorized but unissued stock or treasury stock not reserved for any other purpose. 4.2 Unused Stock. In the event any shares of Common Stock that are subject to an Director Option which, for any reason, expires, terminates or is canceled as to such shares, such shares again shall become available for issuance under the Plan. 4.3 Adjustment in Capitalization. In the event of any change in the outstanding shares of Common Stock by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or other similar corporate change, the aggregate number of shares of Common Stock subject to Director Options to be granted or outstanding pursuant to Section 5 hereof, and/or the stated option price, shall be appropriately adjusted by the Board, whose determination shall be conclusive; provided, however, that fractional shares shall be rounded to the nearest whole share. Section 5. Director Options 5.1 Grant and Eligibility. (a) On each Grant Date applicable to this Section 5.1(a) which occurs after the Effective Date, Director Options for the purchase of shares of Common Stock will be granted to each individual who is a Non-Employee Director. The number of shares of Common Stock subject to each Director Option shall be determined by dividing (a) the average cash compensation earned by the Non-Employee Directors during the calendar year immediately preceding the calendar year in which the Grant Date occurs, by (b) the dollar value of a Director Option to purchase one share of Common Stock on the Grant Date (provided, however, that such number of Shares shall be rounded down to the nearest whole Share). Such dollar value shall be based on utilization of the Black-Scholes or other appropriate pricing model on the basis used with respect to the determination of option awards under the Omnibus Plan (as defined below). (b) Director Options may be granted to Non-Employee Directors at any time and from time to the time as the Board shall determine. 5.2 Director Option Agreement. Each Director Option shall be evidenced by a Director Option Agreement that shall specify the option price, the duration of the option, the number of shares of Common Stock to which the option pertains, and such other provisions as the Board shall determine. 5.3 Tax Status. Director Options shall be options in the form of nonqualified stock options which are intended not to fall under the provisions of Code Section 422. 5.4 Option Price and Payment. The option price of each share of Common Stock subject to a Director Option shall be 100% of the Fair Market Value on the Grant Date. Director Options shall be exercised by the delivery of a written notice to the Company setting forth the number of shares of Common Stock with respect to which the option is to be exercised, accompanied by full payment for the Shares. Upon exercise of any Director Option, the option price shall be payable to the Company in full either (a) in cash or its equivalent (including for this purpose, the proceeds from a cashless exercise as permitted under the Federal Reserve Board's Regulation T, or other borrowed funds), or (b) by tendering previously-acquired Common Stock held for six months or longer having an aggregate Fair Market Value at the time of exercise equal to the total option price (including for this purpose Shares deemed tendered by affirmation of ownership), or (c) by a combination of (a) and (b). Notwithstanding the foregoing, the exercise price payable upon the exercise of a Director Option by a Non-Employee Director who has a deferral election in effect under the Company's Nonqualified Stock Option - Gain Deferral Plan or similar plan (the "Gain Deferral Plan"), shall be made solely by tendering previously-acquired Shares in accordance with clause (b) above. 5.5 Vesting and Duration of Options. Each Director Option shall vest and become exercisable in full upon the first to occur of (a) the expiration of one year after the Grant Date with respect to the Director Options described in Section 5.1(a) or six months after the Grant Date with respect to any other Director Options, unless prior thereto the Non-Employee Director has ceased to be a director for any reason other than death or disability, (b) the death or disability of the Non-Employee Director, or (c) a Change-in-control (as provided in Section 6.1 hereof). Once vested, Director Options shall expire upon the date which is three years following termination of the Director's Board membership for any reason; provided, however, in no event may any Director Option be exercised beyond the tenth anniversary of its Grant Date, or such shorter period which may be set forth in the Director Option Agreement. 5.6 Delivery of Certificate. As soon as practicable after receipt of each notice of exercise and full payment of the exercise price, the Company shall deliver to the Non-Employee Director a certificate or certificates representing acquired shares of Common Stock. Notwithstanding the foregoing, in the event the Non-Employee Director has in effect a deferral election under the Gain Deferral Plan, the Company shall deliver to the trustee of the trust established under the Gain Deferral Plan, a certificate or certificates representing such number of Shares determined by dividing (a) the excess of the (i) Fair Market Value of the Shares purchased pursuant to the option exercise, over (ii) the exercise price for the Shares purchased, by (b) the Fair Market Value of one Share. The Company shall deliver a certificate or certificates for the remainder of the Shares, representing Shares with a Fair Market Value equal to the option exercise price paid. For purposes of the foregoing, Fair Market Value shall be determined on the date the Director Option is exercised. Section 6. Coordination with 1989 Omnibus Stock and Incentive Plan The following provisions of the Company's 1989 Omnibus Stock and Incentive Plan, as from time to time amended (the "Omnibus Plan"), shall be applicable to the Director Options as if such provisions were set forth in this Plan in full: 6.1 Change-in-Control. For purposes of this Plan, a "Change-in-Control" shall be deemed to have occurred on the date a Change-in-Control occurs under the Omnibus Plan. Notwithstanding any other provision of the Plan, if a Change-in-Control occurs, then each Director Option shall become fully vested and exercisable as of the date of the Change-in-Control. 6.2 Limited Transferability of Options; Beneficiary Designations. No Director Option granted under this Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, otherwise than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Board may, in its discretion, authorize all or a portion of the Director Options to be on terms which permit the transfer by the Non-Employee Director to the extent the Committee under the Omnibus Plan may permit such transfers. Non-Employee Directors may designate beneficiaries with respect to Director Options granted hereunder on the same basis as applicable to options under the Omnibus Plan. Section 7. Amendment and Termination The Board, or any committee to the extent authorized by the Board, may make such modifications to, or may terminate, the Plan as it shall deem advisable; provided, however, that except as contemplated by Section 4.3, no modification shall increase this number of Shares subject to issuance under the Plan without approval of the Company's shareholders; and provided, further, that no modification or termination shall adversely affect the rights under any Director Options then outstanding without the written consent of the holder. Section 8. Miscellaneous 8.1 Rights of Directors. Neither the Plan nor any action taken hereunder shall be construed as giving any Non-Employee Director any right to continue to serve as a Director of the Company or otherwise to be retained in the service of the Company. 8.2 Indemnification. Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him in satisfaction of any judgment in any such action, suit or proceeding against him, provided he shall give the Company an opportunity, at its expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation or Bylaws, as a matter of law or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 8.3 Requirements of Law. The granting of Director Options and the issuance of shares of Common Stock with respect to an option exercise, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 8.4 Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware. 8.5 Administration. The Board may establish such rules and regulations with respect to the proper administration of the Plan as it may determine, and may amend or revoke any rule or regulation so established. This Plan shall be interpreted by and all questions arising in connection therewith shall be determined by a majority of the Board, whose interpretation or determination, when made in good faith, shall be conclusive and binding.   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan * * * * * SUMMARY DESCRIPTION THIS DOCUMENT (INCLUDING THE APPENDICES HERETO) CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE DATE OF THIS SUMMARY DESCRIPTION IS AUGUST 31, 2000.           FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION Table of Contents Page Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Available information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Resale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Appendix A - General Information Regarding Director Stock Option Grants A - 1 to A - 3 Appendix B - General Information Regarding Reload Stock Options . . . . . . . B - 1 to B - 4 Appendix C - General Information Regarding Transferability of Director                  Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C - 1 to C - 2 Appendix D -General Information Regarding Director Stock Option Loan                  Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D - 1 to D - 2 Appendix E - General Information Regarding Nonqualified Stock Option Gain                  Deferral Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E - 1 to E - 2   FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * Introduction In May, 1997 the Board of Directors of First Midwest Bancorp, Inc. ("First Midwest" or Company") established the First Midwest Bancorp, Inc. Non-Employee Directors' 1997 Stock Option Plan (the "Plan"). The Plan was amended and restated on February 16, 2000 and presented to the shareholders for approval at the April 19, 2000 Annual Shareholders Meeting. The Plan permits the granting of 225,000 nonqualified stock options. The purpose of the Plan is to advance the interests of First Midwest by encouraging the acquisition of an equity interest by Directors and by enabling the Company to attract and retain the services of Directors. This Summary Description including Appendices A through E attached hereto, sets forth general information relating to nonqualified stock options granted under the Plan and supercedes any other prior Summary Description of the Plan. This Summary Description should be read in conjunction with the information incorporated by reference therein, as well as the text of the Plan to which reference is made. Available Information The Company has filed a Registration Statement with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933 (the "Securities Act") with respect to the shares of Common Stock which may be issued under the Plan. Pursuant to the rules of the SEC, this Summary Description does not contain all of the information set forth in the Registration Statement and exhibits thereto, to which reference is made. The Company will provide, without charge, to each person to whom this Summary Description is delivered, upon written or oral request of such person, a copy of any and all of the following documents which have been incorporated by reference into the Registration Statement: - The Company's latest Annual Report on Form 10-K filed with the SEC. - All quarterly and other reports filed by the Company with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"). - The description of the Company's Company Stock and its Preferred Share Purchase Rights contained in applicable registration statements and other reports filed by the Company with the SEC under Section 12 of the Exchange Act. In addition, a copy of First Midwest's most recent Annual Report to Stockholders accompanies this Summary Description or has been furnished previously. The Company will provide to each Director who has received this Summary Description copies of all reports, proxy statements and other communications distributed by the Company to its stockholders generally. In the event a recipient of this Summary Description misplaces any such documents, another will be furnished, without charge, upon written request. Requests for copies of any of the documents referred to above, or any questions regarding the Plan or its administration, should be directed to the Office of the Corporate Controller, First Midwest Bancorp, Inc. 300 Park Blvd., Suite 405, Itasca, IL 60143 (telephone (630) 875-7459). Resale of Shares The Plan does not apply any specific restrictions on the resale of shares of Common Stock issued to Directors under the Plan. However, the Securities Act and Exchange Act may impose certain limitations on such resale. Under the Securities Act, all Directors of the Company may be deemed to be "affiliates" of the Company for purposes of the Securities Act. Because such affiliates are so closely identified with the Company, sales of Common Stock by such persons may be deemed to be sales of Common Stock by the Company. Rule 144, promulgated under the Securities Act, sets forth a "safe harbor" procedure for affiliates to sell shares yet not have the sale be deemed a distribution of Common Stock on behalf of the Company. Rule 144 restricts the number of shares of Common Stock which may be sold by an affiliate during any 90-day period, designates a manner of sale and requires the filing of a notice of proposed sale with the SEC. Any affiliates of the Company should consult with a qualified legal advisor regarding his or her own situation before making any resales of Common Stock issued pursuant to the Plan. Section 16(b) of the Exchange Act provides that, in certain circumstances, the profit realized by an affiliate of the Company on the purchase and sale, or sale and purchase, of Common Stock within a six-month time frame, is recoverable by the Company from the affiliate if it is a prohibited "short-swing profit". Accordingly, Directors of the Company should review the implications of the "short-swing profit" prohibitions prior to exercising any rights pursuant to any awards received under the Plan or prior to disposing of any shares of Common Stock purchased or otherwise received under the Plan. General information about the applicability of Section 16(b) and the rules promulgated thereunder to the particular forms of awards granted under the Plan is included in the applicable Appendix describing such awards.   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX A GENERAL INFORMATION REGARDING DIRECTOR STOCK OPTION GRANTS           August 31, 2000   FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX A GENERAL INFORMATION PERTAINING TO DIRECTOR STOCK OPTION GRANTS Introduction Nonqualified stock options are granted to Non-Employee Directors ("Directors") on each grant date, as defined in the Plan. Generally, the grant date will be the date of the first regularly scheduled Board Meeting held in each calendar year. With respect to any individual who becomes a Director after the date of such first Board Meeting, the date the individual first becomes a Director shall also be a grant date, and the stock options granted will be pro-rated. Calculation and Exercise Price of Director Stock Option Grants Director stock option grants are expressed as the number of shares of First Midwest Common Stock (the "Common Stock") that may be purchased by such grant. The number of shares of Common Stock subject to each Director stock option grant is determined by dividing the average cash compensation earned by Directors during the prior calendar year by the dollar value of a Director stock option to purchase one share of Common Stock on the date of the grant. The dollar value for purposes of this calculation will be based on utilization of the Black-Scholes pricing model. The option exercise price of each share of Common Stock subject to a Director stock option shall be 100% of the fair market value of the Common Stock on the grant date. The fair market value is the average of the high and low sale prices for the Common Stock as quoted by NASDAQ on the date of the grant. In the event of any change in outstanding shares of Common Stock by reason of a stock dividend, split or similar corporate change, the aggregate number of shares of Common Stock subject to each outstanding Director stock option grant, and the stated exercise price, shall be adjusted. Exerciseability of Director Stock Options Except as otherwise approved, Director stock options shall be exercisable (i.e. vested) as follows: .   No options are exercisable until one year following the date of the grant. .   One year following the date of the grant, the option is exercisable with respect to 100% of the number of shares of Common Stock covered thereby. .   Upon the death or disability of the Director, or upon a change-in-control of First Midwest, as defined in the Plan, all options will be immediately exercisable in full.   The options expire ten years after the date of the grant. If the Director's Board membership terminates prior to the expiration date, the options, to the extent exercisable as of the date of such termination will remain exercisable for 3 years after the date on which membership is terminated and will then expire. However, if the Director enters into a "Continuing Participant Agreement" with First Midwest which is approved by the Board of Directors, as described below, such Director's Board membership will not be deemed to have terminated for purposes of the Plan. However, in no event may the Director stock option be exercised beyond its ten year expiration date. Director Stock Option Grant Letter Agreement Within a reasonable period of time after each Director stock option grant is approved by the Committee, a Letter Agreement between First Midwest and the Director will be executed along with the appropriate beneficiary forms. The Director will also be supplied with forms and other information related to the procedures for the exercise of options. Continuing Participant Agreement For purposes of the Plan, a Director's directorship will not be deemed to have terminated, and in stead will be deemed to be continuing, during any period during which such Director is a party to a written Continuing Participant Agreement with the Company that was approved by the Board of Directors. Federal Income Tax Considerations The following is a brief summary of the principal income tax consequences under the Internal Revenue Code of 1986, as amended (the "Code") relating to nonqualified stock options granted under the Plan. This summary is not intended to be exhaustive and, among other things, does not describe the impact of any state and local taxes. General - In general, a Director will not realize income for federal income tax purposes at the time a Director stock option is granted. The Director will recognize ordinary income upon exercise of the Director stock option in an amount equal to the difference between the aggregate exercise price paid for the shares of Common Stock purchased and the fair market value of such shares as of the date of exercise. Upon disposition of the shares acquired upon exercise, appreciation (or depreciation) after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending upon the holding period of the shares sold. The Plan allows Directors to pay for the exercise price of nonqualified stock options by surrendering shares of Common Stock that the Director currently owns having a fair market value equal to such exercise price if such shares have been held for at least 6 months prior to the date of exercise (the "previously acquired shares"). If the Director pays the exercise price, in full or in part, with previously acquired shares of Common Stock, the use of such shares will not affect the tax treatment of the exercise. No gain or loss will be recognized with respect to the shares of Common Stock tendered to the Company in payment of the exercise price or with respect to the equivalent number of shares of Common Stock issued in connection with the option exercise. Such number of shares of Common Stock received upon exercise will have the same basis and holding period for purposes of determining capital gain or loss upon subsequent disposition as did the previously acquired shares. The shares of Common Stock received upon exercise in excess of the number of previously acquired shares tendered will have a basis equal to the fair market value of such previously acquired shares as of the date ordinary income is recognized with respect to the option exercise and the holding period will commence on that date To the extent that the Director recognizes ordinary income on the exercise of the option, the Company will be entitled to a tax deduction in an amount equal to the amount of ordinary income recognized.   No Withholding Taxes Due on Exercise - No withholding taxes (either income or FICA/Medicare) are due on the exercise of Director stock options. This tax treatment is the same as that applied to Directors' fees, where no tax withholding is required. A Form 1099 will be issued to Directors exercising stock options for the calendar year in which the exercise occurs. Accordingly, Directors should be aware that estimated tax payments may be required for the years in which Director stock options are exercised. Section 16 of the Exchange Act In general, an affiliate subject to the reporting obligations of Section 16(a) and the short-swing profit recovery provisions of Section 16(b) of the Exchange Act will be deemed to have "purchased" shares of Common Stock as of the date any stock option is granted to the affiliate. Such purchase will, however, generally be exempt from reporting and from any short-swing profit recovery. Such options should, however, be reported on the first Form 4 or Form 5 filed by the affiliate following the date of grant. The exercise of a Director stock option is not considered a "purchase" for purposes of the short-swing profit recovery rules, but must be reported on a Form 4 by the 10th day of the month following the option exercise. Any subsequent sale of the shares received is a reportable transaction that can give rise to a short-swing profit recovery. Affiliates are encouraged to consult with the Corporate Secretary of the Holding Company regarding the Form 4 and Form 5 reporting and short-swing profit recovery implications of the exercise and subsequent sale of shares of Common Stock prior to any such exercise or sale.     First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX B GENERAL INFORMATION REGARDING RELOAD STOCK OPTIONS     August 31, 2000   FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX B GENERAL INFORMATION REGARDING RELOAD STOCK OPTIONS Introduction   Reload Stock Options may be granted to Directors at any time and on such terms as set forth by the Board of Directors of First Midwest Bancorp, Inc. (the "Board"). The Board has determined that Reload Stock Options ("Reloads") will be granted at such times and under such terms as discussed in the sections below. Definition and Purpose of Reload Stock Options First Midwest's Director Stock Option Letter Agreements provide that First Midwest Common Stock may be used as consideration for the exercise price of option exercises. As part of its program to encourage ownership of Common Stock by its Directors, the Board approved the granting of Reloads when Common Stock is tendered as consideration for a Director stock option exercise. The purpose of granting Reloads is to enable the Director to maintain the same "upside potential" when tendering Common Stock to pay for the exercise price. The benefit to First Midwest through the granting of Reloads and the holding requirements of the underlying shares imposed thereon are not only increased ownership on the part of the Director but also the realization of a tax benefit by the Company from such exercise. Eligibility for Reload Options Reloads will be granted only to active Directors; retired Directors are not eligible. Reloads will be granted only for shares tendered in an option exercise that are already owned for at least 6 months prior to the option exercise. Shares tendered for option exercises will be considered as newly-held for purposes of the 6 month holding rule and may not be used for a subsequent option exercise for at least 6 months. A Director stock option grant will be reloaded only three times. Date of the Reload Option Grant The date of the Reload grant will be the same date on which the Common Stock is tendered in consideration for the Director stock option exercise. Until the Board determines otherwise, Reloads will be granted, and canceled if appropriate (see below), automatically, with no further action by the Board required. Reload Option Price The Reload exercise price will be the average of the high and low market prices quoted on the NASDAQ National Market System on the date of the option exercise for which Common Stock is used as consideration and the Reload is granted. This also represents the methodology used for valuing the Common Stock used for option exercise consideration and for the annual granting of Director stock options. Reload Option Term The term, or maturity, of the Reload will be the same as the remaining term of the underlying Director stock option that is exercised. Reload Option Vesting Reloads will vest on a date that is the earlier of 6 months after the Reload is granted or 30 days prior to the expiration of the underlying Director stock option for which the Reload is granted. Reload Option Cancellation If any Common Stock is sold by a Director who receives Reloads while such Director holds unvested Reloads, a like number of the unvested Reloads will be canceled. The cancellation will be first applied to the unvested Reloads with the longest remaining term. Once vested, the Reload will only be canceled to the extent the Director sells the Common Stock that was received when the underlying option was exercised. Since the purpose of granting Reloads is to enable a Director to maintain the same upside potential on Common Stock, any voluntary reduction in such upside potential (through the sale of Common Stock by the Director) should be reflected by a like reduction in the Reloads held by the Director. Examples of Reload Stock Option Grants Pages B - 3 and B - 4 are examples of Reloads granted in both taxable stock option exercises and stock option exercises under the Nonqualified Stock Option Gain Deferral Plan (see Appendix D to the Summary Description). Actions Necessary To Be Granted Reload Stock Options Until the Board amends or modifies the Reload feature, Reloads will automatically be granted upon the exercise of Director stock options where the purchase price is paid with Common Stock held 6 months or longer. The Reload will be made in the form of a Letter Agreement (similar to the Director Letter Agreement) which will be provided to the Director within 30 days after the eligible exercise. Example of Reload Stock Option Grants Taxable Option Exercises Note: Reload Stock Option Grants are only applicable to stock option exercises in which FMBI Common Stock is tendered for payment of the option exercise price.     P FMBI Stock Price is $50 per share. P Director does not elect gain deferral and owns 680 shares of FMBI (with a holding period of 6+ months). P Options (1800) to be exercised are as follows: (a) 500 options @$10; exp. date 1999; exercise price $5,000; Profit-$20,000 (b) 1,000 options @ $20; exp. date 2000; exercise price $20,000; Profit-$30,000 (c) 300 options @ $30; exp. date 2001; exercise price $9,000; Profit- $6,000 P FMBI stock required to exercise all 1,800 options: $34,000 exercise price / $50 FMV = 680 shares tendered for exercise P Director receives 1,800 shares of FMBI Common Stock. P Reduction in Director's "upside potential" before and after exercise is 680 shares, as follows: Before Exercise After Exercise Outstanding Options 1,800 --- Shares tendered for option exercise 680 --- Shares received from option exercise -- 1,800 Total 2,480 1,800   P Reload Options granted at $50 per share applicable to the exercise price are as follows: Expiration Date Reload Options Granted Methodology 1999 100 Exercise price of each grant exercised / total exercise price x reduction in upside potential (680 shares). 2000 400 2001 180 Total 680         Example of Reload Stock Option Grants Option Exercises under Gain Deferral Plan Note: Reload Stock Option Grants are only applicable to stock option exercises in which FMBI Common Stock is tendered for payment of the option exercise price. P FMBI Stock Price is $50 per share. P Director elects gain deferral and owns 680 shares of FMBI (with a holding period of 6+ months). P Options (1800) to be exercised are as follows: (a) 500 options @$10; Exp. date 1999; exercise price $5,000; Profit -$20,000 (b) 1,000 options @ $20; Exp. date 2000; exercise price $20,000; Profit -$30,000 (c) 300 options @ $30; Exp. date 2001; exercise price $9,000; Profit- $6,000 . FMBI stock required to exercise all 1,800 options (which are then immediately returned to Director under terms of the tax-free exchange): $34,000 exercise price / $50 FMV = 680 shares P "Profit Shares" to be deposited in the Gain Deferral Plan: $56,000 profit / $50 FMV = 1,120 shares P Reduction in Director's "upside potential" before and after exercise is 680 shares as follows: Before Exercise After Exercise Outstanding Options 1,800 --- Shares tendered for option exercise 680 680 Shares in Gain Deferral Plan -- 1,120 Total 2,480 1,800 P Reload Options granted at $50 per share applicable to the exercise price are as follows: Expiration Date Reload Options Granted Methodology 1999 100 Exercise price of each grant exercised / total exercise price x reduction in upside potential (680 shares). 2000 400 2001 180 Total 680   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX C GENERAL INFORMATION REGARDING TRANSFERABILITY OF DIRECTOR STOCK OPTIONS       A ugust 31, 2000 FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX C GENERAL INFORMATION REGARDING TRANSFERABILITY OF DIRECTOR STOCK OPTIONS Purpose of Stock Option Transferability Transferability of stock options by Directors of First Midwest who hold stock options enables Directors to enhance the after-tax value of stock options by allowing maximum flexibility for gift and estate tax planning purposes. Eligibility to Transfer Stock Options In order to transfer stock options in accordance with the requirements outlined below, the Director must be an active Director of First Midwest; retirees are not eligible. Requirements for Transferability For Directors transferring stock options, the following requirements must be meet: 1.   Transferability is limited to immediate family members only, as defined in the Plan. 2.   The transfer must be a bonafide gift that is not made in exchange for any consideration. 3.   The transferred option will continue to be subject to the same terms and conditions which were applicable prior to the transfer such as vesting requirements and expiration dates.     Example of a Stock Option Transfer The following is an example of the steps necessary to affect a stock option transfer: 1.   Based upon restrictions outlined in the Plan and the Letter Agreement, a Director will assign the stock option to a family member - donee and pay all appropriate gift taxes. 2.   The potential appreciating asset represented by the stock option is thereby removed from the estate of the Director - donor through the transfer to the family member. 3.   Prior to the stock option expiration datem the family member can exercise the stock option. 4.   After the stock option exercise, if the shares of First Midwest are retained by the family member exercising the stock option, such shares may be considered "restricted" stock and subject to SEC Rules 144 and 145 governing resale. The First Midwest Corporate Secretary should be contacted if the family member wishes to resell such shares. Tax Considerations As noted above, transfer of options is intended to provide flexibility to Directors with regard to gift and estate planning purposes. The tax rules governing the transfer of options are complex. Accordingly a Director considering a transfer of options should consult with his or her tax advisor prior to initiating an option transfer. Actions Necessary to Make a Stock Option Transfer If a Director wishes to make a transfer of stock options (whether vested or unvested), he/she should contact the Corporate Controller of First Midwest who will initiate the appropriate transfer documentation.   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX D GENERAL INFORMATION REGARDING DIRECTOR STOCK OPTION LOAN PROGRAM August 31, 2000 FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX D GENERAL INFORMATION REGARDING DIRECTOR STOCK OPTION LOAN PROGRAM Purpose of Loan Program First Midwest has established a Loan Program to facilitate both the exercise of Director stock options and the retention of the acquired shares for the purpose of increasing First Midwest Common Stock ownership. Eligibility for Stock Option Loans Directors eligible for stock option loans must be active Directors of First Midwest; retirees are not eligible. Maximum Loan Amount Loans can be used to pay both the price and taxes related to a stock option exercise. The maximum amount of all stock option loans outstanding at any one time to a Director will be $250,000. Loan Collateral All stock option loans will be fully recourse. In addition, all First Midwest Common Stock acquired upon the exercise of a stock option that is funded by the stock option loan will be collateral for such loan. For example, if a Director exercises 1,000 options and pays for 50% of the exercise price with a stock option loan, 500 shares of the Common Stock acquired from the exercise will be held as collateral for the loan. Loan Term The term of the stock option loan will be established at the inception of the loan and cannot exceed five years. Loan Interest Rate The Applicable Federal Rate ("A.F.R.") as defined by the Internal Revenue Code ("IRC") on the date that the loan is made will be the interest rate applicable to such loan. The A.F.R. is the lowest rate allowable under the IRC without imputing interest income to the borrower. As an example, the June 2000 A.F.R.'s are as follows: .   Loans of three years or less - 6.53% .   Loans of over three years and up to five years - 6.62% Loan Interest Calculation Interest on stock option loans will be calculated on a 365 day basis. Interest will be payable at the maturity of the loan, but may be paid prior to maturity at the election of the Director. Impact of Subsequent Common Stock Sales Stock option loans must be repaid on a pro-rata basis if any of the underlying collateral is sold. For example, if a Director sells 50% of the shares acquired in a stock option exercise funded by the Loan Program, the Director must repay 50% of the outstanding loan balance, including any accrued interest applicable to such balance. Conversely, if a portion of the principal balance of the loan is repaid, a pro-rata portion of the underlying collateral will be returned. Tendering of the underlying collateral for purposes of taxable as well as gain deferral stock option exercises is permitted under the Stock Option Loan Program and will not require loan repayment as long as an identical number of shares is returned as collateral for the loan after the exercise. Repayment Schedule All principal and interest on a stock option loan will be payable at the end of the term of the loan. Effect of Termination of Directorship Upon termination of a Directorship for any reason, including after a change-in-control, as defined in the Plan, the stock option loan will continue under the same terms and conditions until the end of the term of the loan or loans.     First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX E GENERAL INFORMATION REGARDING NONQUALIFIED STOCK OPTION GAIN DEFERRAL PLAN       August 31, 2000 FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan SUMMARY DESCRIPTION * * * * * APPENDIX E GENERAL INFORMATION REGARDING NONQUALIFIED STOCK OPTION GAIN DEFERRAL PLAN ("Gain Deferral Plan") The purpose of this Appendix E is to provide general information about the Gain Deferral Plan and is qualified in its entirety by the Summary Description of the Gain Deferral Plan and the text of the Gain Deferral Plan Document. The Gain Deferral Plan provides the Compensation Committee of the Board of Directors of First Midwest Bancorp, Inc. (the "Committee") with the responsibility for the administration of the Gain Deferral Plan. The Committee is authorized to interpret the Gain Deferral Plan, to prescribe and modify its rules and procedures, and to make all other determinations necessary in its administration. Purpose of the Gain Deferral Plan The purpose of the Gain Deferral Plan is to further stock ownership by Directors of First Midwest by facilitating deferral of gains resulting from the exercise of Director stock options ("options"). In order to defer receipt of gains resulting from such exercises, Directors must make appropriate elections and must exercise their options only through the exchange of First Midwest Common Stock held for at least six months prior to the exercise date. Deferred gains can only be invested in First Midwest Common Stock; dividends earned on such Common Stock held by the Gain Deferral Plan can likewise only be reinvested. Eligibility for Participation The Gain Deferral Plan is structured as a "Nonqualified Plan" under applicable IRS and Department of Labor guidelines. As such, eligibility for participation must be monitored closely to ensure that the Gain Deferral Plan maintains compliance with these rules, regulations and limitations and is not disqualified. Accordingly, eligibility for participation in the Gain Deferral Plan will be determined by the Committee based upon the compensation guidelines of the IRS and DOL. Additionally, the ability to defer gains from option exercises is further restricted to Directors who own 500 or more shares of Common Stock in their own name, in joint tenancy with their spouse or in an alternative ownership from whereby the participant has sole voting and investment power (such as a Trust). The Common Stock ownership limitation will be reviewed annually. Election to Participate In order to effectuate participation in the Gain Deferral Plan, Directors must execute a Deferral Election Form within 30 days following his/her participation commencement date (generally, the date of the Director's election or appointment to the Board). The deferral election will apply to all options exercised where Common Stock is used as the sole payment of the exercise price. If a Director does not execute a form with 30 days following his/her participation commencement date, the deferral election will become effective only for options exercised in the calendar year following the execution date of the Deferral Election Form. A Director may execute additional forms, or a Deferral Election Revocation Form, with each subsequent form superseding all prior forms in accordance with the timing provisions contained in the Gain Deferral Plan. If a Director executes a Deferral Election Form, it will apply to all option exercises that utilize Common Stock as consideration until revoked. However, the Director may still exercise options using cash as consideration (or in cashless exercises) to the maximum extent allowed by the Plan.   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan * * * * * HOW TO EXERCISE YOUR STOCK OPTIONS         August 31, 2000 FIRST MIDWEST BANCORP, INC. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan HOW TO EXERCISE YOUR STOCK OPTIONS Table of Contents   Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 When Can an Option be Exercised? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 How Can an Option be Exercised? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Method (1) - Cash Exercise . . . . . . . . . . . . . . . . . . . . 1 Method (2) - Stock Exercise . . . . . . . . . . . . . . . . . . . 1 Method (3) - Cash and Stock Exercise . . . . . . . . . . . 2 Method (4) - Gain Deferral Exercise . . . . . . . . . . . . 2 Advantage of a Stock Option Exercise - Reload Stock Option . . . . . . . . . . . . . . . . . . . . . . 2 Examples of the Exercise Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Method (1) - Cash Exercise . . . . . . . . . . . . . . . . . . . . 2 Method (2) - Stock Exercise . . . . . . . . . . . . . . . . . . 2 Method (3) - Cash and Stock Exercise . . . . . . . . . . . 2 When Does and Option Grant Terminate? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 How are the Options Taxed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Exhibit 1 - Notice of Intent to Exercise Form (2 pages) . . . . . . 5-6   First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan HOW TO EXERCISE YOUR STOCK OPTIONS * * * * * Introduction The following sections describe the manner in which Director options can be exercised. For more detailed information concerning the exercise procedures, please consult the "Amended and Restated Non-Employee Directors' 1997 Stock Option Plan-Summary Description" and Appendices A through E to the Summary Description. Additionally, further information is also provided in each Director's Letter Agreement, received with each option grant. When Can an Option be Exercised? All shares covered by Director options are exercisable beginning on or after the one year anniversary of the date of the grant except for reload stock options, which vest in six months. All Director options must be exercised within ten years from the date of the grant or they will expire. Special rules are applicable to the vesting of Director options in the event of death or disability of the Director or in the event of a change-in-control, as defined in the Plan. How Can a Director Option be Exercised ? A Director option is exercised by completing the two-part Notice of Intention to Exercise Form ("Exercise Form") and submitting it along with the form of payment (some combination of a check or First Midwest Common Stock, as described below) for the option exercise. Although a Director option exercise will result in taxable income to the Director, no income or payroll tax withholding is required to be withheld upon the exercise of a Director option. The Exercise Form is attached as Exhibit 1 to this document. Extra forms are available through the office of the Corporate Controller of First Midwest Bancorp, Inc. There are several ways to exercise a Director option. The following section describes these exercise methods. Examples of Methods (1) - (3) below are also provided in the following section. . Method (1) - Cash Exercise - Under this method a check is submitted along with the Exercise Form to cover the option price due upon exercise (see the section in this document entitled "How are the Options Taxed?" for a discussion of taxes due). . Method (2) - Stock Exercise - Under this method the Plan allows Directors to pay for the exercise price of the options by surrendering shares of First Midwest Common Stock that the Director currently owns and has owned for at least 6 months prior to the exercise date (the "previously-acquired shares"), having a market value equal to the total exercise price. The Director simply pays for the exercise price due upon exercise with previously- acquired shares instead of cash. . Method (3) - Cash and Stock Exercise - Under this method a combination of cash and previously-acquired shares is submitted along with the Exercise Form to cover the exercise price. Any combination of cash and previously- acquired shares may be submitted in payment of the exercise price.   . Method (4) - Gain Deferral Exercise - Directors of First Midwest are eligible to participate in the Nonqualified Stock Option Gain Deferral Plan. Eligibility for participation, as well as examples, are addressed in the Plan Summary Description (Appendix E). The price that will be used for purposes of determining the value of Common Stock tendered in payment of the exercise price of Director options will be the average of the high and low prices quoted by NASDAQ on the date that the Exercise Form is received by the Office of the Corporate Controller. If the stock is not traded on that date, the next date on which the stock is traded will be used. Shares of Common Stock from the exercise of Director options will only be issued after payment has been received, either in the form of cash or Common Stock. First Midwest understands that, in certain forms of exercise, the payment for the exercise price will be coming from a brokerage firm or other agent and a short delay may result in such case. However, First Midwest must receive payment for Director options within three business days after the Exercise Form has been received by the Office of the Corporate Controller or the exercise will be nullified. Advantage of a Stock-for-Stock Exercise - Reload Stock Options Directors who use previously-acquired shares to exercise Director options will be granted Reload Stock Options. However, the requirements for vesting Reload Stock Options limit the Director's sale of Common Stock during the vesting period. The granting and vesting of Reload Stock Options are described in the Plan Summary Description (Appendix B).Examples of the Exercise Methods Facts - Options for 1,000 shares at a $20 per share exercise price are to be exercised. The average of the high and low market prices on date the Exercise Form is received by the office of the Corporate Controller is $40 per share. Method (1) - Cash Exercise .   Director exercises 1,000 options and submits a check for $20,000. .   Director is issued a new certificate for 1,000 shares worth $40,000. Method (2) - Stock Exercise .   Director owns 500 shares of Common Stock which have been held for 6 months or more and wants to exercise 1,000 options. .   Director submits 500 previously acquired shares for the exercise price (500 x $40 current price = $20,000 exercise price). .   Director is issued a new certificate for 1,000 shares worth $40,000. .   Director is also granted 500 Reload Stock Options at an exercise price of $40 per share. Method (3) - Cash and Stock Exercise .   Director owns 250 shares of Common Stock which have been held for 6 months or more and wants to exercise 1,000 options. .   Director submits $10,000 and 250 shares (with a value of $10,000; 250 x $40 current price = $10,000) are exchanged for exercise price. .   Director is issued a new certificate for 1,000 shares worth $40,000. .   Director is also granted 250 Reload Stock Options at an exercise price of $40 per share.   The exercise methods shown above provide each Director with a great deal of flexibility in exercising stock options and questions may arise that are not addressed by the above examples. Any questions regarding these restrictions, the exercise methods or more detailed information regarding the options should be directed to the Office of the Corporate Controller. When Does an Option Grant Terminate ? In the event of disability or death, all unexercised options become immediately vested. Upon resignation or other termination of directorship any exercisable options (that is, those options that are vested on the date of termination) may be exercised for a period of 3 years following the termination date. However, no vested option may be exercised beyond its original expiration date of 10 years. How are the Options Taxed ? Under current tax laws, there is no taxable income realized when an option is granted to a Director. However, when an option is exercised, the difference between the market price on the date of exercise and the option price will generally be subject to federal and state income tax. For example, if options for 100 shares are exercised at an option price of $20 per share and the fair market value per share is $40 on the date of exercise, the Director will realize taxable income of $2,000 from the exercise (100 shares multiplied by the difference between $40 and $20). This amount will be included in the Director's Form 1099 received from First Midwest for the year in which the exercise occurs. Additionally, special IRS rules also may apply to the tax basis of, and gain or loss recognized on, stock tendered in payment of exercised options. These rules also address the tax basis of the shares acquired through an option exercise. Please consult with your tax advisor on these complex issues.       First Midwest Bancorp, Inc. HOW TO EXERCISE YOUR STOCK OPTIONS * * * * * EXHIBIT 1 NOTICE OF INTENTION TO EXERCISE FORM       August 31, 2000   FIRST MIDWEST BANCORP, INC. AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' 1997 STOCK OPTION PLAN NOTICE OF INTENTION TO EXERCISE DIRECTOR STOCK OPTIONS (Important Note: If exercising Director options granted under different grant dates with different exercise prices, please use a separate Notice of Intention to Exercise Form for each such grant). PART ONE To: Office of the Corporate Controller of First Midwest Bancorp, Inc. In accordance with the terms of the First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors' 1997 Stock Option Plan (the "Plan"), I elect to exercise my nonqualified stock options granted on _________________ and to purchase _________ shares of First Midwest Bancorp, Inc. $.01 par value Common Stock at the exercise price of $___________ per share. In satisfaction of the option price, I elect to utilize the First Midwest Bancorp, Inc. Loan Program for the term of ______ year(s) not to exceed 5 years and/or enclosed is a check for $_______ and/or __________ previously-acquired shares of First Midwest Bancorp, Inc. Common Stock that have been held by me for at least 6 months prior to the date of this Notice. The option shares are to be registered and certificated as follows: Name(s):       ____________________________________________________________ Address:        ____________________________________________________________ City/State/Zip:   ___________________________________________________________ Additionally, I understand that the difference between the fair market value of the shares acquired in this exercise, less the option price, is subject to current taxation and that this taxable amount will be included on my 1099 Form for this tax year. The specific amount conforming to the exercise election above is detailed on Part Two of this Form, attached hereto and incorporated by reference.       __________________________________      ________________________________        Participant's Signature                                              Date       FIRST MIDWEST BANCORP, INC. AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS' 1997 STOCK OPTION PLAN NOTICE OF INTENTION TO EXERCISE DIRECTOR STOCK OPTIONS PART TWO AGGREGATE EXERCISE PRICE COMPUTATIONAL WORKSHEET   1. Director's Name:                                                2. Date of Grant:                                                  3. Exercise Price per Share:                                         4. Effective Date of Notice to Exercise:                             5. Number of Shares Acquired in this Exercise:                     6. Aggregate Exercise Price (3 multiplied by 5):                     7. Satisfaction of Aggregate Exercise Price: (1) Check                     (2) Surrender of ________previously-aquired shares that have been held by me for at least 6 months prior to the date of this Notice with a fair market value of $__________ per share.                     TOTAL    $  -----------------  
QuickLinks -- Click here to rapidly navigate through this document 4-24-2000 Exhibit 10(p) MINNTECH CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN     THIS INSTRUMENT amends and restates the Minntech Corporation Supplemental Executive Retirement Plan effective as of April 1, 2000. The Plan was originally established effective as of April 1, 1995.     Sec. 1.  Purpose of Plan.  The purpose of this Plan is to permit a select group of management employees and directors to defer a portion of their compensation to a later date and to provide these employees and directors with supplemental retirement benefits as set forth herein.     Sec. 2.  Definitions.  When used in this Plan, the following terms shall have the meanings assigned below:     2.1  Board.  "Board" is the Board of Directors of Minntech Corporation.     2.2  Covered Compensation.  "Covered Compensation" is the base salary earned by the Participant for the Plan Year. For a Board member, "Covered Compensation" is directors' fees.     2.3  Deferred Compensation.  "Deferred Compensation" is the portion of a Participant's Covered Compensation and Incentive Compensation which the Participant has elected to defer under Sec. 3.1 of this Plan.     2.4  Incentive Compensation.  "Incentive Compensation" is the Participant's annual cash bonus accrued by the Employer on the last day of the Plan Year and payable thereafter to the Participant.     2.5  Minntech.  "Minntech" is Minntech Corporation, a Minnesota corporation. Minntech Corporation is the administrator of the Plan. The chief financial officer of Minntech is authorized to perform general administrative functions under the Plan on behalf of Minntech.     2.6  Participant.  A "Participant" is any executive or management level employee of Minntech who meets all of the following requirements: (i) the individual has become a "participant" in the Retirement Plan, (ii) the individual is an executive officer of Minntech, (iii) the individual is a highly compensated employee as defined in Internal Revenue Code Section 414(q) (or in the case of an individual who became an employee of Minntech during the current Plan Year or the previous Plan Year, he or she would be such a highly compensated employee if he or she had received compensation from Minntech during the preceding Plan Year equal to the individual's current annual rate of compensation), and (iv) the individual is a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974. "Participant" also means any Board member. Each such employee or Board member shall continue to be eligible to contribute to this Plan until such individual ceases to be an employee or Board member who meets the requirements described above; provided, however, that the individual shall continue to be a Participant for purposes of the provisions of this Plan other than Sec. 3 until his or her benefits are fully paid. The Board, from time to time, may provide by resolution for additional positions that will qualify for participation in this Plan, provided, however, that any such employee must satisfy clauses (iii) and (iv) of the first sentence of this section.     2.7  Plan Year.  The "Plan Year" is the 12 month period ending on each March 31.     2.8  Retirement Plan.  The "Retirement Plan" is the Minntech Corporation Profit Sharing and Retirement Plan, as it may be amended from time to time. --------------------------------------------------------------------------------     Sec. 3.  Deferred Compensation and Other Credits.       3.1  Deferral Election.  Each Participant may elect to have treated as Deferred Compensation amounts which are earned or ascertained subsequent to the date of such election, subject to the following: (a)The maximum amounts that may be elected for any Plan Year are: (1)75% of the Participant's Covered Compensation in the case of an employee, and 100% of the Participant's Covered Compensation in the case of a Board member. (2)90% of the Participant's Incentive Compensation. (b)An election of Deferred Compensation pursuant to this section shall be in writing, and shall be made on or before the March 30 prior to the beginning of the Plan Year. The Election shall apply to Covered Compensation and Incentive Compensation payable during the next Plan Year. Such election shall remain in effect for and shall be irrevocable during the Plan Year, except that a Participant who is determined by the Company in its sole discretion to have incurred a financial hardship as defined in Sec. 6 may elect to completely discontinue future deferrals. A new election may be made for each subsequent Plan Year. If no election is made by a Participant prior to the first day of any Plan Year, the election in effect for the prior Plan Year, if any, shall continue in effect. (c)Notwithstanding subsection (b), within 30 days of the date on which the Participant first becomes eligible to participate in the Plan, the Participant may make an election of Deferred Compensation for Covered Compensation with respect to services to be performed subsequent to the election. (d)Notwithstanding the foregoing, no amounts shall be deferred from any Covered or Incentive Compensation that is payable on a date that is after the individual's termination of employment or directorship occurred. (e)On the date that an amount of Deferred Compensation under this section would otherwise be paid to the Participant, the amount of such Deferred Compensation shall be credited to an account on the books of Minntech.     3.2  Profit Sharing Make-up Credits.  A Participant may be eligible to receive additional credits to a separate account established under this Plan to make up for the limit imposed on Discretionary Contributions under the Retirement Plan by Section 401(a)(17) of the Internal Revenue Code. Any such credits shall be determined as follows: (a)The amount of a Participant's credit for any Plan Year shall be equal to (i) the amount of Discretionary Contributions that would have been allocated to the Participant for the Plan Year under the Retirement Plan if the limit on compensation under Section 401(a)(17) of the Internal Revenue Code and the dollar limit on contributions under Section 415(c)(1)(A) of said Code did not apply, minus (ii) the amount of Discretionary Contributions actually allocated to the Participant for the Plan Year under the Retirement Plan. (b)In order to receive a credit for a Plan Year under this Sec. 3.2, the Participant must be employed by Minntech on the last day of the Plan Year to which the Discretionary Contribution relates. (c)For purposes of deemed investments under Sec. 4, the credit for a Plan Year under this Sec. 3.2 shall be reflected in the Participant's separate account as of the date that the Discretionary Contribution for that Plan Year is deposited in the Participant's account in the Retirement Plan. The first credit under this Sec. 3.2 was for the Plan Year commencing April 1, 1998. 2 -------------------------------------------------------------------------------- (d)The Participant's elections under Sec. 4 and Sec. 5 shall also apply to the separate account reflecting the amounts credited under this Sec. 3.2. If no account has been established for a Participant under Sec. 3.1 prior to the first date an amount is to be credited to the Participant under this Sec. 3.2, the Participant shall promptly file an election designating deemed investments for purposes of Sec. 4 and the method of distributions for purposes of Sec. 5. (e)If the Participant's employment with Minntech terminates before the Participant has become 100% vested under Sec. 7.2 of the Retirement Plan, the Participant shall be entitled to a benefit from the account established under this Sec. 3.2 based only on the vested portion of that account. The vested portion shall be determined by multiplying the balance in the account as of the date the termination of employment occurred by the vested percentage on that date determined under Sec. 7.2 of the Retirement Plan. The balance of the account in excess of the vested portion shall be subtracted from the account as of the date the termination of employment occurred and shall be irrevocably forfeited. The vested portion shall thereafter continue to be held in the Participant's account until distributed and shall remain subject to the other provisions of this Plan. (f)Except as provided to the contrary in this Sec. 3.2, credits under this section shall be subject to all of the provisions of this Plan after they have been credited to the Participant's account.     3.3  Matching Credits.  A Participant may be eligible to receive additional Matching Credits to a separate account established under this Plan. Any such credits shall be determined as follows: (a)The Matching Credit under this section for a particular period will be equal to 50% of the amount of Deferred Compensation credited to the Participant for that period pursuant to the Participant's Deferral Election under Sec. 3.1. However, for purposes of applying the previous sentence, any Deferred Compensation credited to the Participant for a Plan Year in excess of $15,000 shall be disregarded, and Matching Credits for that Plan Year shall cease when this limit is reached during the Plan Year. (b)For purposes of deemed investments under Sec. 4, each Matching Credit under this Sec. 3.3 shall be reflected in the Participant's separate account as of the date the Deferred Compensation on which the Matching Credit is based is credited to the Participant's account in this Plan. The first Matching Credits under this Sec. 3.3 shall be for the Plan Year commencing April 1, 2000. (e)The Participant's elections under Sec. 4 and Sec. 5 shall also apply to the separate account reflecting the amounts credited under this Sec. 3.3. The Participant is always 100% vested in the amounts credited under this Sec. 3.3. (e)Except as provided to the contrary in this Sec. 3.3, credits under this section shall be subject to all of the provisions of this Plan after they have been credited to the Participant's account.     3.4  Participant Accounts.  No Participant shall derive any rights or benefits in or to any assets of Minntech solely from the establishment or maintenance of accounts on the books of Minntech for purposes of this Plan.     Sec. 4.  Deemed Investment of Deferrals.       4.1  Election of Deemed Investment.  Each Participant shall designate the form and percentages of deemed investment options in Sec. 4.2 at the time of his or her first annual election of Deferred Compensation on a form provided by Minntech (or at the time the Participant first receives a credit under Sec. 3.2, if earlier). The Participant may change the form or percentages of deemed investment options during his or her period of employment or directorship with Minntech by filing a new form with Minntech or its designated agent. The new investment options shall apply to the period commencing as soon as administratively feasible following the date on which the change is received by 3 -------------------------------------------------------------------------------- Minntech or its designated agent (as determined by Minntech or its designated agent in its sole discretion) and ending on the day before the effective date of a subsequent election. All elections must be expressed in whatever increments for each investment option Minntech or its designated agent may establish from time to time. The Participant may file separate elections for the deemed investment of the existing account balance and the deemed investment of future deferrals and credits.     4.2  Investment Options.  Prior to the time any benefit is actually paid to the Participant as provided below, the Participant's accounts shall be increased by the gain or decreased by the loss (the "adjustment") determined on the basis of the following forms of investments as selected by the Participant as in effect from time to time during the period after each amount was credited to the Participant's accounts. (a)Fidelity Magellan Fund. (b)Alleghany Safety of Principal Fund. (c)Vanguard GNMA Fund. (d)Value Line Aggressive Income Fund. (e)Alleghany Balanced Fund. (f)Vanguard Institutional Index Fund. (g)Alleghany Montag & Caldwell Growth Fund. (h)Heartland Value Fund. (i)Alleghany/Veredus Aggressive Growth Fund. (j)Hotchkis & Wiley International Fund. (k)Janus Worldwide Fund. (l)Such other investments that Minntech may from time to time add to the Plan. If an investment option becomes unavailable, Minntech may replace the option with one that maintains similar investment characteristics. Minntech may in its sole discretion add additional options or delete options at any time.     4.3  Account Information.  The selection of investments by which adjustments to the Participant's accounts will be determined shall be solely for the purpose of establishing a method of calculating the adjustments in such accounts and shall not obligate Minntech to set aside any assets or to invest any assets it may set aside in such investment or in any particular type of investment. Adjustments shall be determined in each fund by Minntech no less often than annually, and Minntech's determination shall be final. Minntech shall provide each Participant with a report of the account values as of the end of each Plan Year, or more frequently.     Sec. 5.  Distributions From Accounts.       5.1  Termination with Minntech.  Following termination of employment or directorship with Minntech, the Participant shall receive cash distribution of his or her accounts at the time and in the manner specified by the Participant under Sec. 5.2.     5.2  Timing and Form of Distribution.  At the time of initial enrollment in the Plan, Participants shall elect to have their accounts distributed to them (or their beneficiaries) at the times and in the manner provided below. Such elections shall be made in writing and are irrevocable. 4 -------------------------------------------------------------------------------- (a)Participants may elect to have distributions commence at the following times: (1)In the calendar year of the Participant's termination of employment or directorship with Minntech. (2)In the calendar year following the Participant's termination of employment or directorship with Minntech. (3)Following the fifth anniversary of the Participant's termination of employment or directorship with Minntech. (4)In the calendar year in which there occurs the later of (i) the Participant's 60th birthday, or (ii) the Participant's termination of employment or directorship with Minntech. (b)Participants shall elect to have their accounts distributed in one of the following forms, subject to approval by Minntech: (1)A single lump sum. (2)Distribution in substantially equal quarterly installments ranging from two to 10 years. Lump sum distributions shall be paid on the 15th day of the first calendar quarter immediately following the date the applicable event specified in subsection (a) occurs. Installment payments shall also commence on the same date, with succeeding amounts paid on the 15th day of each calendar quarter thereafter until paid in full. The amount of each installment shall be determined by dividing the total of the Participant's accounts by the number of installments remaining to be paid, including the current installment. During the installment period, earnings or losses on all unpaid amounts shall be credited in accordance with the Participant's deemed investment election at the commencement of payments. (c)Notwithstanding the foregoing, if a Participant had less than five years of employment or directorship with Minntech at the time the termination of employment or directorship occurs, the entire benefit under the Plan shall be paid in a lump sum on the earlier of (i) the date payments are to commence under subsections (a) and (b), or (ii) January 15th of the year following the calendar year in which the termination of employment or directorship occurred.     5.3  Distribution to Beneficiary.  If the Participant is deceased, the distribution shall be payable to the beneficiary of the Participant in the form payable to the Participant hereunder. Minntech, in its sole discretion, may accelerate the payment of benefits under this Plan to the Participant's beneficiary.     Sec. 6.  Distributions for Financial Hardship.  Participants may withdraw any portion of their accounts without regard to the provisions of Sec. 5 in the event the Participant, in the sole discretion of Minntech, has incurred, or will incur, an immediate and heavy financial hardship. (a)A distribution based upon financial hardship shall not exceed the amount required to meet the immediate financial need created by the hardship and not reasonably available from other resources of the Participant. A "financial hardship" for purposes of this section must involve an unforeseeable emergency that is caused by events beyond the control of the Participant. (b)An application for a distribution pursuant to this section shall be made in writing and delivered to the chief financial officer of Minntech. Minntech may require the submission of such supporting documentation as it deems necessary and shall render its final and conclusive decision on such applications.     Sec. 7.  Funding.  Nothing in this Plan shall be construed as permitting a Participant or beneficiary to claim any security for the fulfilling of the obligations of Minntech hereunder, and the Participant or beneficiary shall look only to the general assets of Minntech for the satisfaction of Minntech's obligations. Minntech is not required to invest in any property to secure its obligations 5 -------------------------------------------------------------------------------- under this Plan. If Minntech should invest in property to fund its obligations under this Plan, Minntech shall be the sole owner of such property, and the Participant, beneficiary and estate shall have no rights in said property. If Minntech obtains an insurance contract in connection with its obligations under this Plan, the Participant shall cooperate with Minntech and shall execute any documents reasonably requested by Minntech to obtain such insurance.     Sec. 8.  Designation of Beneficiary.  Each Participant shall file with Minntech a written designation of the person or persons to receive the benefits under this Plan in the event of the Participant's death. This right of the Participant shall include the right to name and change primary and contingent beneficiaries. Any designation of beneficiaries shall be effective only when filed by the Participant in writing with Minntech during the Participant's lifetime. In the absence of such written designation, or if all the beneficiaries so named predecease the Participant, the individuals in the first of the following classes in which there is a survivor, share and share alike, shall be considered the designated beneficiary: (a)The Participant's spouse, if surviving, with unpaid amounts at the spouse's death payable to the spouse's estate or as otherwise designated by the spouse. (b)The Participant's surviving children and surviving issue of deceased children, such issue of deceased children taking by right of representation. (c)The Participant's estate.     Sec. 9.  Claims Procedure.       9.1  Claims Procedure and Review.  A Participant or beneficiary may make a claim for Plan benefits within the time and in the manner described herein. Such claim shall be made within 60 days after the claim arises by filing a written request with the chief financial officer of Minntech. The claim shall be determined by Minntech within 90 days after the receipt of the written claim. Notice of Minntech's decision shall be communicated to the claimant in writing. If the claim is denied, the notice shall include the specific reasons for the denial (including reference to pertinent Plan provisions), a description of any additional material or information necessary for Minntech to reconsider the claim, the reasons for any of such additional material or information, and an explanation of the review procedure.     9.2  Appeal.  The claimant or a duly authorized representative may, within 60 days after receiving such written notice, request the president of Minntech to review Minntech's decision. The president shall afford the claimant a hearing and the opportunity to review all pertinent documents and submit issues and comments orally or in writing and shall render a review decision in writing within 60 days after receipt of request for review. The review proceeding shall be conducted in accordance with the rules and regulations adopted from time to time by the president of Minntech.     9.3  Attorneys' Fees and Costs of Litigation.  If a Participant or beneficiary who has exhausted the above claims procedure subsequently brings an action in court and receives a final judgment that he or she is entitled to a greater benefit than Minntech had determined, Minntech shall reimburse the individual for all reasonable attorneys' fees and related costs incurred in obtaining and enforcing the judgment.     Sec. 10.  Miscellaneous.       10.1  Liability.  No officer of Minntech shall be personally liable by virtue of any contract, agreement or other instrument made or executed by the officer or on his or her behalf as an officer, nor for any mistake or judgment made by such officer or any other officer, nor for any negligence, omission or wrongdoing of any other officer or of anyone employed by Minntech, nor for any loss, unless resulting from his or her own gross negligence or willful misconduct. In addition, Minntech does 6 -------------------------------------------------------------------------------- not assure or guarantee the tax consequences of benefits provided hereunder or other matters beyond its control.     10.2  Title to Assets.  No Participant or former Participant shall have any legal or equitable right or interest in any funds set aside by Minntech or in any assets in which Minntech may invest, from time to time, to cover its obligations under this Plan.     10.3  Amendments.  Minntech reserves the right to amend or modify, in whole or in part, any or all of the provisions of this Plan at any time by action of the Board or by a written instrument executed by the president of Minntech; provided, however, that no amendment or modification shall be made which will deprive any Participant or any Participant's beneficiary of any vested benefits to which he or she is entitled under the Plan. Notwithstanding the foregoing, the amendment can alter the deemed investment options under Sec. 4 with respect to periods after the date the amendment is adopted, both for future deferrals and for amounts deferred in past.     10.4  Termination.  Continuation of the Plan is not a contractual obligation of Minntech, and the right is reserved by Minntech to reduce, suspend or discontinue the Plan at any time by action of the Board or by written instrument executed by the president of Minntech. However, no such reduction, suspension or discontinuance shall deprive any Participant or beneficiary of any benefits that become vested under the Plan prior to the termination, but may alter future deemed investments as provided in Sec. 10.3.     10.5  Assignment and Levy.  The Plan is for the benefit and protection of the Participants and their beneficiaries and the rights, privileges and benefits herein conferred shall not, to the extent permitted by law, be subject to alienation, assignment, pledge, levy, attachment, garnishment or other legal process or in any manner anticipated, encumbered, committed, withdrawn or surrendered, and neither shall the same be subject or liable in any way for debts, contracts, or agreements or other claims of creditors of such Participants or their beneficiaries whether such claims are now contracted or may hereafter be contracted or incurred.     10.6  Participant's Rights.  The establishment of this Plan shall not create any legal or equitable right against Minntech unless such right is specifically provided for in this Plan. Furthermore, nothing in this Plan shall be construed as giving a Participant the right to be retained in the employment of Minntech, and a Participant shall remain subject to discharge at any time to the same extent as if this Plan had not been adopted.     10.7  Incompetency.  Every person receiving or claiming benefits under this Plan shall be conclusively presumed to be mentally competent until the date on which Minntech receives a written notice in a form and manner acceptable to Minntech that such person is incompetent and that a guardian, conservator or other person legally vested with the care of his or her estate has been appointed. In such event, Minntech may direct payments of benefits to such guardian, conservator or other person legally vested with the care of the person's estate and any such payments so made shall be a complete discharge of Minntech to the extent so made.     10.8  Notices.  Notices required by this Plan to be given to Minntech or a Participant shall be in writing and shall be considered to have been duly given or served if personally delivered, or sent by first class, certified or registered mail.     10.9  Severability.  The invalidity or partial invalidity of any portion of this Plan shall not invalidate the remainder thereof, and said remainder shall remain in full force and effect.     10.10  Release.  Any payment to or for the benefit of any Participant or beneficiary in accordance with the provisions hereof shall, to the extent thereof, be in full satisfaction of all claims hereunder against Minntech. 7 --------------------------------------------------------------------------------     10.11  Withholding of Taxes.  The benefits payable under this Plan shall be subject to the deduction of any federal, state or local income taxes or other taxes which are required to be withheld from such payments by applicable laws and regulations.     10.12  Governing Law.  Construction and administration of this Plan shall be governed by the laws of the State of Minnesota, except to the extent such laws are preempted by federal law.     MINNTECH CORPORATION                                 By                 --------------------------------------------------------------------------------         Its                 -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- QUICKLINKS MINNTECH CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
EXHIBIT 10.41 DEFINITIVE AGREEMENT TO FORM VENDING BUSINESS Between Photo-Me International, Plc. and SanDisk Corporation August 7, 2000 CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS       Page         RECITALS 1   ARTICLE I—STRUCTURE OF VENDING BUSINESS 2 1.01   DPI 2 1.02   Product and Flash Memory Cards 3 1.03   Maintenance 5 1.04   Marketing and Promotion 5 1.05   Intellectual Property 5 1.06   Management 6 1.07   Facilities 7 1.08   Overhead Compensation 7 1.09   Independent Auditors 7   ARTICLE II—RESERVED 7   ARTICLE III—CLOSING 7 3.01   Place and Time 7 3.02   Delivery of Documents 7   ARTICLE IV—REPRESENTATIONS AND WARRANTIES OF SANDISK 8 4.01   Organization 8 4.02   Authorization/Enforceability 8 4.03   Financial Statements 8 4.04   Undisclosed Liabilities 8 4.05   Absence of Changes 9 4.06   Tax Matters 9 4.07   Compliance with Laws 9 4.08   Litigation and Claims 10 4.09   Intangible Assets 10 4.10   No Conflict 10 4.11   Disclosure 11 4.12   Investment Intent 11   ARTICLE V—REPRESENTATIONS AND WARRANTIES OF PMI 11 5.01   Organization 11 5.02   Authorization/Enforceability 11 5.03   Financial Statements 12 5.04   Undisclosed Liabilities 12 5.05   Absence of Changes 12 5.06   Tax Matters 12 5.07   Compliance with Laws 12 5.08   Litigation and Claims 13 5.09   Intangible Assets 13 5.10   No Conflict 13 5.11   Disclosure 14 5.12   Investment Intent 14   ARTICLE VI—COVENANTS 14 6.01   Initial Public Offering 14 6.02   Public Announcements 15 6.03   Exclusivity 15 6.04   SanDisk Investment Opportunities 17 -------------------------------------------------------------------------------- ARTICLE VII—CONDITIONS TO OBLIGATIONS OF SANDISK 17 7.01   Obligations of SanDisk 17   ARTICLE VIII—CONDITIONS TO OBLIGATIONS OF PMI 18 8.01   Obligations of PMI 18   ARTICLE IX—TERM AND TERMINATION 19 9.01   Term 19 9.02   Termination of Agreement Prior to Closing 19 9.03   Termination of This Agreement Post Closing 20 9.04   Termination of Obligations 21   ARTICLE X—SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. AND INDEMNIFICATION 21 10.01   Survival of Representations and Warranties, Etc 21 10.02   General Indemnification 21 10.03   Indemnification for Patent and Trademark Infringement 22 10.04   Notice of Loss or Asserted Liability 22 10.05   Opportunity to Contest 22 10.06   Limitation of Liability 23   ARTICLE XI—MISCELLANEOUS 23 11.01   Headings 23 11.02   Severability 23 11.03   Entire Agreement; Amendment; Waiver 23 11.04   Assignment 24 11.05   No Third-Party Beneficiaries 24 11.06   Counterparts 24 11.07   Knowledge 24 11.08   Notices 24 11.09   Expenses 25 11.10   Dispute Resolution 25 11.11   Governing Law 26 -------------------------------------------------------------------------------- INDEX OF EXHIBITS  Exhibit Number  Description     Exhibit A  Product Specification     Exhibit B  Bylaws of DPI     Exhibit C  Stockholders’ Agreement     Exhibit D  Business Plan     Exhibit E  Exclusive Product Purchase Agreement     Exhibit F  Maintenance Agreement     Exhibit G  RESERVED     Exhibit H  Non-Solicitation Agreement     Exhibit I  Trademark Cross-License Agreement ii -------------------------------------------------------------------------------- i -------------------------------------------------------------------------------- DEFINITIVE AGREEMENT         This Agreement (“Agreement”), dated and effective August 7, 2000 (the “Effective Date”), is between SanDisk Corporation, a Delaware corporation (“ SanDisk”), and Photo-Me International, Plc. (“PMI”) a corporation organized under the laws of England and Wales. RECITALS         A.  PMI has developed a technology for a product, described on Exhibit A to this Agreement, which is a self-service digital photo printing kiosk capable of reading flash memory cards, floppy diskettes and CD ROM discs which can be connected to an Internet photo portal and which is capable of printing digital photographic images on silver-halide paper obtained from flash data cards, Internet photo portals and other sources, which may dispense flash memory cards for use with digital photography equipment and may be placed in public locations (the “PMI Technology”).         B.  PMI has developed unique proprietary technology and know-how, including software, which is incorporated into the design, manufacturing, marketing, operation and support of the PMI Technology, and has developed methods and procedures and know-how for the operation of the PMI Technology in many and varied public locations which enable a profitable business to be conducted in the sale and delivery of photos to consumers.         C.  SanDisk develops and markets flash memory storage systems (“FMS Technology”) that it sells to the consumer electronics market for use in, among other things, digital photography equipment.         D.  SanDisk owns certain confidential or proprietary information including specifications, designs, drawings, mask works, software, processes, data, know-how, plans, services, samples, prototypes, applications and other information regarding technical specifications for its FMS Technology.         E.  PMI and SanDisk desire to jointly operate and control a vending business in the Exclusive Territory (as defined in Section 6.03) (the “Vending Business”) that operates self-service digital photo printing kiosks under the SanDisk and PMI brand and name, utilizing the PMI Technology and which may dispense SanDisk brand flash memory cards, such kiosks to be designed and manufactured in accordance with the specifications set forth on Exhibit A hereto or as amended in writing by agreement of the parties (the “Product”).         NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows: iii -------------------------------------------------------------------------------- AGREEMENT ARTICLE I STRUCTURE OF VENDING BUSINESS         1.01  DPI.               (a)  Formation. Prior to Closing (as defined below), the parties will cause a corporation to be organized under the laws of the State of Delaware and named DigitalPortal Inc. (“DPI”). Each of PMI and SanDisk will hold 50% of the initially outstanding shares of common stock of DPI.               (b)  Capitalization. Each of PMI and SanDisk will contribute to DPI a total of $4,000,000 to be dispersed as set forth in Article III. The capitalization of DPI shall consist of 87,000,000 shares of common stock, par value $0.0001 per share. Each of PMI and SanDisk will be issued 40,000,000 shares of common stock. *.               (c)  Governance.         (1)  DPI will be governed by a Board of Directors consisting of four directors (the “Board”). The Board shall have responsibility for the general supervision, direction and control of the business of DPI and shall have all the powers and duties typically vested in a board of directors of a corporation, as set forth in the Bylaws of DPI, attached hereto as Exhibit B. The Bylaws shall provide that the Board shall meet at least once each quarter, that at least one meeting per year shall be held in Grenoble, France and that at least one meeting per year shall be held in Sunnyvale, California. DPI shall provide at its expense audited financial statements for each year ended April 30 and unaudited financial statements for each six month period ended October 31 to PMI.         (2)  The Bylaws of DPI shall provide that except as required by applicable law, all actions or decisions of the Board shall require the vote of a majority of Directors and shall provide that DPI may not take certain actions, as set forth in this Agreement, without the express written approval of a director appointed by each of SanDisk and PMI (the “Approval Agents”).         (3)  Effective as of Closing, the parties shall enter into a Stockholders Agreement, attached hereto as Exhibit C, which shall provide among other things: (A) for annual election of two directors designated by SanDisk and two directors designated by PMI; (B) for annual election of a Chairman, who shall be designated by SanDisk in even years and designated by PMI in odd years; and (C) that DPI shall declare an annual dividend to the stockholders of DPI on a pro rata basis consisting of all net profits less allocations to research, development, reserves and other items approved by the Board and the Approval Agents.               (d)  Business of DPI. DPI will operate a Vending Business for the Product in the Exclusive Territory (as defined in Section 6.03 hereof). DPI shall not engage in any other type of business without the consent of the Board.               (e)  Development of a Business Plan. DPI shall operate the Vending Business in accordance with the business plan attached hereto as Exhibit D (“Business Plan”) or as amended by the Board from time to time in accordance with the Bylaws. The Business Plan shall be a base plan setting forth, among other things, the capital expenditures, projected revenues, supply costs, profit margins, kiosk deployment and overhead for DPI fiscal years 2001 through 2002. DPI shall revise the Business Plan at least annually for each subsequent fiscal year not later than November 15 of the prior fiscal year. In the event DPI fails to revise the Business Plan for any fiscal year, the last Business Plan approved by the Board of DPI, or the Business Plan set forth in Exhibit D, as the case may be, shall be the operative Business Plan until the Board of DPI approves a re vised Business Plan.               (f)  Failure to Agree on a Business Plan. If the Board shall fail to agree on a Business Plan for the subsequent fiscal year by December 15 of the prior fiscal year, the parties shall follow the dispute resolution, buy-sell and liquidation provisions contained in Section 9 of the Stockholders Agreement.               (g)  Additional Investors. The parties shall enter into good faith negotiations to consider inviting a strategic investor to participate as an approximately ten percent (10%) shareholder of DPI, where such strategic investor will have such rights and obligations as the parties may mutually agree in written amendments to this Agreement and the Transaction Documents.               (h)  DPI Management Team. Within thirty (30) days of the effective date of this agreement, the parties shall contract with a reputable international recruiter to initiate the search for a senior level Chief Executive Officer candidate with experience and knowledge in retail sales in general and/or the photographic print processing business specifically. *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 1 --------------------------------------------------------------------------------               (i)  Other Entities. From time to time, the Board may elect to create subsidiaries or operating divisions for purposes of organizing aspects of the Vending Business.         1.02  Product and Flash Memory Cards.               (a)  Product Purchases. DPI or a third party in a leasing transaction with DPI (“Lessor”) will purchase units of Product exclusively from PMI, and PMI will supply such Product through one of its subsidiaries including, without limitation, KIS, S.A., located in Grenoble, France. At its option, DPI may contract with a third party to purchase Product from PMI and lease Product to DPI pursuant to sale-leaseback transactions or may pursue other vehicles for financing or purchase of the Product. For purposes of this Agreement, references to purchase by DPI shall be deemed to include purchase by any such third party. All Product purchased by DPI or Lessor from PMI shall be designed and manufactured in compliance with the specifications attached hereto as Exhibit A or as amended in writing by agreement of the parties. The Product will be customized according to DPI&# 146;s reasonable requirements, which will not include any customer-specific customization. For the period beginning on the date hereof and ending upon the closing of any initial public offering of DPI common stock, PMI and SanDisk shall each provide several, but not joint, guaranties of the financing of the purchase or lease of units of Product equal to their respective percentage equity ownership of DPI, if such guaranties are required by third parties from which DPI will obtain such financing, provided however, that SanDisk and PMI will use best efforts to structure such guaranties in a manner which allows SanDisk and PMI to be released from such obligations upon closing of an IPO. Subsequent to the closing of the contemplated initial public offering of DPI common stock, PMI and SanDisk may, if agreed to by PMI and SanDisk, each provide several, but not joint, guaranties of the financing of the purchase or lease of units of Product equal to their respective percentage equity ownership of DPI, if such guara nties are required by third parties from which DPI will obtain such financing.               (b)  Number/Location of Units. DPI shall place orders specifying delivery of a minimum of 2,000 units of Product for the end of 2001; provided however, that notwithstanding the initial Business Plan, DPI shall not be obligated to purchase more than 2000 units of Product for any one (1) year period through the end of 2002. DPI shall place orders specifying delivery of a minimum of 2,000 units of the Product per year for the duration of this Agreement starting in the fourth quarter of calendar year 2000 with a non-binding target of placing orders for delivery of between * and * units by December 31, 2001. DPI’s obligations to order units of Product shall be terminated in the event that Section 9 of the Stockholders’ Agreement (Exhibit C) is invoked by PMI, SanDisk or DPI. The invocation of Section 9 of the Stockholders’ Agreement shall not r elieve DPI or PMI of obligations incurred prior thereto, including the obligation of PMI to deliver previously ordered units of Product or of DPI to pay for units of Product previously ordered. Units of the Product initially will be sited in high-traffic locations, preferably where there currently is no digital photo printing capability. DPI will determine the site placement for any and all Product.               (c)  Terms. DPI will purchase exclusively from PMI each unit of Product at the price ex works (as such term is defined in Incoterms ICC Edition 2000), Grenoble, France, not to exceed US $20,000 per unit * for the initial * units. Such prices do not include site-specific or customer-specific customization. Notwithstanding the foregoing, if PMI shall sell any units of product substantially similar to the Product to other parties at *. The unit price is based upon an exchange rate of * (the “Base Rate”). SanDisk and PMI agree to review at the end of each calendar quarter, the exchange rates between the Euro and the US dollar, as set forth in the New York Foreign Exchange mid-range rates (Currency per US Dollars) table published in the Wall Street Journal, Western Edition) (such rates, the “Exchange Rates”) for each of the preceding 90 days (such period, the “Ex change Rate Period”). In the event that the average of the Exchange Rates during the Exchange Rate Period (such average, the “Average Exchange Rate”) differs from the Base Rate by more or less than * percent (but not more or less than * percent), then the unit price as reflected on invoices issued during the following calendar quarter shall be adjusted accordingly. DPI shall purchase the Products exclusively from PMI according to terms to be set forth in the “Exclusive Product Purchase Agreement” attached hereto as Exhibit E.               (d)  Development of Enhanced Feature Kiosks. PMI shall use commercially reasonable efforts to develop and make available for purchase to DPI multiple terminal kiosks, and kiosks featuring a mechanism for storing photographic prints for subsequent retrieval, within the first two (2) years of the term of this Agreement.               (e)  Flash Memory Cards. The parties agree to discuss in good faith whether, and upon what terms, DPI may obtain from SanDisk the flash memory cards which incorporate FMS Technology and which may be dispensed in the Product. SanDisk shall be the exclusive source for any such cards.         1.03  Maintenance. Unless and until DPI obtains more competitive pricing, terms, response time, or quality of service for such services or determines to form its own maintenance organization (which it may do so at its own discretion), PMI, through its US subsidiary, Photo-Me USA, LLC, will provide for the support, maintenance and operation of the Product, including cleaning, data input, data collection and all other services required to ensure the on-going maintenance and operation of the Product according to terms set forth in the “Maintenance Agreement” attached hereto as Exhibit F. *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 3 --------------------------------------------------------------------------------         1.04  Marketing and Promotion. Marketing and Promotion of the Product will be undertaken by DPI, in consultation with PMI and SanDisk. SanDisk shall employ a reasonable number of its sales force for the purpose of locating and securing sites for the Project. SanDisk shall be compensated monthly by DPI for this service as follows: *. Each party agrees to co-operate reasonably in such marketing and promotion and the parties will enter into a trademark cross-license agreement granting DPI, PMUSA and each other the non-exclusive right to use identified trademarks on a paid-up, royalty free basis according to the terms set forth in the “Trademark Cross-License Agreement” attached hereto as Exhibit I. The display of any advertising, trademarks or logos on the Product, other than the trade colors of DPI, require approval from both Approval Agents.         1.05  Intellectual Property.               (a)  DPI will develop the brand and trademarks under which the Product will be promoted in the Exclusive Territory (as defined in Section 6.03 hereof). DPI will own the trademarks that it develops.               (b)  “Intellectual Property Rights” shall mean all current and future worldwide patents and other patent rights, utility models, copyrights, mask work rights, trade secrets, trademarks and all other intellectual property rights and the related documentation or other tangible expression thereof.               (c)  SanDisk shall retain all right, title and interest in and to all of the information, content, data, designs, materials and all copyrights, patent rights, trademark rights and other Intellectual Property Rights thereto provided by it pursuant to this Agreement, including but not limited to all such rights in the FMS Technology or in any and all modifications or derivative works of the FMS Technology, including but not limited to any upgrades or enhancements thereof.               (d)  PMI shall retain all right, title and interest in and to all of the information, content, data, designs, materials and all copyrights, patent rights, trademark rights and other Intellectual Property Rights thereto provided by it pursuant to this Agreement, including but not limited to all such rights in the PMI Technology, in any and all modifications or derivative works of the PMI Technology, including but not limited to any upgrades or enhancements thereof, the Product and any and all modifications or derivative works of the Product, including but not limited to any upgrades or enhancements thereof.               (e)  Except as expressly provided herein, no other right or license is granted under this Agreement. All rights not expressly granted hereunder by a party are expressly reserved to such party and its licensors and information and content providers.               (f)  The provisions of this Section 1.05 shall survive termination of this Agreement.         1.06  Management.               (a)  Chief Executive Officer. The Bylaws of DPI shall provide for appointment of a Chief Executive Officer (“CEO”), who will have the responsibility for the management of the ordinary course day-to-day operations of DPI and the Vending Business and will report to the Board. The CEO will be designated jointly by the Approval Agents for appointment by the Board.               (b)  Other Officers. The Board of DPI shall also appoint such other officers as are required by applicable law or, as permitted by the Bylaws, as it determines from time to time are in the best interests of DPI.               (c)  Core Employees. The CEO shall appoint a core team of employees. Initially, and until changes are approved by the Board, such team, in addition to the CEO, shall consist of one Product Manager, two network engineers, two web specialist people, two marketing people and one assistant. Compensation of core employees is forecasted to be as shown on the cash flow analysis in Exhibit D.               (d)  Other Employees. Prior to the closing of the IPO (as defined below), DPI shall utilize SanDisk’s human resources, finance and administration personnel, for which SanDisk will be compensated by DPI as provided in Section 1.08 below.               (e)  Employee Incentive Compensation. The Board shall adopt an incentive stock option plan, pursuant to which, as approved by the Board, options to purchase Common Stock, may be granted to officers, directors, employees and consultants. *.               (f)  Non-Solicitation Agreement. PMI and SanDisk shall each execute a non-solicitation agreement, attached hereto as Exhibit H.         1.07  Facilities. During the first twelve months of operations, the headquarters of DPI will be located at the SanDisk Sunnyvale, California premises, for which SanDisk will be compensated by DPI as provided in Section 1.08 below. *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 4 --------------------------------------------------------------------------------         1.08  *.        1.09 Independent Auditors. The initial independent auditors for DPI and the Vending Business will be Ernst & Young (the “Auditors”). ARTICLE II         This Article is intentionally blank. ARTICLE III CLOSING         3.01  Place and Time. The closing (“Closing”) shall take place at 9:00 a.m., Central Time, at the offices of Wolin, Ridley & Miller LLP, 3100 Bank One Center, 1717 Main Street, Dallas, Texas 75201, on August 7, 2000 or at such other time and date as is mutually agreed to by the parties.         3.02  Delivery of Documents.               (a)  Each party shall deliver to DPI in payment for its shares of DPI common stock in accordance with the following schedule: (a) $1,000,000 by each party on or before August 17, 2000; (b) $1,000,000 by each party on or before November 1, 2000; (c) $1,000,000 by each party on or before February 1, 2001; and (d) $1,000,000 by each party on or before May 1, 2001. Payment for such shares shall be made by wire transfer to the bank account established by DPI in immediately available funds.               (b)  At each payment date specified in clause (a) above, each party shall take delivery of certificates representing the respective number of shares (“Shares”) in DPI purchased by such party at the price of $0.10 per Share.               (c)  At Closing, each party shall execute and deliver to the other this Agreement, any agreement which is an exhibit to this Agreement (collectively, “Transaction Documents”) to which such party is a party, and such other instruments as are contemplated by this Agreement.               (d)  At Closing, the parties shall cause to be executed the organizational documents of DPI, all Transaction Documents to which DPI is a party, and such other instruments as are contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SANDISK         SanDisk represents and warrants to PMI as follows:         4.01  Organization. SanDisk is a corporation duly organized, validly existing and in good standing under the laws of Delaware, has all corporate requisite power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets, and is duly qualified and in good standing in every jurisdiction in which the conduct of its businesses or the ownership of its properties and assets requires it to be so qualified.         4.02  Authorization/Enforceability. SanDisk has the right, power and capacity to execute, deliver and perform this Agreement and all documents ancillary hereto and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and all documents ancillary hereto by SanDisk and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of SanDisk. This Agreement and the Transaction Documents have been duly and validly executed and delivered by SanDisk and constitute the legal, valid and binding obligation of SanDisk, enforceable in accordance with their terms.         4.03  Financial Statements. SanDisk has provided PMI with true and correct copies of (i) SanDisk’s financial statements for the year ended December 31, 1999, audited by Ernst & Young and (ii) SanDisk’s unaudited financial statements for the six months ended June 30, 2000 (collectively, the “Financial Statements”). The Financial Statements have been prepared from the books and records of SanDisk, are correct in all material respects and present fairly SanDisk’s financial position and results of operations as of their respective date and for the respective period, in accordance with United States generally accepted accounting principles. *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESED WITH RESPECT TO THE OMITTED PORTIONS. 5 --------------------------------------------------------------------------------         4.04  Undisclosed Liabilities. Except as disclosed in the Financial Statements or on Schedule 4.04 hereto, to its knowledge, SanDisk has no obligations or liabilities (whether absolute, accrued, contingent or otherwise) of any nature whatsoever, other than obligations incurred in the ordinary course of business and not material to its business.         4.05  Absence of Changes. Except as disclosed on Schedule 4.05, since December 31, 1999 none of the following has occurred:               (a)  Any change in the financial condition, assets, liabilities, business, prospects, or operations, other than changes in the ordinary course of business or changes affecting the economy or industry as a whole, which in the aggregate would have a material adverse effect on SanDisk;               (b)  Any material damage, destruction, or loss, whether or not covered by insurance, of SanDisk;               (c)  Any event or condition that, to the knowledge of SanDisk, could materially and adversely affect SanDisk or its business prospects; or               (d)  Any receipt of notice (formal or informal) that any supplier or customer has taken or contemplates taking any steps that could disrupt SanDisk’s business relationship with the supplier or customer.         4.06  Tax Matters. SanDisk has timely filed all annual federal, state, and local tax returns as required by applicable law. Except as disclosed on Schedule 4.06(a), none of SanDisk’s tax returns have been audited by any taxing authority during the past five (5) years, and SanDisk has not received any notice of deficiency or other adjustment from any taxing authority that is unresolved as of Closing. Except as described on Schedule 4.06(a), no audit or examination, claim or proposed assessment by any taxing authority is pending or, to the knowledge of SanDisk, threatened against SanDisk or any portion of its business.         4.07  Compliance with Laws.               (a)  To the knowledge of SanDisk: (i) SanDisk has complied and is in compliance with all laws, regulations, and orders applicable to SanDisk, and has obtained all permits, licenses, orders, and approvals of federal, state, and local governmental and regulatory bodies that are required for it to own, maintain, and operate its business; (ii) no threat of cancellation, modification, or non-renewal of any such permits, licenses, orders, or approvals is pending, nor to the knowledge of SanDisk, does any basis exist for cancellation, modification, or non-renewal; (iii) except as otherwise set forth on Schedule 4.07(a), SanDisk is not currently in violation or default of any such permit, license, order, or approval and the present uses of SanDisk do not violate any law, regulation, or order; and (iv) except as disclosed in Schedule 4.07(a) , SanDisk does not have or need governmental permits or licenses to transact its business as currently conducted and, except as listed on Schedule 4.07(a), none of the permits or licenses that SanDisk holds will be adversely affected in any way by reason of this Agreement or the consummation of the transactions contemplated hereby, including assignment of the permits and licenses to Purchaser. No governmental authority has issued or threatened any notice or warning with respect to any failure or alleged failure of SanDisk to comply with any law, regulation or order.               (b)  Except as set forth in Schedule 4.07(b), no consent or approval of, prior filing with, notice to, or other action by, any governmental body or agency is required for SanDisk to execute and deliver this Agreement, any document ancillary hereto, or other instrument to be executed and delivered pursuant to this Agreement or to consummate the transactions provided for hereby.         4.08  Litigation and Claims. Except as disclosed in Schedule 4.08, no judgments, orders, writs, decrees, injunctions, or quasi judicial or administrative decisions are outstanding to which SanDisk or its properties are subject which would materially affect SanDisk’s ability to perform any of its obligations under this Agreement and the Transaction Documents. Except as disclosed on Schedule 4.08, no litigation, claim, action, suit, investigation, or proceeding is pending or has been filed at any time since January 1, 1999, or to the knowledge of SanDisk, threatened against or relating to SanDisk or SanDisk’s Assets which would materially affect SanDisk’s ability to perform any of its obligations under this Agreement and the Transaction Documents.         4.09  Intangible Assets. Schedule 4.09 lists all trademarks, service marks, trade names, and service names owned by, registered in the name of, or used in connection with SanDisk’s flash memory card business since 1996 (or for which application has been made), and which are to be licensed to DPI in the Trademark Cross License Agreement. There are no pending or, to the knowledge of SanDisk, threatened infringement claims against SanDisk by any person with respect to any of the items listed on Schedule 4.09, nor has any such item been declared invalid or been limited by any court or agreement. The intangible assets will afford DPI after Closing the rights to use all trademarks, trade names and service marks owned by SanDisk as specified in the Trademark Cross License Agreement. To the knowledge of SanDisk the use of these intangible assets will not and, the conduc t of SanDisk as currently conducted does not, infringe on the intellectual property rights of any other person.         4.10  No Conflict. Except as set forth on Schedule 4.10, neither the execution and delivery of this Agreement nor any document ancillary hereto nor the consummation of the transactions contemplated herein will (a) result in the breach, violation or contravention of, or constitute a default under, or conflict with, or give rise to a right of termination of, or accelerate any obligation under any of the provisions of (i) SanDisk’s charter, bylaws or other organizational documents; (ii) any agreement, 6 -------------------------------------------------------------------------------- lease, note, bond, debenture or other evidence of indebtedness or any mortgage, deed of trust, indenture or other instrument to which SanDisk is a party or by which it is bound or to which any of its assets is subject, (iii) any judgment, decree, order or award of any court, regulatory agency or other governmental body or arbitrator to which SanDisk or any of its assets is subject or by which SanDisk is bound or (iv) any statute, rule or regulation or other law applicable to SanDisk, (b) result in the creation of any pledge, lien, encumbrance or security interest upon any of its assets, or (c) require the authorization, approval, consent or order of, or filing with, or other action by any court, regulatory agency or other governmental body.         4.11  Disclosure. No representations, warranties, assurances, or statements of SanDisk in this Agreement and no statement in any document (including the Financial Statements and the Schedules), certificate, or other writing furnished or to be furnished by SanDisk (or caused to be furnished by SanDisk) to PMI or any of its representatives pursuant to this Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was made, to make the statements made not misleading.         4.12  Investment Intent.               (a)  The Shares will be acquired by SanDisk for its own account for investment and not with a view to, or for resale in connection with any distribution of such securities, within the meaning of the Securities Act of 1933, as amended (the “Act”). SanDisk hereby acknowledges that in connection with the purchase and sale contemplated herein, the Shares will not be registered under the Act.               (b)  SanDisk is aware that there are substantial restrictions on the transferability of the Shares. SanDisk agrees that the Shares shall not be sold, pledged, hypothecated or otherwise transferred, except in compliance with the registration provisions of the Act and applicable state securities laws, unless in the opinion of counsel reasonably satisfactory to DPI, any such transaction is exempt from registration. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PMI         PMI represents and warrants to SanDisk as follows:         5.01  Organization. PMI is a corporation duly organized, validly existing and in good standing under the laws of England and Wales and has all corporate requisite power and authority to carry on and conduct its business as it is now being conducted and to own or lease its properties and assets, and is duly qualified and in good standing in every jurisdiction in which the conduct of its businesses or the ownership of its properties and assets requires it to be so qualified.         5.02  Authorization/Enforceability. PMI has the right, power and capacity to execute, deliver and perform this Agreement and all documents ancillary hereto and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and all documents ancillary hereto by PMI and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of PMI. This Agreement and all Transaction Documents have been duly and validly executed and delivered by PMI and constitute the legal, valid and binding obligation of PMI, enforceable in accordance with their terms.         5.03  Financial Statements. PMI’s financial statements for the year ended April 30, 1999, audited by Menzies, as set forth in public filings (collectively, the “Financial Statements”), are true and correct. The Financial Statements have been prepared from the books and records of PMI, are correct in all material respects and present fairly PMI’s financial position and results of operations as of their respective date and for the respective period, in accordance with United Kingdom generally accepted accounting principles.         5.04  Undisclosed Liabilities. Except as disclosed in the Financial Statements or on Schedule 5.04 hereto, to its knowledge, PMI has no obligations or liabilities (whether absolute, accrued, contingent or otherwise) of any nature whatsoever, other than obligations incurred in the ordinary course of business and not material to its business.         5.05  Absence of Changes. Except as disclosed on Schedule 5.05, since April 30, 1999 none of the following has occurred:               (a)  Any change in the financial condition, assets, liabilities, business, prospects, or operations, other than changes in the ordinary course of business or changes affecting the economy or industry as a whole, which in the aggregate would have a material adverse effect on PMI;               (b)  Any material damage, destruction, or loss, whether or not covered by insurance, of PMI;               (c)  Any event or condition that, to the knowledge of PMI, could materially and adversely affect PMI or its business prospects; or 7 --------------------------------------------------------------------------------               (d)  Any receipt of notice (formal or informal) that any supplier or customer has taken or contemplates taking any steps that could disrupt PMI’s business relationship with the supplier or customer.         5.06  Tax Matters. PMI has timely filed all annual tax returns as required by applicable law. Except as disclosed on Schedule 5.06 , none of PMI’s tax returns have been audited by any taxing authority during the past five (5) years, and PMI has not received any notice of deficiency or other adjustment from any taxing authority that is unresolved as of Closing. Except as described on Schedule 5.06(a), no audit or examination, claim or proposed assessment by any taxing authority is pending or, to the knowledge of PMI, threatened against PMI or any portion of its business.         5.07  Compliance with Laws.               (a)  To the knowledge of PMI: (i) PMI has complied and is in compliance with all laws, regulations, and orders applicable to PMI, and has obtained all permits, licenses, orders, and approvals of governmental and regulatory bodies that are required for it to own, maintain, and operate its business; (ii) no threat of cancellation, modification, or non-renewal of any such permits, licenses, orders, or approvals is pending, nor to the knowledge of PMI, does any basis exist for cancellation, modification, or non-renewal; (iii) except as otherwise set forth on Schedule 5.07(a), PMI is not currently in violation or default of any such permit, license, order, or approval and the present uses of PMI do not violate any law, regulation, or order; and (iv) except as disclosed in Schedule 5.07(a), PMI does not have or need governmental permits o r licenses to transact its business as currently conducted and, except as listed on Schedule 5.07(a), none of the permits or licenses that PMI holds will be adversely affected in any way by reason of this Agreement or the consummation of the transactions contemplated hereby, including assignment of the permits and licenses to Purchaser. No governmental authority has issued or threatened any notice or warning with respect to any failure or alleged failure of PMI to comply with any law, regulation or order.               (b)  Except as set forth in Schedule 5.07(b), no consent or approval of, prior filing with, notice to, or other action by, any governmental body or agency is required for PMI to execute and deliver this Agreement, any document ancillary hereto, or other instrument to be executed and delivered pursuant to this Agreement or to consummate the transactions provided for hereby.         5.08  Litigation and Claims. No judgments, orders, writs, decrees, injunctions, or quasi-judicial or administrative decisions are outstanding to which PMI or its properties are subject which would materially affect PMI’s ability to perform any of its obligations under this Agreement and the Transaction Documents. Except as disclosed on Schedule 5.08, no litigation, claim, action, suit, investigation, or proceeding is pending or has been filed at any time since May 1, 1999, or to the knowledge of PMI, threatened against or relating to PMI or PMI’s Assets which would materially affect PMI’s ability to perform any of its obligations under this Agreement and the Transaction Documents.         5.09  Intangible Assets. Schedule 5.09 lists all inventions, licenses, trademarks, service marks, trade names, service names, copyrights, know-how, patents, and related registrations and applications owned by, registered in the name of, or used in connection with the PMI Technology, which are to be licensed to DPI in the Trademark Cross License Agreement or will be incorporated into the Product. There are no pending or, to the knowledge of PMI, threatened infringement claims against PMI by any person with respect to any of the items listed on Schedule 5.09, nor has any such item been declared invalid or been limited by any court or agreement. The intangible assets will afford DPI at all times after Closing the rights to use all technology, proprietary information, know-how or patented ideas, designs, inventions, trademarks, copyrights, trade names and service marks o wned by PMI or others necessary for the conduct of PMI as currently being conducted. To the knowledge of PMI the use of these intangible assets will not and, the conduct of PMI as currently conducted does not, infringe on the intellectual property rights of any other person.         5.10  No Conflict. Except as set forth on Schedule 5.10, neither the execution and delivery of this Agreement nor any document ancillary hereto nor the consummation of the transactions contemplated herein will (a) result in the breach, violation or contravention of, or constitute a default under, or conflict with, or give rise to a right of termination of, or accelerate any obligation under any of the provisions of (i) PMI’s charter, bylaws or other organizational documents; (ii) any agreement, lease, note, bond, debenture or other evidence of indebtedness or any mortgage, deed of trust, indenture or other instrument to which PMI is a party or by which it is bound or to which any of its assets is subject, (iii) any judgment, decree, order or award of any court, regulatory agency or other governmental body or arbitrator to which PMI or any of its assets is subject or by which PMI is bound or (iv) any statute, rule or regulation or other law applicable to PMI, (b) result in the creation of any pledge, lien, encumbrance or security interest upon any of its assets, or (c) require the authorization, approval, consent or order of, or filing with, or other action by any court, regulatory agency or other governmental body.         5.11  Disclosure. No representations, warranties, assurances, or statements of PMI in this Agreement and no statement in any document (including the Financial Statements and the Schedules), certificate, or other writing furnished or to be furnished by PMI (or caused to be furnished by PMI) to SanDisk or any of its representatives pursuant to this Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was made, to make the statements made not misleading. 8 --------------------------------------------------------------------------------         5.12  Investment Intent.               (a)  The Shares will be acquired by PMI for its own account for investment and not with a view to, or for resale in connection with any distribution of such securities, within the meaning of the Act. PMI hereby acknowledges that in connection with the purchase and sale contemplated herein, the Shares will not be registered under the Act.               (b)  PMI is aware that there are substantial restrictions on the transferability of the Shares. PMI agrees that the Shares shall not be sold, pledged, hypothecated or otherwise transferred, except in compliance with the registration provisions of the Act and applicable state securities laws, unless in the opinion of counsel satisfactory to DPI, any such transaction is exempt from registration. ARTICLE VI COVENANTS         6.01  Initial Public Offering. The Parties shall request that the Board of DPI consider, at the earliest appropriate time, the registration of the shares of common stock of DPI with the SEC and the listing or quoting of shares on one or more appropriate stock exchanges or the over-the-counter market in connection with an underwritten initial offering to the public of shares of DPI’s common stock (the “IPO”), to the extent feasible and practicable given (a) market conditions, (b) DPI’s actual and anticipated financial performance, (c) applicable legal requirements, and (d) the interests of DPI. Such an IPO shall only be undertaken with the consent of both Approval Agents.         6.02  Public Announcements. Except as required by law or the rules of any stock exchange on which a Party’s capital stock is listed, no Party shall make any public announcement regarding the transactions contemplated herein without the prior written consent of the other Party, which shall not be reasonably withheld, and shall give the other Party advance notice of the proposed public announcement.         6.03  Exclusivity.               (a)  DPI shall have unrestricted exclusive rights to operate and control the Vending Business in the United States and Canada and shall have the right of first refusal to conduct the Vending Business in Japan, Korea, Hong Kong, Taiwan, China and the countries within the Pacific Rim. As used herein, the phrase “Exclusive Territory” shall mean the United States, Canada and any other country for which DPI shall have exercised its right of first refusal.               DPI will not operate outside the Exclusive Territory now or in the future, unless the parties otherwise agree in writing.               (b)  PMI and its subsidiaries shall be prohibited in the Exclusive Territory from selling, operating or manufacturing the Product or any other device incorporating technology equivalent to that of the Product (including, but not limited to, automated or partially automated ordering and printing of digital photographic prints, where such ordering takes place through the use of publicly displayed self-service kiosks from electronic storage devices or where such ordering takes place through the use of multiple vending terminals connected to a remote printing facility from electronic storage devices), unless they own less than 10% of the then outstanding DPI common stock. PMI shall remain fully entitled, at all times without limitation, to freely make, use, sell, lease and operate the Product in any country or territory other than the Exclusive Territory; provided that in the event that PMI de sires to, or desires to enter into a relationship with another entity to, sell, manufacture, license, or operate the Product, or any other device or service similar to the Product, in Japan, Korea, Hong Kong, Taiwan, China and the countries within the Pacific Rim (“Opportunity”), PMI shall first offer the Opportunity to DPI on the following terms:         (i)  Notice of Opportunity. PMI shall deliver a written notice (the “Notice of Opportunity”) to DPI (with copy to SanDisk) describing the proposed Opportunity. The Notice of Opportunity will include a statement of PMI’s intention to distribute and/or operate the Product in the country at issue.         (ii)  DPI’s Acceptance. DPI may elect to undertake the Opportunity by delivering to PMI written notice of such election within 30 days after delivery of the Notice of Opportunity (the “Election Period”), in which case the additional country will be considered to be within the Exclusive Territory.         (iii)  DPI’s Rejection. If DPI has not elected in writing to undertake the Opportunity by the end of the Election Period, PMI will be free to undertake the Opportunity itself, and the additional country shall not be considered to be within the Exclusive Territory.         (iv)  Acceptance. If SanDisk notifies DPI within the Election Period that it desires DPI to accept such Opportunity, the Board of Directors of DPI shall consider and, if appropriate after exercising its business judgment, approve the election to undertake the Opportunity and notify PMI of DPI’s election in the manner set forth in clause (ii) above. 9 --------------------------------------------------------------------------------               (c)  Notwithstanding the foregoing, at any time following twelve (12) months after the Closing Date, upon the request of SanDisk, the Board of Directors of DPI shall, if appropriate after exercising its business judgment, notify PMI (“Expansion Notice”) of its intent to expand the Vending Business into one or more of the countries specified in Section 6.03 (b).               (d)  DPI’s exclusive right to conduct the Vending Business in a territory specified in paragraph 6.03 (i.e., in Japan, Korea, Hong Kong, Taiwan, China and the countries within the Pacific Rim) shall terminate without notice, and the provisions of subsection (iii) hereof shall apply, if: (1) DPI fails to deploy one or more Products for test marketing purposes in the territory within six months of the Election Period; or (2) DPI fails to submit purchase orders to PMI for the installation of at least 25 units of Product within six months of the Expansion Notice.               (e)  SanDisk and its subsidiaries shall be prohibited in the Exclusive Territory from selling, operating or manufacturing the Product or any other device incorporating technology equivalent to that of the Product unless they own less than 10% of the then outstanding DPI common stock. In the event SanDisk desires to make, use, sell, lease, distribute or operate a non-infringing device similar to the Product or service in any nation in the European Union by itself or with a third party, SanDisk shall first offer the opportunity (“European Opportunity”) to PMI on the following terms:         (i)  Notice of SanDisk Opportunity. SanDisk shall deliver a written notice (the “SanDisk Notice of Opportunity”) to PMI describing the proposed European Opportunity. The SanDisk Notice of Opportunity will include a statement of SanDisk’s intention to distribute and/or operate a device similar to the Product or service in the European Union country at issue.         (ii)  PMI’s Acceptance. PMI may elect to undertake the European Opportunity by delivering to SanDisk written notice of such election identifying the country in the European Union at issue within 30 days after delivery of the SanDisk Notice of Opportunity (the “SanDisk Election Period”).         (iii)  PMI’s Rejection. If PMI has not elected in writing to undertake the European Opportunity by the end of the SanDisk Election Period, SanDisk will be free to undertake the European Opportunity in the specified country in the European Union. SanDisk’s right to enter the specified nation in the European Union shall terminate without notice, and the provisions of subsection (iv) hereof shall apply, if SanDisk fails to install at least 25 noninfringing devices similar to the Product within one (1) year of the SanDisk Election Period.         (iv)  Termination of Opportunity. If SanDisk fails to satisfy the contingency in subsection (iii) above, it shall not thereafter distribute and/or operate a device similar to the Product or service in the European Union country at issue without offering the European Opportunity again to PMI in accordance with this Section.         (v)  No License to Technology. Nothing in this Section, or in this Agreement, shall be deemed to constitute a license of the PMI Technology to SanDisk.               (f)  The provisions of this Section 6.03 shall terminate with the termination of the Definitive Agreement, except that such provisions shall survive termination of the Definitive Agreement upon the closing of an initial public offering but only for so long as either party remains at least a ten percent (10%) shareholder of DPI.         6.04  SanDisk Investment Opportunities.         (a)  *.         (b)  Other Opportunities. Except as otherwise provided in subsection (a) above, PMI shall invite SanDisk to invest in, purchase or otherwise acquire an amount of shares equal to the number of shares of any investment opportunity offered to PMI in any internet-related investment which pertains to the Vending Business, upon terms (including price) substantially similar to PMI’s purchase price for its equity investment, including cash and non-cash contributions as adjusted for any taxes payable by PMI on such purchase and sale. This provision does not apply to PMI’s interest in *. ARTICLE VII CONDITIONS TO OBLIGATIONS OF SANDISK         7.01  Obligations of SanDisk. The obligations of SanDisk are subject to the satisfaction or waiver at Closing of each of the following conditions:               (a)  Representations and Warranties True at Closing. PMI’s representations and warranties contained in this Agreement shall be true in all material respects on and as of Closing and as of the date hereof with the same force and effect as though made on and as of such date; PMI shall have complied in all material respects with its covenants and agreements in this Agreement on or before Closing; and PMI shall have delivered to SanDisk a certificate dated as of Closing signed by an authorized officer to all such effects. 10 -------------------------------------------------------------------------------- *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.               (b)  Litigation. No suit, investigation, action or other proceeding shall be overtly threatened or pending against PMI before any court or governmental agency which (i) could result in an order materially restricting SanDisk, PMI or DPI from performing their respective obligations under this Agreement or the Transaction Documents; or (ii) could result in an order prohibiting the consummation of the transactions contemplated herein.               (c)  No Material Adverse Changes. PMI shall not have suffered any material adverse change in its businesses, prospects, financial condition, working capital, assets, liabilities (absolute, accrued, contingent, or otherwise) or operations which would materially affect its ability to perform its obligations under this Agreement and the Transaction Documents.               (d)  Documents and Schedules Satisfactory. All schedules, assignments, certificates, and other documents delivered by PMI to SanDisk at Closing will be in form and substance satisfactory to SanDisk and its counsel.               (e)  Required Governmental Approvals. All governmental authorizations, consents, and approvals necessary to consummate the transactions contemplated herein shall have been obtained by PMI and shall be in full force and effect.               (f)  Other Necessary Consents. PMI shall have obtained all other consents and approvals necessary to consummate the transactions contemplated herein.               (g)  Transaction Documents. The Transaction Documents shall have been executed, effective as of Closing. ARTICLE VIII CONDITIONS TO OBLIGATIONS OF PMI         8.01  Obligations of PMI. The obligations of PMI are subject to the satisfaction or waiver at Closing of each of the following conditions:               (a)  Representations and Warranties True at Closing. SanDisk’s representations and warranties contained in this Agreement shall be true in all material respects on and as of Closing and as of the date hereof with the same force and effect as though made on and as of such date; SanDisk shall have complied in all material respects with its covenants and agreements in this Agreement on or before Closing; and SanDisk shall have delivered to PMI a certificate dated as of Closing signed by an authorized officer to all such effects.               (b)  Litigation. No suit, investigation, action or other proceeding shall be overtly threatened or pending against SanDisk before any court or governmental agency which (i) could result in an order materially restricting SanDisk, PMI or DPI from performing their respective obligations under this Agreement or the Transaction Documents; or (ii) could result in an order prohibiting the consummation of the transactions contemplated herein.               (c)  No Material Adverse Changes. SanDisk shall not have suffered any material adverse change in its businesses, prospects, financial condition, working capital, assets, liabilities (absolute, accrued, contingent, or otherwise) or operations which would materially affect its ability to perform its obligations under this Agreement and the Transaction Documents.               (d)  Documents and Schedules Satisfactory. All schedules, assignments, certificates, and other documents delivered by SanDisk to PMI at Closing will be in form and substance satisfactory to PMI and its counsel.               (e)  Required Governmental Approvals. All governmental authorizations, consents, and approvals necessary to consummate the transactions contemplated herein shall have been obtained by SanDisk and shall be in full force and effect.               (f)  Other Necessary Consents. SanDisk shall have obtained all other consents and approvals necessary to consummate the transactions contemplated herein.               (g)  Transaction Documents. The Transaction Documents shall have been executed, effective as of Closing 11 -------------------------------------------------------------------------------- ARTICLE IX TERM AND TERMINATION         9.01  Term. This Agreement shall commence on the Closing Date and shall expire on December 31, 2010, unless terminated earlier as provided herein.         9.02  Termination of Agreement Prior to Closing. This Agreement may be terminated at any time prior to Closing:               (a)  By the mutual written consent of the parties;               (b)  By SanDisk in writing, without liability, if PMI (i) fails to perform in any material respect any covenant required at Closing, or (ii) materially breaches any representation or warranty in this Agreement;               (c)  By PMI in writing, without liability, if SanDisk (i) fails to perform in any material respect any covenant required at Closing, or (ii) materially breaches any representation or warranty in this Agreement; or               (d)  By any party in writing, without liability, if any court or governmental or regulatory agency order, writ, injunction, or decree prohibits or restrains any party from consummating the transactions contemplated herein.         9.03  Termination of this Agreement Post Closing.               (a)  Any time upon closing of any IPO.               (b)  On six months’ notice by any party hereto, if such notice is given in writing from January 1, 2003 through January 30, 2003, the dissolution of DPI shall proceed in accordance with Section 9 of the Stockholders’ Agreement without regard to the mediation provisions.               (c)  At any time during the twelve month period following the second anniversary of the end of the first fiscal year subsequent to the Closing Date, this Agreement may be terminated by either party if DPI fails to meet at least seventy percent (70%) of the revenue and profit targets for the two year period provided in Exhibit D attached hereto. Thereafter, at any time during the 12 month period following the completion of any subsequent fiscal year, this agreement may be terminated by either party if DPI fails to meet at least (70%) of the revenue and profit targets for the applicable Business Plan. Any such termination shall be effected by providing the parties to this Agreement one hundred eighty (180) days’ prior written notice.               (d)  For the term of the Agreement, this Agreement may be terminated by SanDisk, upon 90 days written notice (“Shortfall Notice Period”), of the failure or refusal of PMI to deliver ex works Grenoble, France at least * of the minimum annual quantities (i.e., 2,000 units) of Product (“Delivery Shortfall”), if ordered by DPI in accordance with Section 1.02(b) herein and Article 3 of the Exclusive Product Purchase Agreement, within three (3) months of the end of the applicable calendar year, unless within such Shortfall Notice Period, PMI shall have cured such Delivery Shortfall. For the years 2001 and thereafter during the term of the Agreement, this Agreement may be terminated by SanDisk, upon 90 days written notice (“ Shortfall Notice Period”), of the failure or refusal of PMI to deliver each quarter ex works Grenoble, France the applicable percenta ge (“Applicable Percentage”) of the minimum quarterly quantities * of Product (“Delivery Shortfall”), if ordered by DPI in accordance with Section 1.02(b) herein and Article 3 of the Exclusive Product Purchase Agreement, within two (2) months of the end of the applicable calendar quarter, unless within such Shortfall Notice Period, PMI shall have cured such Delivery Shortfall. The Applicable Percentage for each of the four quarters of 2001 shall be *, *, * and *, respectively. The Applicable Percentage for each quarter of 2002 and 2003 shall be *.               (e)  This Agreement may be terminated by PMI, upon 90 days written notice, if DPI fails to order the minimum annual quantities or the minimum quarterly quantities specified in clause (d) above, unless DPI shall have cured such shortfall within such notice period.               (f)  This Agreement may be terminated by either party on termination of the Exclusive Product Purchase Agreement by PMI.               (g)  Following the second anniversary of the Closing Date, this Agreement may be terminated by either party upon the occurrence of a Business Plan deadlock, as specified in Section 1.01(f), and pursuant to the provisions of Section 9 of the Stockholders Agreement.         9.04  Termination of Obligations.         (a)  In the case of termination pursuant to Section 9.02, within fifteen (15) days after this Agreement is terminated, each party will, upon written request from any other party, return all documents and copies previously delivered to it or made in connection with this Agreement. 11 -------------------------------------------------------------------------------- *INDICATES THAT CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.         (b)  Termination of this Agreement pursuant to Section 9.02 (a) or (d) will terminate all of the parties’ obligations, except for the obligations under Section 10.02 and Section 10.03 hereof.         (c)  Termination pursuant to Section 9.02 (b) or Section 9.02 (c) hereof will not relieve a defaulting or breaching party from any liability to any other party therefore.         (d)  In the event of termination pursuant to Section 9.03(g), the parties shall be bound to the additional rights and obligations imposed by Section 9 of the Stockholders Agreement.          13 -------------------------------------------------------------------------------- ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. AND INDEMNIFICATION         10.01  Survival of Representations and Warranties, Etc. All representations and warranties made by SanDisk or PMI in this Agreement shall survive the execution and delivery hereof and Closing hereunder, and will continue to survive for a period of six (6) months after the Closing. All covenants and other agreements hereof which are to be performed after the Closing shall survive the execution and delivery hereof and Closing hereunder, and will continue to survive until the dissolution of DPI.         10.02  General Indemnification. Each of PMI and SanDisk agrees to indemnify, defend and hold the other and their respective majority owned affiliate companies and permitted assigns harmless from and against all losses, costs, deficiencies, damages, fines, penalties and liabilities incurred, and all expenses (including, but not limited to reasonable attorneys= fees) arising out of or otherwise related to any claim based upon, arising out of or otherwise related to any material inaccuracy in any representation or warranty or any breach of any covenant or agreement made pursuant to this Agreement or any of the Transaction Documents (collectively, and together with the Losses under Section 10.03, “Losses,” and individually, a “Loss”), net of any insurance recovery or tax benefits actually received relating to such Loss.         10.03  Indemnification for Patent and Trademark Infringement.               (a)  SanDisk agrees to indemnify, defend and hold harmless DPI and PMI (including their respective majority owned affiliate companies) and permitted assigns against any and all claims, actions, suits or proceedings claiming patent infringement, theft of trade secrets, trademark infringement or trademark related causes of action under the Lanham Act related to SanDisk trademarks and/or FMS Technology used in connection with the Product (collectively, and together with the Losses in Section (b) below and under Section 10.02, “Losses,” and individually, a “Loss”) net of any insurance recovery or tax benefits actually received relating to such Loss.               (b)  PMI agrees to indemnify, defend and hold harmless DPI and SanDisk (including their respective majority owned affiliate companies and permitted assigns) against any and all claims, actions, suits or proceedings claiming patent infringement, copyright infringement, trademark infringement or trademark related causes of action under the Lanham Act, or theft of trade secrets related to PMI trademarks and/or PMI Technology used in connection with the Product (collectively, and together with the Losses in Section (a) above and under Section 10.02, “Losses,” and individually, a “Loss”) net of any insurance recovery or tax benefits actually received relating to such Loss.               (c)  The provisions of this Section 10.03 shall survive termination of this Agreement.         10.04  Notice of Loss or Asserted Liability. Promptly after (a) becoming aware of circumstances that have resulted in a Loss for which any party hereto (the “Indemnitee”) intends to seek indemnification under Sections 10.02 and 10.03 hereof or (b) receipt by the Indemnitee of written notice of any demand, claim or circumstances which, with or without the lapse of time, the giving of notice or both, would give rise to a claim or the commencement (or threatened commencement) of any action, proceeding or investigation (an “Asserted Liability”) that may result in a Loss, the Indemnitee will give notice thereof to any other party (or parties) obligated to provide indemnification pursuant to Sections 10.02 and 10.03 hereof (the “Indemnifying Party”).         10.05  Opportunity to Contest. Subject to the provisions of Section 10.05 hereof, the Indemnifying Party may elect to compromise or contest, at its own expense and by its own counsel, any Asserted Liability. If the Indemnifying Party elects to compromise or contest such Asserted Liability, it will within thirty (30) days after receiving notice of the claim from Indemnitee (or sooner, if the nature of the Asserted Liability so requires) notify the Indemnitee in writing of its intent to do so, and the Indemnitee will cooperate, at the expense of the Indemnifying Party, in the compromise or contest of such Asserted Liability. If the Indemnifying Party elects not to compromise or contest the Asserted Liability, fails to so notify the Indemnitee of its election as herein provided or contests its obligation to indemnify under this Agreement, the Indemnitee (upon further notice to the Indemnifying P arty) will hereafter have the right to pay, compromise or contest such Asserted Liability on behalf of and for the account and risk of the Indemnifying Party, subject to the right of the Indemnifying Party to assume the compromise or contest of such Asserted Liability at any time before final settlement or determination thereof. In any event, the Indemnitee and the Indemnifying Party may participate, at their own expense, in the contest of such Asserted Liability. If the Indemnifying Party chooses to contest any Asserted Liability, the Indemnitee will make available to the Indemnifying Party any books, records or other documents within its control that are necessary or appropriate for, will make its officers and employees available, on a basis reasonably consistent with their other duties, in connection with, and will otherwise cooperate with, such defense.         10.06  Limitation of Liability.               EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NEITHER PARTY SHALL BE RESPONSIBLE OR LIABLE TO THE OTHER FOR LOST PROFITS, OR LOST BUSINESS OPPORTUNITIES OR FOR INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH PERFORMANCE OF WORK PROVIDED FOR UNDER THIS AGREEMENT OR FOR TERMINATION OF THIS 13 -------------------------------------------------------------------------------- AGREEMENT AS PROVIDED FOR HEREIN. THIS PROVISION SHALL SURVIVE ANY EXPIRATION OR TERMINATION OF THIS AGREEMENT. ARTICLE XI MISCELLANEOUS         11.01  Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.         11.02  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.         11.03  Entire Agreement; Amendment; Waiver. This Agreement, together with all ancillary documents and all other exhibits and schedules hereto (including the Schedules and the other agreements referred to herein), constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended except in an instrument in writing signed by or on behalf of each of the parties hereto. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by or on behalf of the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.         11.04  Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party without the prior written consent of the other party, except (i) in accordance with the Stockholders Agreement, or (ii) in the event of the sale of all or substantially all of the business or assets of either party, such party may assign all of its rights and obligations under this Agreement and the Transaction Documents to the acquirer of such business or assets, provided that such acquirer agrees to assume in writing the obligations of such party set forth in this Agreement and the Transaction Documents. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.         11.05  No Third-Party Beneficiaries. Except as provided in Article X, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.         11.06  Counterparts. This Agreement and any exhibits hereto may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement or any exhibits hereto by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement or such exhibit This Agreement may be executed in one or more counterparts, each of which will for all purposes be deemed to be an original and all of which will constitute the same instrument. A fax copy of a signature page shall be treated as if it were an original.         11.07  Knowledge. As used in this Agreement, “knowledge” and “to the knowledge of” means actual knowledge of a party or any executive officer of the party.         11.08  Notices. Any notice, request, instruction, or other document to be given must be in writing and delivered personally or sent by certified mail or by United States Express Mail, postage or fees prepaid, or by FedEx, as follows:  If to SanDisk to: SanDisk Corporation 140 Caspian Court Sunnyvale, CA 94089 Attn: Vice President, General Counsel Facsimile: 408-548-0385  with copies to: Brobeck, Phleger & Harrison LLP Two Embarcadero Place 2200 Geng Road Palo Alto, CA 94303 15 -------------------------------------------------------------------------------- Attn: Timothy R. Curry, Esq. Facsimile: 650-496-2715  If to PMI to: Photo-Me International, Plc. c/o KIS 2110, avenue du Général de Gaulle 38130 Echirolles France Attn: Directeur Juridique Facsimile: 011-33-476-339647  with a copy to: Wolin, Ridley & Miller LLP 1717 Main Street, Suite 3100 Dallas, Texas 75201 Attn: Stephen A. Kennedy, Esq. Facsimile: (214) 939-4949 Any notice delivered personally in the manner provided here will be deemed given to the party to whom it is directed upon the party’s (or its agent’s) actual receipt. Any notice addressed and mailed in the manner provided here will be deemed given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth (4th) business day after the day it is placed in the mail or, if earlier, the time of actual receipt.         11.09  Expenses. PMI and SanDisk agree that they will each bear and pay all costs and expenses incurred by them respecting the transactions contemplated herein and all investigations and proceedings in connection therewith, including, without limitation, fees and expenses of their respective counsel, accountants and advisors. Notwithstanding, SanDisk and PMI agree to split the legal fees and expenses (excluding travel) of Wolin, Ridley& Miller LLP incurred in preparing initial drafts of the transaction documents through and including July 12, 2000.         11.10  Dispute Resolution. All disputes arising in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The arbitration shall take place in New York, New York and shall be conducted in the English language. The parties hereby agree to the enforceability of any judgements worldwide and to the authority of the arbitrator to award injunctive relief.         11.11  Governing Law. This Agreement will be construed in accordance with and governed by the laws of the State of California without regard to its conflicts of law provisions.         11.12  The provisions of this Article XI shall survive termination of this Agreement. [SIGNATURE PAGE FOLLOWS] 16 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, PMI and SanDisk have caused this Agreement to be executed by their duly authorized officers as of the date first set forth above.      PHOTO-ME INTERNATIONAL, PLC   By:   /s/ Serge Crasnianski      --------------------------------------------------------------------------------      Name: Serge Crasnianski Title: Chief Executive Officer      SANDISK CORPORATION   By:   /s/ Eli Harari      --------------------------------------------------------------------------------      Name: Eli Harari Title: President
OPTION AGREEMENT THIS OPTION AGREEMENT ("Agreement") is made and entered into as of this 19th day of October, 2000 (the "Contract Date") by and between Quentra Networks, Inc., a Delaware corporation ("Optionee"), HA Technology, Inc., a Delaware corporation (the "Company" or "HA"), Barbara Conrad, the sole shareholder of the Company ("Conrad"), Jerry Conrad, an employee of the Company ("Employee"), and DQE Enterprises, Inc., the holder of a warrant to purchase shares in the Company ("Enterprises"). As used herein the term "Optionor" shall mean Conrad, Enterprises and HA, as appropriate. W I T N E S S E T H WHEREAS, Optionee, Conrad, Employee, Enterprises and HomeAccess MicroWeb, Inc., a California corporation ("HomeAccess"), entered into that certain Amended and Restated Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), under which a wholly owned subsidiary of Optionee will be merged with and into HomeAccess with HomeAccess being the surviving corporation (the "Merger"); and WHEREAS, in consideration of the parties' previous business relationships and Optionee's offer to pay the Option Consideration (as defined herein), the parties have agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements as hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. Terms not otherwise defined in this Agreement shall have the meanings given to them in the Merger Agreement (provided, however, that references to HomeAccess shall be deemed to refer to the Company in construing such definitions, where the context so requires). "Closing Date" means the date the Transaction (as defined below) is consummated. "Enterprises Warrant" means the warrant issued to Enterprises by the Company to purchase forty percent (40%) of the capital stock of the Company (333,333 shares of the Company Preferred Stock (as defined herein)) in the form attached hereto at Exhibit A. "HA License Agreement" means that certain license agreement dated October 19, 2000 between the Company and HomeAccess, in the form attached hereto as Exhibit B, as the same may be amended from time to time. "Merger Closing Date" means the date of this Agreement. "Quentra Common Stock" means the common stock, $1.00 par value per share, of Optionee. -1- 2. Grant of Rights. (a) Grant of Option. Optionor and HA, as applicable, hereby grant to Optionee an irrevocable option ("Option") to acquire from Optionor all of the capital stock of the Company now owned or acquired by Optionor in the future, or to acquire from HA all or substantially all of the assets of HA (the "Transaction") at any time on or prior to April ___, 2002 (the "Option Expiration Date") in accordance with the terms of a merger agreement, stock purchase agreement or asset purchase agreement (the "Purchase Agreement") to be entered by the parties in accordance with Section 2(d). Optionee shall determine, in its sole discretion, whether the transaction will be in the form of a merger, stock purchase or asset sale, provided that the Transaction shall be treated as a tax-free reorganization. (b) Exercise Price. The exercise price for the Option shall be nine million (9,000,000) shares of Quentra Common Stock and warrants substantially in the form attached hereto as Exhibit C (the "Warrants") to purchase three million eight hundred thousand (3,800,000) shares of Quentra Common Stock at an exercise price of $8.64 per share (each subject to adjustment in the event of a stock split, recapitalization or similar event) (collectively, the "Option Consideration"). If (i) the Closing Date occurs within six (6) months after the Merger Closing Date, and (ii) Enterprises has not exercised the Enterprises Warrant, in full, on or prior to the Closing Date, Optionee shall only pay sixty percent (60%) of the Option Consideration (i.e., 5,400,000 shares of Quentra Common Stock and 2,280,000 Warrants) to Conrad and the Enterprises Warrant shall convert into the right to receive forty percent (40%) of the Option Consideration (i.e., 3,600,000 shares of Quentra Common Stock and 1,520,000 Warrants) for the same consideration as set forth in the Enterprises Warrant; in such event, if the Enterprises Warrant, as converted, is not exercised, in full, on or prior to the six (6) month anniversary of the Merger Closing Date, such warrant shall expire and no longer be of any force or effect. If the Closing Date occurs after the six (6) month anniversary of the Merger Closing Date and Enterprises fails to exercise the Enterprises Warrant, in full, on or prior to the Closing Date, such warrant shall terminate and no longer be of any force or effect and Optionee shall only be obligated to pay sixty percent (60%) of the Option Consideration to Conrad. (c) Option Exercise. Optionee may exercise the Option at any time on or before the Option Expiration Date by giving Optionor and HA written notice of such exercise (the "Exercise Notice"). The Exercise Notice shall set forth the anticipated Closing Date and the time and place of closing; provided, however, the Closing Date shall occur within thirty (30) days after the delivery of the Exercise Notice to Optionor and HA and not earlier than fifteen (15) days after the delivery of the Exercise Notice to Optionor and HA, time being of the essence, unless otherwise agreed to by Optionee, Optionor and HA. (d) Additional Actions Upon Exercise. Upon Optionee's exercise of the Option, the parties will execute a definitive Purchase Agreement as soon as practicable, but in no event later than thirty (30) days after Optionor's and HA's receipt of the Exercise Notice. The Purchase Agreement will contain the representations, warranties, covenants, indemnification and limitation of liability provisions set forth in the Merger Agreement (with references in the Merger Agreement to "HomeAccess" referring to "HA"), except to the extent necessary to incorporate the business terms set forth in this -2- Agreement and necessary to make the representations and warranties set forth in the Purchase Agreement true and correct, including without limitation, an obligation by Optionee to register the Optionee shares issued or to be issued as part of the Option Consideration, or upon the exercise of the Enterprises Warrant, in accordance with Section 6.3(e) of the Merger Agreement, and the survival, indemnification and limitation of liability provisions of Article 7 of the Merger Agreement 3. Conduct of Business of the Company. Except as contemplated by this Agreement or with the prior written consent of Optionee, which consent shall not be unreasonably withheld, during the period from the date of this Agreement to the Closing Date, the Company shall conduct its operations only in the ordinary course of business and shall use its reasonable best efforts to preserve intact the business organization of the Company, to keep available the services of the present officers and key employees of the Company, and to preserve the good will of customers, suppliers and all other persons having business relationships with the Company. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement, prior to the Closing Date, the Company shall not, without the prior written consent of Optionee, which consent shall not be unreasonably withheld and shall not fail to take into account the desire of the parties to operate their business independently if this Option is not exercised: (a) amend or otherwise change the Company's certificate of incorporation or bylaws; (b) except as contemplated by this Agreement, issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of the Company capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of the Company capital stock, or any other ownership interest (including, without limitation, any phantom interest) of the Company, any subsidiary or any of its affiliates; (c) sell, pledge, dispose of or encumber any assets or inventory of the Company (except for (i) sales of assets or inventory in the ordinary course of business, (ii) dispositions of obsolete or worthless assets, and (iii) pledges of assets pursuant to existing agreements, or agreements the Company is permitted to enter into in connection with the purchase of assets), or take any action that would reasonably be expected to result in any damage to, destruction or loss of any material asset of the Company (whether or not covered by insurance); (d) (i) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of the Company capital stock, (ii) split, combine or reclassify any of the Company capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of the Company capital stock, (iii) amend the terms of, repurchase, redeem or otherwise acquire any of its securities, except in accordance with preexisting commitments as of the date hereof, or propose to do any of the foregoing; -3- (e) (i) acquire (by merger, consolidation, or acquisition of stock or assets) any Entity or division thereof, or enter into or amend any contract to effect any such acquisition, (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee (other than guarantees of bank debt of a subsidiary entered into in the Ordinary Course of Business) or endorse or otherwise as an accommodation become responsible for, the obligations of any Person, or make any loans or advances, except in each case in the ordinary course of business (including pursuant to existing credit lines and lease facilities); (iii) provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any Entity; (iv) except in the Ordinary Course of Business or otherwise provided or permitted by this Agreement, enter into or amend any material Contract which provides for the sale, license, or purchase by the Company of assets; (v) authorize any capital expenditures or purchase of fixed assets which are, in the aggregate, in excess of $10,000; (vi) except in the ordinary course of business, license, grant or sell any right to use or otherwise encumber in any manner whatsoever the Company's rights to the intellectual property, including all updates, revisions, or modifications thereof, granted to the Company pursuant to the HA License Agreement or any other intellectual property or proprietary rights now owned or subsequently developed or created by the Company (the "HA Intellectual Property") (by way of example, entering into a license agreement with respect to the HA Intellectual Property similar to the terms contemplated in the proposed agreement between HomeAccess and Portland General Electric Company, shall be considered a license entered into in the ordinary course of business); or (vii) enter into or amend any Contract to effect any of the matters prohibited by this Section 3(e); (f) increase the compensation payable or to become payable to its officers or employees, except for increases in salary or wages of employees of the Company who are not executive officers of the Company in the ordinary course of business or grant any severance or termination pay to, or enter into any employment or severance agreement with any director, officer (except for officers who are terminated on an involuntary basis), or, in the ordinary course of business, establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees, except, in each case, as may be required by law; (g) take any action to change accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable); (h) settle or compromise any material federal, state, local or foreign Tax liability or agree to an extension of a statute of limitations; (i) pay, discharge or satisfy any claims, Liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business; -4- (j) engage in any action or enter into any transaction or permit any action to be taken or transaction to be entered into that could reasonably be expected to delay the consummation of, or otherwise adversely affect, any of the transactions contemplated by this Agreement; (k) undertake any revaluation of any of the Company's assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (l) take, or agree in writing or otherwise to take, any of the actions described in Sections 3(a) through (k). 4. Legends. The Company shall cause all certificates evidencing securities of the Company to contain the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION AGREEMENT BETWEEN THE COMPANY, THE SHAREHOLDER AND QUENTRA NETWORKS, INC. A COPY OF THIS AGREEMENT IS AVAILABLE FOR REVIEW AT THE COMPANY'S OFFICES. In addition, the Company shall not authorize the assignment, pledge, hypothecation or otherwise allow the transfer (the "Transfer") by Optionor of the securities subject to the terms of this Agreement, unless the transferee has agreed to be bound by the terms of this Agreement and such Transfer is made in accordance with Section 8(a). 5. The Company's Warranties, Representations and Covenants. The Company warrants and represents as of the date hereof (with the express understanding that Optionee is relying on said warranties, representations and covenants) that: (a) The Company has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, and has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. The Company is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to so qualify would not have a Material Adverse Effect on the Company. The Company has no Subsidiaries and has never owned beneficially or otherwise any equity interest in any other Person. (b) The Company has never conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or name other than the name set forth in its articles of incorporation, as amended. (c) As of the date of this Agreement, the authorized capital stock of the Company consists of 833,333 shares of the Company's common stock, $.001 par value (the "Company Common Stock") -5- and 333,333 shares of Series A Convertible Preferred Stock, $.001 par value per share ("Company Preferred Stock"), none of which are issued and outstanding. As of the date of this Agreement, 500,000 shares of Company Common Stock are issued and outstanding, all of which are owned by Conrad, and Enterprises owns the Enterprises Warrant to purchase 333,333 shares of the Company Preferred Stock. Except as set forth in this Section 5(c), there are no options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights or other rights, agreements, arrangements or commitments of any character to which the Company is a party or by which the Company is bound relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company. All Company Common Stock, the Enterprises Warrant, and the shares of Company Preferred Stock issuable upon exercise of the Enterprises Warrant, will be free and clear of all Encumbrances and have been duly authorized, validly issued, fully paid and nonassessable, will not be subject to preemptive rights and have been issued in full compliance with all applicable securities laws and other Legal Requirements. There are no outstanding contractual obligations of the Company to repurchase, redeem or acquire any shares of capital stock of the Company or securities convertible into or exchangeable for any of the foregoing. (d) The Company has entered into the HA License Agreement with Home Access and granted the Enterprises Warrant to Enterprises, both in the form previously reviewed by Optionee. (e) The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transaction and the other transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by the Company of the Transaction and the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company and no other proceedings on the part of the Company are necessary to authorize this Agreement or to consummate such transactions. This Agreement has been validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms. (f) The Company has delivered to Optionee accurate and complete copies of: (i) the Company's certificate of incorporation and bylaws, including all amendments thereto; (ii) the stock records of the Company; and (iii) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the shareholders of the Company, and any predecessor thereto, and the board of directors of the Company, and any predecessor thereto. There have been no meetings or other proceedings of the shareholders of the Company, or any predecessor thereto, or the board of directors of the Company, or any predecessor thereto, that are not reflected in such minutes or other records. (g) There has not been any violation of any of the provisions of the Company's certificate of incorporation or bylaws or of any resolution adopted by the Company's shareholders or the Company's board of directors, and to the Knowledge of the Company no event has occurred, and no -6- condition or circumstance exists, that likely would (with or without notice or lapse of time) constitute or result directly or indirectly in such a violation. (h) The books of account, stock records, minute books and other records of the Company are accurate, up to date and complete, and have been maintained in accordance with sound and prudent business practices. All of the records of the Company and any predecessor thereto are in the actual possession and direct control of the Company. (i) Neither the execution and delivery of this Agreement, nor the consummation or performance of the Transaction, will directly or indirectly (with or without notice or lapse of time): (i) contravene, conflict with or result in a violation of (A) any of the provisions of the Company's certificate of incorporation or bylaws, or (B) any resolution adopted by the Company's shareholders, the Company's board of directors or any committee of the Company's board of directors, if any; (ii) to the Knowledge of the Company, contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge this Agreement or the transactions contemplated hereby or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company, or any of the assets owned or used by the Company, is subject; (iii) cause the Company to become subject to, or to become liable for the payment of, any Tax; (iv) cause any of the assets owned or used by the Company to be reassessed or revalued by any taxing authority or other Governmental Body; (v) to the Knowledge of the Company, contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or any of its employees or that otherwise relates to the Company's business or to any of the assets owned or used by the Company; (vi) contravene, conflict with or result in a violation or breach of, or result in a default under, any material provision of any of the Company Contracts; (vii) give any Person the right to (A) declare a default or exercise any remedy under any the Company Contract, (B) accelerate the maturity or performance of any the Company Contract, or (C) cancel, terminate or modify any the Company Contract; -7- (viii) give any Person the right to any payment by the Company or give rise to any acceleration or change in the award, grant, vesting or determination of options, warrants, rights, severance payments or other contingent obligations of any nature whatsoever of the Company in favor of any Person, in any such case as a result of the change in control of the Company or otherwise resulting from this Agreement or the transactions contemplated hereby; or (ix) result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by the Company. (j) Except as set forth in the HA License Agreement, the Company is not a party to any agreement or license with any other party concerning the HA Intellectual Property. The Company will not be required to make any filing with or give any notice to, or obtain any Consent from, any Person in connection with the execution and delivery of this Agreement or the consummation or performance of the Transaction. As of the date hereof, all such filings, notices and Consents have been duly made, given or obtained and are in full force and effect, other than those which by their nature are required to be made, given or obtained after the execution of this Agreement, all of which shall be made, given or obtained within the time required therefor. 6. Optionor's Representations and Warranties. Each Optionor severally warrants and represents as of the date hereof with respect to such Optionor (with the express understanding that Optionee is relying on said warranties, representations and covenants) that: (a) Optionor has all necessary power and authority to execute and deliver this Agreement, to perform its obligations under this Agreement and to consummate the Transaction and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation by Optionor of the Transaction contemplated hereby have been duly and validly authorized by all necessary action, and no other proceedings on the part of the Optionor are necessary to authorize this Agreement or to consummate such transactions. This Agreement has been validly executed and delivered by the Optionor and constitutes a legal, valid and binding obligation of the Optionor, enforceable against it in accordance with its terms. (b) The Optionor has legal, valid, beneficial and exclusive title to, in the case of Conrad, 500,000 shares of Company Common Stock, and, in the case of Enterprises, the Enterprises Warrant, free and clear of all Encumbrances other than those imposed by the Securities Act. 7. Optionee's Representations and Warranties. Optionee warrants and represents as of the date hereof (with the express understanding that the Optionor, the Company and Employee are relying on said warranties, representations and covenants) that: (a) Optionee and each Subsidiary of Optionee (collectively, the "Optionee Subsidiaries") has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite power -8- and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted. Each of Optionee and each Optionee Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to so qualify would not have a Material Adverse Effect on Optionee. Schedule 7(a) sets forth a complete and correct list of all of the Optionee Subsidiaries. Neither Optionee nor any Optionee Subsidiary holds any equity interest in any Person other than the Optionee Subsidiaries so listed. (b) Optionee has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transaction and the other transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by Optionee of the Transaction and the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action other than the approval of Optionee's stockholders (the "Optionee Shareholder Approval") and no other corporate proceedings on the part of Optionee are necessary to authorize this Agreement or to consummate such transactions, except for the Optionee Shareholder Approval. This Agreement has been duly authorized and validly executed and delivered by Optionee and constitutes a legal, valid and binding obligation of Optionee, enforceable against it in accordance with its terms. (c) The representations and warranties set forth in Section 5.2 of the Merger Agreement are true and correct. 8. Covenants. (a) Until the termination of this Agreement, each Optionor agrees not to Transfer or otherwise Encumber the Company Common Stock, the Enterprises Warrant or the Company Common Stock issuable upon exercise of the Enterprises Warrant, as applicable, unless the transferee has agreed to be bound by the terms hereof and without the prior written consent of Optionee, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Optionee's consent shall not be required with respect to a Transfer to an Affiliate of Optionor or as a result of a merger, change in control or the sale of all or substantially all of the Optionor's assets. (b) Subject to the terms and conditions provided in this Agreement and to applicable legal requirements, each of the parties agrees to use its best efforts to take, or cause to be taken, all action, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, as promptly as practicable, all things necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by this Agreement. -9- 9. Non-Performance. (a) In the event of a failure of Optionor or HA to consummate the Transaction in accordance with the terms hereof, Optionee may pursue, any one or all of the following remedies: (i) Terminate this Agreement; (ii) Waive such default and close; (iii) Institute an action for specific performance; and/or (iv) Pursue any other remedies available under law or in equity; (b) This Agreement shall terminate automatically if Optionee has not provided Optionor and HA an Exercise Notice on or prior to the Option Expiration Date, time being of the essence. 10. Assignment. Except upon the prior written consent of the parties Optionee may not assign the Option or any other right under this Agreement. 11. Broker. Each of the parties hereto represents to the other that it has not retained the services of a broker or finder in connection with this transaction. Optionor hereby expressly agrees to indemnify and hold Optionee harmless from and against any and all loss incurred by Optionee as a result of a claim by any person(s) or entity(ies) for a commission claim through Optionor with respect to the transaction contemplated by this Agreement. HA hereby expressly agrees to indemnify and hold Optionee harmless from and against any and all loss incurred by Optionee as a result of a claim by any person(s) or entity(ies) for a commission claim through HA with respect to the transaction contemplated by this Agreement. Optionee hereby expressly agrees to indemnify and hold Optionor harmless from and against any and all loss incurred by Optionor as a result of a claim by any person(s) or entity(ies) for a commission claim through Optionee with respect to the transaction contemplated by this Agreement. 12. Notice. Any and all notices or other communications required or permitted under this Agreement shall be given in writing and delivered in Person or sent by United States certified or registered mail, postage prepaid, return receipt requested, or by overnight express mail, or by telex, facsimile or telecopy to the address of such party set forth below. Any such notice shall be effective upon receipt or three (3) days after placed in the mail, whichever is earlier. If to Quentra: Quentra Networks, Inc. 1460 S. Sepulveda Blvd., Suite 222 Los Angeles, CA 90025 Attention: Timothy G. Atkinson, General Counsel Facsimile No.: -10- With copies to: Morrison + Foerster, LLP 370 17th Street, Suite 5200 Denver, CO 80202 Attention: Warren L. Troupe, Esq. Facsimile No.: (303) 592-1510 If to the Company, Conrad or Employee: HA Technology, Inc. c/o Jerry Conrad 9500 Toledo Way Irvine, California 92618-1806 With copies to: Cassady + Klein 908 Kenfield Avenue Los Angeles, CA 90049 Attention: Raymond M. Klein, Esq. Facsimile No.: (310) 471-3006 And: DQE Enterprises, Inc. One Northshore Center Suite 100 12 Federal Street Pittsburgh, PA 15212 Attention: President Facsimile No.: (412) 231-2140 If to Enterprises, to the address set forth above, with a copy to: Kirkpatrick and Lockhart LLP 1500 Oliver Building Pittsburgh, PA 15222 Attention: David J. Lehman, Esq. Facsimile No.: (412) 355-6501 Any party may, by notice so delivered, change its address for notice purposes hereunder. 13. Arbitration. Any dispute between the parties pursuant to this Agreement shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in Los -11- Angeles, California. The arbitration proceeding shall be conducted by one arbitrator selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in accordance with the following procedures and time schedules unless otherwise mutually agreed to by Optionor or HA, as applicable, and Optionee: (i) within ten (10) days after the appointment of the arbitrator, Optionor or HA, as applicable, and Optionee shall provide the arbitrator with all documents, records and supporting information reasonably necessary to resolve the dispute and a hearing on such dispute shall be held; (ii) within three (3) days after the hearing, the arbitrator shall render his or her decision; (iii) Optionor or HA, as applicable, and Optionee shall each be entitled to present the testimony of up to two (2) individuals, which testimony shall not exceed four (4) hours in the aggregate; and (iv) no discovery shall be allowed. The decision or award of the arbitrator shall be final and binding upon Optionor or HA, as applicable, and Optionee to same extent and to the same degree as if the matter had been adjudicated by a court of competent jurisdiction and shall be enforceable under the Federal Arbitrations Act. The costs and expenses of the arbitration and of the prevailing party (including reasonable attorneys' fees) shall be paid by the non-prevailing party. 14. General Provisions. (a) Integration Clause. This is the entire agreement between the parties with respect to this transaction. There are no oral promises, conditions, representations, understandings, interpretations, or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties. This Agreement may not be amended or modified except by a document in writing signed by the parties. (b) Applicable Law. This Agreement shall be interpreted in accordance with the laws of the State of California. (c) Severability. In the event any provisions hereof or any portion of any provision hereof shall be deemed to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not alter the remaining portion of any provision, or any other provision hereof, as each provision of this Agreement shall be deemed to be severable from all other provisions hereof. (d) Waivers. The waiver of either party hereto of any right granted to it hereunder shall not be deemed to be a waiver of any other right granted herein, nor shall the same be deemed to be a waiver of a subsequent right obtained by reason of the continuation of any matter previously waived. (e) Binding Agreement; Inurement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. (f) Time Calculations. Unless otherwise indicated, all periods of time referred to in this Agreement shall refer to calendar days unless specifically stated otherwise and shall include all Saturdays, Sundays and state or national holidays; provided that if the date or last date to perform any act or give any notice with respect to this Agreement shall fall on a Saturday, Sunday or state or -12- national holiday, such act or notice may be timely performed or given on the next succeeding day which is not a Saturday, Sunday or state or national holiday. (g) Construction of Party Relationships. Nothing herein contained shall be deemed or construed by the parties hereto or by any third person to create the relationship of principal or agent or of partnership or joint venture or of any association between the parties. (h) Captions. The captions of the paragraphs hereof are for convenience only and shall not govern or influence the interpretation hereof. (i) Parties Not Bound. No term or provision of this Agreement or the Exhibits hereto is intended to, or shall be for the benefit of any person, firm, corporation or other entity not a party hereto (including, without limitation, any broker) and no such other person, firm, corporation or entity shall have any right or cause of action hereunder. (j) Preparation of Agreement. The parties hereto acknowledge that this Agreement has been negotiated and prepared in an arms-length transaction and that the parties have negotiated all the terms contained herein. Accordingly, the parties agree that no party shall be deemed to have drafted the Agreement and the Agreement shall not be interpreted against any party as the draftsman. (k) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and which together shall constitute but one and the same instrument. -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written. HA Technology, Inc., a Delaware corporation By: /s/ Jerry Conrad ------------------------------------- OPTIONOR: DQE Enterprises, Inc. By: /s/ Neal G. Taylor -------------------------------------- OPTIONOR: Barbara Conrad /s/ Barbara Conrad ------------------------------------------- Jerry Conrad /s/ Jerry Conrad ------------------------------------------- OPTIONEE: Quentra Networks, Inc., a Delaware corporation By: /s/ James R. McCullough ------------------------------------- -14- EXHIBIT A Form of Enterprises Warrant EXHIBIT B Form of License EXHIBIT C Form of Warrant
EXHIBIT 10.4 EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINENTAL AIRLINES, INC., a Delaware corporation ("Company"), and C.D. McLEAN ("Executive"), and is dated and effective as of July 25, 2000 (the "Effective Date"). W I T N E S S E T H: WHEREAS, Company and Executive are parties to that certain Amended and Restated Employment Agreement dated as of September 16, 1999 (the "Existing Agreement"), which expires on November 21, 2000; and WHEREAS , the Human Resources Committee of the Board of Directors of Company ("HR Committee") has deemed it advisable and in the best interests of Company and its stockholders to assure management continuity for Company and, consistent therewith, has authorized the execution, delivery and performance by Company of this Agreement; WHEREAS, in connection therewith, the parties desire to enter into this Agreement to replace and supersede the Existing Agreement in its entirety, effective as of the Effective Date; NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:   ARTICLE 1: EMPLOYMENT AND DUTIES 1.1 Employment; Effective Date. Company agrees to employ Executive and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article 2 of this Agreement, subject to the terms and conditions of this Agreement. 1.2 Positions. From and after the Effective Date, Company shall employ Executive in the position of Executive Vice President - Operations of Company, or in such other positions as the parties mutually may agree. 1.3 Duties and Services. Executive agrees to serve in the positions referred to in paragraph 1.2 and to perform diligently and to the best of his abilities the duties and services appertaining to such offices as set forth in the Bylaws of Company in effect on the Effective Date, as well as such additional duties and services appropriate to such offices which the parties mutually may agree upon from time to time.   ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT 2.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for a five-year period beginning on the Effective Date. Said term of employment shall be extended automatically for an additional successive five-year period as of the fifth anniversary of the Effective Date and as of the last day of each successive five-year period of time thereafter that this Agreement is in effect; provided, however, that if, prior to the date which is six months before the last day of any such five-year term of employment, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the five-year term of employment during which such notice is given. 2.2 Company's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Company, acting pursuant to an express resolution of the Board of Directors of Company (the "Board of Directors"), shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons: (i) upon Executive's death; (ii) upon Executive's becoming incapacitated for a period of at least 180 days by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the material duties and services required of him hereunder on a full-time basis during such period; (iii) if, in carrying out his duties hereunder, Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct resulting in material economic harm to Company; (iv) upon the conviction of Executive for a felony or any crime involving moral turpitude; or (v) for any other reason whatsoever, in the sole discretion of the Board of Directors. 2.3 Executive's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Executive shall have the right to terminate his employment under this Agreement at any time for any of the following reasons: (i) the assignment to Executive by the Board of Directors or other officers or representatives of Company of duties materially inconsistent with the duties associated with the positions described in paragraph 1.2 as such duties are constituted as of the Effective Date, or the failure to elect or reelect Executive to any of the positions described in paragraph 1.2 or the removal of him from any such positions; (ii) a material diminution in the nature or scope of Executive's authority, responsibilities, or titles from those applicable to him as of the Effective Date, including a change in the reporting structure so that Executive reports to someone other than the President or the Chief Executive Officer of Company; (iii) the occurrence of acts or conduct on the part of Company, its Board of Directors, or its officers, representatives or stockholders which prevent Executive from, or substantively hinder Executive in, performing his duties or responsibilities pursuant to this Agreement; (iv) Company requiring Executive to be permanently based anywhere outside a major urban center in Texas; (v) the taking of any action by Company that would materially adversely affect the corporate amenities enjoyed by Executive on the Effective Date; (vi) a material breach by Company of any provision of this Agreement which, if correctable, remains uncorrected for 30 days following written notice of such breach by Executive to Company, it being agreed that any reduction in Executive's then current annual base salary, or any reduction in Executive's annual cash bonus opportunity as a percentage of such base salary from that percentage in effect on the Effective Date (i.e., 0% to 125% of base salary) or any material change in the frequency of payment thereof or the performance factors on which such bonus is based, shall constitute a material breach by Company of this Agreement; or (vii) for any other reason whatsoever, in the sole discretion of Executive. 2.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, it or he shall do so by giving written notice to the other party that it or he has elected to terminate Executive's employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.   ARTICLE 3: COMPENSATION AND BENEFITS 3.1 Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary equal to the greater of (i) $451,500.00 or (ii) such amount as the parties mutually may agree upon from time to time. Executive's annual base salary shall be paid in equal installments in accordance with Company's standard policy regarding payment of compensation to executives but no less frequently than semimonthly. 3.2 Bonus Programs and Restricted Stock Grant. (a) Cash Bonus Programs. Executive shall participate in each cash bonus program maintained by Company on and after the Effective Date (including, without limitation, any such program maintained for the year during which the Effective Date occurs) at a level which is not less than the maximum participation level made available to any Company executive (determined without regard to period of service or other criteria that might otherwise be necessary to entitle Executive to such level of participation); provided that Company shall at all times maintain Executive's annual cash bonus opportunity as a percentage of his base salary in an amount which is at least as great as that in effect on the Effective Date (i.e., 0% to 125% of base salary) and shall not change in any material respect the payment frequency thereof or the performance factors on which such bonus is based. (b) Restricted Stock Grant. On the Effective Date, Company shall make a restricted stock award to Executive of 30,000 shares of Class B common stock of Company under Company's Incentive Plan 2000, which restricted stock award shall vest as to 1/3 of the shares on the first anniversary of the Effective Date, 1/3 of the shares on the second anniversary of the Effective Date, and 1/3 of the shares on the third anniversary of the Effective Date, or otherwise in accordance with the terms of the Incentive Plan 2000 (including any grant document thereunder) and the terms of this Agreement. 3.3 Life Insurance. During the period of this Agreement, Company shall maintain one or more policies of life insurance on the life of Executive providing an aggregate death benefit in an amount not less than the Termination Payment (as such term is defined in paragraph 4.7, and based on a Severance Period of thirty-six months). Executive shall have the right to designate the beneficiary or beneficiaries of the death benefit payable pursuant to such policy or policies up to an aggregate death benefit in an amount equal to the Termination Payment (based on a Severance Period of thirty-six months), and may transfer ownership of such policy or policies (and any rights of Executive under this paragraph 3.3) to any life insurance trust, family trust or other trust. To the extent that Company's purchase of, or payment of premiums with respect to, such policy or policies results in compensation income to Executive, Company shall pay to Executive an additional payment (the "Policy Payment") in an amount such that after payment by Executive of all taxes imposed on Executive with respect to the Policy Payment, Executive retains an amount of the Policy Payment equal to the taxes imposed upon Executive with respect to such purchase or the payment of such premiums. If for any reason Company fails to maintain the full amount of life insurance coverage required pursuant to the preceding provisions of this paragraph 3.3, Company shall, in the event of the death of Executive while employed by Company, pay Executive's designated beneficiary or beneficiaries an amount equal to the sum of (1) the difference between the Termination Payment (based on a Severance Period of thirty-six months) and any death benefit payable to Executive's designated beneficiary or beneficiaries under the policy or policies maintained by Company and (2) such additional amount as shall be required to hold Executive's estate, heirs, and such beneficiary or beneficiaries harmless from any additional tax liability resulting from the failure by Company to maintain the full amount of such required coverage. 3.4 Vacation and Sick Leave. During each year of his employment, Executive shall be entitled to vacation and sick leave benefits equal to the maximum available to any Company executive, determined without regard to the period of service that might otherwise be necessary to entitle Executive to such vacation or sick leave under standard Company policy. 3.5 Supplemental Executive Retirement Plan. (i) Base Benefit. Company agrees to pay Executive the deferred compensation benefits set forth in this paragraph 3.5 as a supplemental retirement plan (the "Plan"). The base retirement benefit under the Plan (the "Base Benefit") shall be in the form of an annual straight life annuity in an amount equal to the product of (a) 2.5% times (b) the number of Executive's credited years of service (as defined below) under the Plan (but not in excess of 26 years) times (c) the Executive's final average compensation (as defined below). For purposes hereof, Executive's credited years of service under the Plan shall be equal to the sum of (1) the number of Executive's years of benefit service with Company, calculated as set forth in the Continental Retirement Plan (the "CARP") beginning at January 1, 1995 ("Actual Years of Service"), (2) an additional two years of service for each one year of service credited to Executive pursuant to clause (1) of this sentence for the period beginning on January 1, 2000 and ending on December 31, 2004, and (3) if the Termination Payment becomes payable to Executive under this Agreement or if Executive's employment is terminated for a reason encompassed by paragraphs 2.2(i) or 2.2(ii), that number of additional years of service as is equal to (X) 18 years minus (Y) three times the number of full calendar years which have occurred during the period beginning January 1, 2000 and ending on the earlier of (i) the date that the Termination Payment under this Agreement first becomes payable to Executive or (ii) December 31, 2004. For purposes hereof, Executive's final average compensation shall be equal to the greater of (A) $451,500.00 or (B) the average of the five highest annual cash compensation amounts (or, if Executive has been employed less than five years by Company, the average over the full years employed by Company) paid to Executive by Company during the consecutive ten calendar years immediately preceding Executive's termination of employment at retirement or otherwise. For purposes hereof, cash compensation shall include base salary plus cash bonuses (including any amounts deferred (other than Stay Bonus amounts described below) pursuant to any deferred compensation plan of the Company), but shall exclude (i) any cash bonus paid on or prior to March 31, 1995, (ii) any Stay Bonus paid to Executive pursuant to that certain Stay Bonus Agreement between Company and Executive dated as of April 14, 1998, (iii) any Termination Payment paid to Executive under this Agreement, (iv) any payments received by Executive under Company's Officer Retention and Incentive Award Program, (v) any proceeds to Executive from any awards under any option, stock incentive or similar plan of Company, and (vi) any cash bonus paid under a long term incentive plan or program adopted by Company. Executive shall be vested immediately with respect to benefits due under the Plan. (ii) Offset for CARP Benefit. Any provisions of the Plan to the contrary notwithstanding, the Base Benefit shall be reduced by the actuarial equivalent (as defined below) of the pension benefit, if any, paid or payable to Executive from the CARP. In making such reduction, the Base Benefit and the benefit paid or payable under the CARP shall be determined under the provisions of each plan as if payable in the form of an annual straight life annuity beginning on the Retirement Date (as defined below). The net benefit payable under this Plan shall then be actuarially adjusted based on the actuarial assumptions set forth in paragraph 3.5(vii) for the actual time and form of payments. (iii) Normal and Early Retirement Benefits. Executive's benefit under the Plan shall be payable in equal monthly installments beginning on the first day of the month following the Retirement Date (the "Normal Retirement Benefit"). For purposes hereof, "Retirement Date" is defined as the later of (a) the date on which Executive attains (or in the event of Executive's earlier death, would have attained) age 60 or (b) the date of Executive's retirement from employment with Company. Notwithstanding the foregoing, if Executive's employment with Company is terminated, for a reason other than death, on or after the date Executive attains age 55 or is credited with 10 Actual Years of Service and prior to the Retirement Date, then Executive shall be entitled to elect to commence to receive Executive's benefit under the Plan as of the first day of any month coinciding with or next following Executive's termination of employment, or as the first day of any subsequent month preceding the Retirement Date (an "Early Retirement Benefit"); provided, however, that (1) written notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, (2) each payment under an Early Retirement Benefit shall be reduced to the extent necessary to cause the value of such Early Retirement Benefit (determined without regard to clause (3) of this proviso) to be the actuarial equivalent of the value of the Normal Retirement Benefit (in each case based on the actuarial assumptions set forth in paragraph 3.5(vii) and adjusted for the actual time and form of payments), and (3) each payment under an Early Retirement Benefit that is made prior to the Retirement Date shall be reduced by an additional 10% of the amount of such payment as initially determined pursuant to clause (2) of this proviso. The HR Committee may, in its sole and absolute discretion, waive all or any part of the reductions contemplated in clauses (2) and/or (3) of the proviso of the preceding sentence. (iv) Form of Retirement Benefit. If Executive is not married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive in the form of a single life annuity for the life of Executive. If Executive is married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive, at the written election of Executive made at least 15 days prior to the first payment of benefits under the Plan, in either (1) the form of a single life annuity for the life of Executive, or (2) the form of a joint and survivor annuity that is actuarially equivalent to the benefit that would have been payable under the Plan to Executive if Executive was not married on such date, with Executive's spouse as of the date benefit payments commence being entitled during such spouse's lifetime after Executive's death to a benefit equal to 50% of the benefit payable to Executive during their joint lifetimes. If Executive fails to make such election, Executive will be deemed to have elected a joint and survivor annuity. (v) Death Benefit. Except as provided in this paragraph 3.5(v), no benefits shall be paid under the Plan if Executive dies prior to the date Executive's benefit commences pursuant to paragraph 3.5(iii). In the event of Executive's death prior to the commencement of Executive's benefit pursuant to paragraph 3.5(iii), Executive's surviving spouse, if Executive is married on the date of Executive's death, will receive a single life annuity consisting of monthly payments for the life of such surviving spouse determined as follows: (a) if Executive dies on or before reaching the Retirement Date, the death benefit such spouse would have received had Executive terminated employment on the earlier of Executive's actual date of termination of employment or Executive's date of death, survived until the Retirement Date, elected a joint and survivor annuity and began to receive Executive's Plan benefit beginning immediately at the Retirement Date, and died on the day after the Retirement Date; or (b) if Executive dies after reaching the Retirement Date, the death benefit such spouse would have received had Executive elected a joint and survivor annuity and begun to receive Executive's Plan benefit beginning on the day prior to Executive's death. Payment of such survivor annuity shall begin on the first day of the month following the later of (1) Executive's date of death or (2) the Retirement Date; provided, however, that if Executive was eligible to elect an Early Retirement Benefit as of the date of Executive's death, then Executive's surviving spouse shall be entitled to elect to commence to receive such survivor annuity as of the first day of the month next following the date of Executive's death, or as the first day of any subsequent month preceding the Retirement Date. Notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, and each payment of such survivor annuity shall be reduced based on the principles used for the reductions described in clauses (2) and (3) of the proviso to the third sentence of paragraph 3.5(iii). (vi) Unfunded Benefit. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation. Further, it is the intention of Company that the Plan be unfunded for purposes of the Internal Revenue Code of 1986, as amended, and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of Company. Executive understands that he must rely upon the general credit of Company for payment of benefits under the Plan. Company shall establish a "rabbi" trust to assist Company in meeting its obligations under the Plan. The trustee of such trust shall be a nationally-recognized and solvent bank or trust company that is not affiliated with Company. Company shall transfer to the trustee money and/or other property determined in the sole discretion of the HR Committee based on the advice of the Actuary (as defined below) on an as-needed basis in order to assure that the benefit payable under the Plan is at all times fully funded. The trustee shall pay Plan benefits to Executive and/or Executive's spouse out of the trust assets if such benefits are not paid by Company. Company shall remain the owner of all assets in the trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) Company ever becomes insolvent. Neither Executive nor any beneficiary of Executive shall have any preferred claim to, any security interest in, or any beneficial ownership interest in any assets of the trust. Company has not and will not in the future set aside assets for security or enter into any other arrangement which will cause the obligation created to be other than a general corporate obligation of Company or will cause Executive to be more than a general creditor of Company. (vii) Actuarial Equivalent. For purposes of the Plan, the terms "actuarial equivalent", or "actuarially equivalent" when used with respect to a specified benefit shall mean the amount of benefit of the referenced different type or payable at the referenced different age that can be provided at the same cost as such specified benefit, as computed by the Actuary and certified to Executive (or, in the case of Executive's death, to his spouse) by the Actuary. The actuarial assumptions used under the Plan to determine equivalencies between different forms and times of payment shall be the same as the actuarial assumptions then used in determining benefits payable under the CARP. The term "Actuary" shall mean the individual actuary or actuarial firm selected by Company to service its pension plans generally or if no such individual or firm has been selected, an individual actuary or actuarial firm appointed by Company and reasonably satisfactory to Executive and/or Executive's spouse. (viii) Medicare Payroll Taxes. Company shall indemnify Executive on a fully grossed-up, after-tax basis for any Medicare payroll taxes (plus any income taxes on such indemnity payments) incurred by Executive in connection with the accrual and/or payment of benefits under the Plan. 3.6 Additional Disability Benefit. If Executive shall begin to receive long-term disability insurance benefits pursuant to a plan maintained by Company and if such benefits cease prior to Executive's attainment of age 65 and while Executive remains disabled, then Company shall immediately pay Executive upon the cessation of such benefits a lump-sum, cash payment in an amount equal to the Termination Payment (based on a Severance Period of thirty-six months). If Executive receives payment of a Termination Payment pursuant to the provisions of Article 4, then the provisions of this paragraph 3.6 shall terminate. If Executive shall be disabled at the time his employment with Company terminates and if Executive shall not be entitled to the payment of a Termination Payment pursuant to the provisions of Article 4 upon such termination, then Executive's right to receive the payment upon the occurrence of the circumstances described in this paragraph 3.6 shall be deemed to have accrued as of the date of such termination and shall survive the termination of this Agreement. 3.7 Other Perquisites. During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment: (i) Automobile - Company will provide an automobile (including replacements therefor) of Executive's choice for Executive's use on the same terms as its current practices relating to the choice and use of automobiles by its Chief Executive Officer. If the automobile is leased, Company agrees to take such actions as may be necessary to permit Executive, at his option, to acquire title to any automobile subject to such a lease at the completion of the lease term by Executive paying the residual payment then owing under the lease. If Executive's employment terminates (other than as a result of the reasons encompassed by paragraphs 2.2 (iii) or (iv)), then Company (1) if the automobile is leased, will continue to make all payments under the lease and permit Executive (or Executive's estate, as applicable) to use the automobile during the remainder of such lease and will, at the conclusion of the lease, cause the title to the automobile to be transferred to Executive (or Executive's estate) without cost to Executive (or Executive's estate), or (2) if the automobile is owned by Company, transfer title to the automobile to Executive (or Executive's estate, as applicable), without cost to Executive (or Executive's estate). (ii) Business and Entertainment Expenses - Subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related purposes, including dues and fees to industry and professional organizations, costs of entertainment and business development, and costs reasonably incurred as a result of Executive's spouse accompanying Executive on business travel. Company shall also pay on behalf of Executive the expenses of one athletic club selected by Executive. (iii) Parking - Company shall provide at no expense to Executive a reserved parking place convenient to Executive's headquarters office and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice. (iv) Other Company Benefits - Executive and, to the extent applicable, Executive's family, dependents and beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly-situated Company employees. Such benefits, plans and programs may include, without limitation, profit sharing plan, thrift plan, annual physical examinations, health insurance or health care plan, life insurance, disability insurance, pension plan, pass privileges on Continental Airlines, Flight Benefits and the like. Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally; provided, however, that Company shall not change, amend or discontinue Executive's Flight Benefits without his prior written consent. ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION 4.1 By Expiration. If Executive's employment hereunder shall terminate upon expiration of the term provided in paragraph 2.1 hereof, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of his employment, except that (A) the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and (B) if such termination shall result from Company's delivery of the written notice described in paragraph 2.1, then Company shall (i) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days after such termination, (ii) cause all Awards made to Executive under Company's Officer Retention and Incentive Award Program ("Retention Program") to vest immediately upon such termination, (iii) cause Company to pay to Executive, at the same time as other Payment Amounts with respect to Awards are paid to other participants under Company's Long Term Incentive Performance Award Program ("LTIP"), all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of a Qualifying Event with respect to Executive in connection with a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (iv) pay Executive on or before the effective date of such termination a lump-sum, cash payment in an amount equal to the Termination Payment, (v) provide Executive with Outplacement, Office and Related Services (as such term is defined in paragraph 4.7 and for the time periods described therein), and (vi) pay any amounts owed but unpaid to Executive under any plan, policy or program of Company as of the date of termination at the time provided by, and in accordance with the terms of, such plan, policy or program. 4.2 By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, and: (i) if such termination shall be for any reason other than those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i); and (ii) if such termination shall be for a reason encompassed by paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days (or such longer period as provided for under the circumstances in applicable option awards) after such termination, (2) cause all Awards made to Executive under the Retention Program to vest immediately upon such termination, (3) cause Company to pay to Executive (or Executive's estate), at the same time as other Payment Amounts with respect to Awards are paid to other participants under the LTIP, all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of Executive's death or Disability after a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (4) provide Executive (or his designated beneficiary or beneficiaries) with the benefits contemplated under paragraph 3.3 or paragraph 3.6, as applicable, and (5) perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i). 4.3 By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and, if such termination shall be pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1. 4.4 Certain Additional Payments by Company. Notwithstanding anything to the contrary in this Agreement, if any payment, distribution or provision of a benefit by Company to or for the benefit of Executive, whether paid or payable, distributed or distributable or provided or to be provided pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to an excise or other special additional tax that would not have been imposed absent such Payment (including, without limitation, any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended), or any interest or penalties with respect to such excise or other additional tax (such excise or other additional tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Taxes imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment (taking into account any similar gross-up payments to Executive under any stock incentive or other benefit plan or program of Company) equal to the Excise Tax imposed upon the Payments. Company and Executive shall make an initial determination as to whether a Gross-up Payment is required and the amount of any such Gross-up Payment. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company and Executive) within ten business days after the receipt of such claim. Company shall notify Executive in writing at least ten business days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with such action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim or Company determines not to contest such claim, then Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. 4.5 Payment Obligations Absolute. Company's obligation to pay Executive the amounts and to make the arrangements provided in this Article 4 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 Company (including its subsidiaries and affiliates) may have against him or anyone else. All amounts payable by Company shall be paid without notice or demand. Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Article 4, and, except as provided in paragraph 4.7 with respect to Continuation Coverage, the obtaining of any such other employment (or the engagement in any endeavor as an independent contractor, sole proprietor, partner, or joint venturer) shall in no event effect any reduction of Company's obligations to make (or cause to be made) the payments and arrangements required to be made under this Article 4. 4.6 Liquidated Damages. In light of the difficulties in estimating the damages upon termination of this Agreement, Company and Executive hereby agree that the payments and benefits, if any, to be received by Executive pursuant to this Article 4 shall be received by Executive as liquidated damages. Payment of the Termination Payment pursuant to paragraphs 4.1, 4.2 or 4.3 shall be in lieu of any severance benefit Executive may be entitled to under any severance plan or policy maintained by Company. 4.7 Certain Definitions and Additional Terms. As used herein, the following capitalized terms shall have the meanings assigned below: "Annualized Compensation" shall mean an amount equal to the sum of (1) Executive's annual base salary pursuant to paragraph 3.1 in effect immediately prior to Executive's termination of employment hereunder and (2) an amount equal to 125% of the amount described in the foregoing clause (1); "Change in Control" shall have the meaning assigned to such term in Company's Incentive Plan 2000 in effect on May 23, 2000; (iii) "Continuation Coverage" shall mean the continued coverage of Executive and his eligible dependents under Company's welfare benefit plans available to executives of Company who have not terminated employment (or the provision of equivalent benefits), including, without limitation, medical, health, dental, life insurance, disability, vision care, accidental death and dismemberment, and prescription drug, at no greater cost to Executive than that applicable to a similarly situated Company executive who has not terminated employment; provided, however, that the coverage to Executive (or the receipt of equivalent benefits) shall be provided under one or more insurance policies so that reimbursement or payment of benefits to Executive thereunder shall not result in taxable income to Executive, and provided further that the coverage to Executive under a particular welfare benefit plan (or the receipt of equivalent benefits) shall be suspended during any period that Executive receives comparable benefits from a subsequent employer, and shall be reinstated upon Executive ceasing to so receive comparable benefits and notifying Company thereof; (iv) "Flight Benefits" shall mean flight benefits on each airline operated by the Company or any of its affiliates or any successor or successors thereto (the "CO system"), consisting of the highest priority space available flight passes for Executive and Executive's eligible family members (as such eligibility is in effect on May 18, 1999), a Universal Air Travel Plan (UATP) card (or, in the event of discontinuance of the UATP program, a similar charge card permitting the purchase of air travel through direct billing to the Company or any successor or successors thereto (a "Similar Card")) in Executive's name for charging on an annual basis up to the applicable Annual Travel Limit (as hereinafter defined) with respect to such year in value (valued identically to the calculation of imputed income resulting from such flight benefits described below) of flights (in any fare class) on the CO system for Executive, Executive's spouse, Executive's family and significant others as determined by Executive, Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive's spouse's names for use on the CO system, a membership for Executive and Executive's spouse in the Company's President's Club (or any successor program maintained in the CO system) and payment by the Company to Executive of an annual amount (not to exceed in any year the Annual Gross Up Limit (as hereinafter defined) with respect to such year) sufficient to pay, on an after tax basis (i.e., after the payment by Executive of all taxes on such amount), the U.S. federal, state and local income taxes on imputed income resulting from such flights (such imputed income to be calculated during the term of such Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare, or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law) or resulting from any other flight benefits extended to Executive as a result of Executive's service as an executive of the Company; "Outplacement, Office and Related Services" shall mean (1) outplacement services, at Company's cost and for a period of twelve months beginning on the date of Executive's termination of employment, to be rendered by an agency selected by Executive and approved by the Board of Directors or HR Committee (with such approval not to be unreasonably withheld), (2) appropriate and suitable office space at the Company's headquarters (although not on its executive office floor) or at a comparable location in downtown Houston for use by Executive, together with appropriate and suitable secretarial assistance, at Company's cost and for a period of three years beginning on the date of Executive's termination of employment, (3) a reserved parking place convenient to the office so provided and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice, at Company's cost and for as long as Executive retains a residence in Houston, Texas, and (4) other incidental perquisites (such as free or discount air travel, car rental, phone or similar service cards) currently enjoyed by Executive as a result of his position, to the extent then available for use by Executive, for a period of three years beginning on the date of Executive's termination of employment or a shorter period if such perquisites become unavailable to the Company for use by Executive; (vi) "Severance Period" shall mean: (1) in the case of a termination of Executive's employment with Company that occurs within two years after the date upon which a Change in Control occurs, a period commencing on the date of such termination and continuing for thirty-six months; or (2) in the case of a termination of Executive's employment with Company that occurs prior to a Change in Control or after the date which is two years after a Change in Control occurs, a period commencing on the date of such termination and continuing for twenty-four months; and (vii) "Termination Payment" shall mean an amount equal to Executive's Annualized Compensation multiplied by a fraction, the numerator of which is the number of months in the Severance Period and the denominator of which is twelve. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Travel Limit" shall mean an amount (initially $50,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Company's average fare per revenue passenger for its jet operations (excluding regional jets) with respect to the applicable year as reported in its Annual Report on Form 10-K (or, if not so reported, as determined by the Company's independent auditors) (the "Average Fare") for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $50,000 annually (adjusted in accordance with clauses (i) and (ii) above) of flights relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in such flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Travel Limit would be increased by 15% to $57,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Travel Limit described in this paragraph. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Gross Up Limit" shall mean an amount (initially $10,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Average Fare for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $10,000 annually (adjusted in accordance with clauses (i) and (ii) above) of tax gross up relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Gross Up Limit would be increased by 15% to $11,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Gross Up Limit described in this paragraph. As used for purposes of Flight Benefits, a year may consist of twelve consecutive months other than a calendar year, it being the Company's practice as of May 18, 1999 for purposes of Flight Benefits for a year to commence on December 1 and end on the following November 30 (for example, the twelve-month period from December 1, 1998 to November 30, 1999 is considered the year 1999 for purposes of Flight Benefits); provided that all calculations for purposes of clause (i) in the prior two paragraphs shall be with respect to fiscal years of the Company. As used for purposes of Flight Benefits, the term "affiliates" of the Company means any entity controlled by, controlling, or under common control with the Company, it being understood that control of an entity shall require the direct or indirect ownership of a majority of the outstanding capital stock of such entity. No tickets issued on the CO system in connection with the Flight Benefits may be purchased other than directly from the Company or its successor or successors (i.e., no travel agent or other fee or commission based distributor may be used), nor may any such tickets be sold or transferred by Executive or any other person, nor may any such tickets be used by any person other than the person in whose name the ticket is issued. Executive agrees that, after receipt of an invoice or other accounting statement therefor, he will promptly (and in any event within 45 days after receipt of such invoice or other accounting statement) reimburse the Company for all charges on his UATP card (or Similar Card) which are not for flights on the CO system and which are not otherwise reimbursable to Executive under the provisions of paragraph 3.7(ii) hereof, or which are for tickets in excess of the applicable Annual Travel Limit. Executive agrees that the credit availability under Executive's UATP card (or Similar Card) may be suspended if Executive does not timely reimburse the Company as described in the foregoing sentence or if Executive exceeds the applicable Annual Travel Limit with respect to a year; provided, that, immediately upon the Company's receipt of Executive's reimbursement in full (or, in the case of exceeding the applicable Annual Travel Limit, beginning the next following year and after such reimbursement), the credit availability under Executive's UATP card (or Similar Card) will be restored. The sole cost to Executive of flights on the CO system pursuant to use of Executive's Flight Benefits will be the imputed income with respect to flights on the CO system charged on Executive's UATP card (or Similar Card), calculated throughout the term of Executive's Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law, and reported to Executive as required by applicable law. With respect to any period for which the Company is obligated to provide the tax gross up described above, Executive will provide to the Company, upon request, a calculation or other evidence of Executive's marginal tax rate sufficient to permit the Company to calculate accurately the amount to be paid to Executive. Executive will be issued a UATP card (or Similar Card), Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive spouse's names, a membership card in the Company's Presidents Club (or any successor program maintained in the CO system) for Executive and Executive's spouse, and an appropriate flight pass identification card, each valid at all times during the term of Executive's Flight Benefits. ARTICLE 5: MISCELLANEOUS 5.1 Interest and Indemnification. If any payment to Executive provided for in this Agreement is not made by Company when due, Company shall pay to Executive interest on the amount payable from the date that such payment should have been made until such payment is made, which interest shall be calculated at 3% plus the prime or base rate of interest announced by Chase Bank of Texas N.A. (or any successor thereto) at its principal office in Houston, Texas (but not in excess of the highest lawful rate), and such interest rate shall change when and as any such change in such prime or base rate shall be announced by such bank. If Executive shall obtain any money judgment or otherwise prevail with respect to any litigation brought by Executive or Company to enforce or interpret any provision contained herein, Company, to the fullest extent permitted by applicable law, hereby indemnifies Executive for his reasonable attorneys' fees and disbursements incurred in such litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay prejudgment interest on any money judgment obtained by Executive from the earliest date that payment to him should have been made under this Agreement until such judgment shall have been paid in full, which interest shall be calculated at the rate set forth in the preceding sentence. 5.2 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company to : Continental Airlines, Inc. 1600 Smith, Dept. HQSEO Houston, Texas 77002 Attention: General Counsel If to Executive to : C.D. McLean 1111 Caroline, Apt. 2602 Houston, TX 77010 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 5.3 Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. 5.4 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 5.5 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 5.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 5.7 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally. 5.8 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 5.9 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. 5.10 Successors. This Agreement shall be binding upon and inure to the benefit of Company and any successor of the Company, including without limitation any person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Except as provided in the preceding sentence or in paragraph 3.3 (regarding assignment of life insurance benefits), this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. 5.11 Term. This Agreement has a term co-extensive with the term of employment as set forth in paragraph 2.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to or upon such termination. 5.12 Entire Agreement. Except as provided in (i) the benefits, plans, and programs referenced in paragraph 3.7(iv) and any awards under the Company's stock incentive plans or programs, LTIP, Retention Program, Executive Bonus Performance Award Program or similar plans or programs, and (ii) separate agreements governing Executive's flight benefits relating to other airlines, this Agreement, as of the Effective Date, will constitute the entire agreement of the parties with regard to the subject matter hereof, and will contain all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Effective as of the Effective Date, the Existing Agreement is hereby terminated and without any further force or effect. Any modification of this Agreement shall be effective only if it is in writing and signed by the party to be charged. 5.13 Deemed Resignations. Any termination of Executive's employment shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, and an automatic resignation of Executive from the Board of Directors (if applicable) and from the board of directors of any affiliate of Company and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company's or such affiliate's designee or other representative. 5.14 Certain Change in Control Matters. Executive agrees that any recapitalization, conversion, reclassification or similar transaction involving Class A common stock of Company owned by Northwest Airlines Corporation or its affiliates, or any acquisition by Company of Class A common stock owned by Northwest Airlines Corporation or its affiliates (whether or not involving other outstanding shares of Class A common stock), which results in a person who is an Institutional Investor (as defined in that certain Rights Agreement dated November 20, 1998, as amended by First Amendment to Rights Agreement dated as of February 8, 2000, between Company and Harris Trust and Savings Bank, as in effect on the date hereof) as of the date hereof and as of the date of any such recapitalization, conversion, reclassification, acquisition or similar transaction being or becoming the beneficial owner of securities of Company sufficient to otherwise trigger a Change in Control pursuant to clause (aa) of Section 12 (c) of Company's Incentive Plan 2000, as in effect on the date hereof, shall not constitute a Change in Control for purposes of this Agreement, or for purposes of Company's stock incentive plans or programs, Long Term Incentive Performance Award Program, Officer Retention and Incentive Award Program, Executive Bonus Performance Award Program or similar plans or programs.         *******   IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.   CONTINENTAL AIRLINES, INC.     By: Name: Title: "EXECUTIVE"     C.D. McLEAN     APPROVED:   _______________________________ Thomas J. Barrack, Jr. Chair, Human Resources Committee
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.78 SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE     THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the "Agreement") is entered into by and between NULAID FOODS, INC., VALLEY FRESH FOODS, INC., and NULAID NEST-BEST, on the one hand, and NORTH CAROLINA STATE UNIVERSITY ("NCSU") and MICHAEL FOODS, INC. ("Michael Foods"), on the other hand. The "Effective Date" of this Agreement shall be the date by which the last party executes the agreement and the Pre-Settlement Royalties are paid. RECITALS     A.  NCSU is the holder, and Michael Foods is the exclusive licensee, of U.S. Patents Nos. 4,808,425 (the "425 Patent"), 4,957,759 (the "759 Patent"), 4,994,291 (the "291 Patent"), 5,019,408 (the "408 Patent"), and reissue application, U.S. Serial No. 08/061,985 ("Reissue Application") and the associated re-examination certificates (collectively the "Patents-In-Suit"), which patents relate to the manufacture of extended shelf life liquid whole egg product (as disclosed in the "425 patent at column 8 lines 45-68) (the "Product").     B.  On August 12, 1993, Nulaid Foods, Inc. filed a declaratory relief action in the United States District Court, Eastern District of California, Civil Action No. CIV-S-93-1314 WBS (PAN), seeking a judgment that the Patents-In-Suit are invalid, unenforceable and not infringed by Nulaid Foods, Inc. NCSU and Michael Foods answered Nulaid Foods, Inc.'s complaint denying the allegations, asserting various affirmative defenses, and asserting a counterclaim against Nulaid Foods, Inc. for damages and injunctive relief alleging that Nulaid Foods, Inc. infringed the Patents-In-Suit.     C.  On August 13, 1993, Michael Foods and NCSU filed an action for damages and injunctive relief against Nulaid Foods, Inc. alleging that Nulaid Foods, Inc. infringed the four Patents-In-Suit. Nulaid Foods, Inc. answered Michael Foods' and NCSU's complaint denying the allegations, asserting various affirmative defenses, and asserting a counterclaim for declaratory judgment that the Patents-In-Suit are invalid, unenforceable and not infringed by Nulaid Foods, Inc.     D.  The two actions were consolidated under Case No. CIV-S-93-1314 WBS (PAN) (the "Pending Litigation").     E.  On or about July 1, 1994, the pleadings were amended to add Valley Fresh Foods and Nulaid Nest-Best as plaintiffs and cross-defendants.     F.  Nulaid Nest-Best, a general partnership between Nulaid Foods, Inc and Valley Fresh Foods, Inc. was formed on or about February 27, 1994. Nulaid Nest-Best sold 1,727,144 pounds of the Product. Nulaid Nest-Best ceased doing business, wound-up and dissolved on or about July 31, 1994.     G.  The parties to this Agreement wish to reach full and final settlement of the disputes noted above. -------------------------------------------------------------------------------- AGREEMENT     In consideration of the mutual covenants and promises set forth below, and for good and fair consideration, receipt of which is hereby acknowledged, the parties agree and stipulate as follows:     1.  Warranties and Disclosures     a.  NCSU Warranty.     NCSU represents and warrants that it is the owner of the right, title and interest in the Patents-In-Suit and is authorized to enter into this Agreement and has the right to grant the rights granted herein.     b.  Michael Foods Warranty.     Michael Foods represents and warrants that it is the holder of an exclusive license to use the Patents-In-Suit and is authorized to enter into this Agreement and has the right to grant the rights granted herein.     c.  Disclosure by Nulaid.     In connection with the disclosure requirements as set forth below, the parties agree that the protective order in the Pending Litigation shall remain in full force and effect during the term of this Agreement. Nulaid Foods, Inc. shall mark all material produced with the appropriate level of confidentiality identifying any claimed trade secret information as such on the face of the material.       i. Within five days of the execution of this Agreement, Nulaid Foods, Inc. and Valley Fresh Foods shall disclose to counsel for Michael Foods and NCSU in the Pending Litigation, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, their current and contemplated processes for pasteurizing and packaging liquid whole egg products with a shelf life in excess of four weeks.      ii. Within five days of the execution of this Agreement, Nulaid Foods, Inc. and Valley Fresh Foods shall disclose to counsel for Michael Foods and NCSU in the Pending Litigation, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, any and all of their pending patent applications or applications to the United States Department of Agriculture ("USDA") for pasteurizing and packaging liquid whole egg products with a shelf life in excess of four weeks.      iii. Nulaid Foods, Inc. shall promptly disclose in writing to counsel for Michael Foods and NCSU in the Pending Litigation, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, any changes in the process or equipment used by Nulaid Foods, Inc. to pasteurize or package liquid whole egg products with a USDA approved or requested shelf life in excess of four weeks made at anytime after the date hereof and before expiration of the last of the Patents-in-Suit. Nulaid Foods, Inc. shall also promptly disclose, on an attorneys' eyes only basis subject to the protective order in the Pending Litigation, any additional procedures, processes or equipment used to pasteurize or package liquid whole egg product with USDA approved shelf life in excess of four weeks made at anytime after the date hereof and before expiration of the last of the Patents-in-Suit. The written disclosure shall be made within 30 days of implementation of the change and/or addition.     2.  Non-exclusive Sublicense.     a.  Michael Foods grants to Nulaid Foods, Inc. on the Effective Date a non-exclusive sublicense to make, use and sell, ***. Nulaid Foods, Inc. will not be precluded from having Michael Foods co-pack the Product. The sublicense granted herein does not extend to the manufacture of Product ***. -------------------------------------------------------------------------------- *** Redacted text. 2 --------------------------------------------------------------------------------     b.  This non-exclusive sublicense shall apply to all production, use and sale by Nulaid Foods, Inc. of Product prior to and through the term of this Agreement.     c.  After current inventories of containers of the Product are used up or within 120 days of the Effective Date, whichever is sooner, Nulaid Foods, Inc. shall mark all containers in the manner prescribed below.     The marking shall include the following in easily legible type: "Covered by one or more of the following U.S. Patents 4,808,425; 4,957,759; 4,994,291; 5,019,408." Should a subsequent patent issue from the Reissue Application, Nulaid Foods, Inc. shall include that patent number in its patent marking within 120 days of notification of issue     d.  This non-exclusive sublicense granted to Nulaid Foods, Inc. is non-assignable, even with a sale of Nulaid Foods, Inc.'s business or assets. Nulaid Foods, Inc. may not directly or indirectly assign, license, sublicense, or otherwise convey this non-exclusive sublicense nor any of the rights or licenses granted herein to any third party without the prior written consent of Michael Foods. A direct or indirect change of new membership or new ownership of greater than 35% of the equity interests of Nulaid Foods, Inc. (a "Material Change of Membership ") pursuant to a transaction or series of transactions regarding the same Person shall be deemed an assignment. In the event of a Material Change of Membership of Nulaid Foods, Inc. in respect to a Person who is not engaged in, or subject to the control of a Person engaged in, the manufacture or sale of extended shelf life liquid whole egg product prior to the proposed assignment, the written consent of Michael Foods shall not be unreasonably withheld and a determination in respect thereto shall be made and communicated within 5 business days of receiving complete information concerning the proposed assignee. This agreement does not restrict changes of ownership of a member of Nulaid Foods, Inc. and such a change shall not constitute an assignment unless the new owner of a Nulaid Foods, Inc. member is engaged or is controlled by a Person who is engaged in the manufacture or sale of extended shelf life liquid whole egg product. ***.     3.  Royalty and Reports.     a.  For the sales or Transfers, less returns, ("Transfer, Transferred or Transfers" for this agreement means exchange of Product for non-monetary consideration) of Product prior to January 1, 2000 by Nulaid Foods, Inc., and/or Nulaid Nest-Best, Nulaid Foods, Inc. agrees to pay an amount equal to *** for all sales or Transfers, less returns, of Product that occurred prior to 1/1/00 (Pre-Settlement Royalties). The number of pounds sold, less returns, on which Pre-Settlement Royalties are due shall be certified in writing marked appropriately on the face of the document as to confidentiality pursuant to the protective order, including designation as a trade secret if appropriate, and delivered to Michael Foods' and NCSU's counsel prior to the Effective Date. Nulaid Foods, Inc. shall pay Michael Foods the Pre-Settlement Royalties in one lump-sum payment on the Effective Date of this Agreement.     The Pre-Settlement Royalties shall not be adjusted, forgiven or returnable if the Patents-in-Suit, or any of them, are subsequently found invalid, unenforceable or not infringed.     b.  For the sale or Transfer, of all Product on or after January 1, 2000, until the expiration of the last of the Patents-In-Suit, Nulaid Foods, Inc., on behalf of itself, its brokers, distributors and customers, shall pay a royalty on the number of pounds sold or Transferred, less returns, at the rate of ***:     *** -------------------------------------------------------------------------------- *** Redacted text. 3 -------------------------------------------------------------------------------- Said royalties under this Paragraph 3(b) of this Agreement (Paragraph 3(b) Royalties) shall be due and payable with respect to all sales or Transfers of the Product using Nulaid Foods, Inc.'s current process or any process or product covered by any claim or claims of the Patents-in-Suit. Nulaid Foods, Inc. agrees and acknowledges that its future manufacture, sale or Transfer of extended shelf life liquid whole egg products is covered by one or more of the Patents-in-Suit.     c.  Paragraph 3(b) Royalties shall be paid solely to Michael Foods, payable on the last day of April, July, October and January for the preceding quarter. Nonpayment of any such royalty within the 30 day cure period as provided in paragraph 6 below shall constitute breach of this Agreement. Regardless of whether any royalties are due, Nulaid Foods, Inc. shall report on the last day of April, July, October, and January the amount of Product sold or Transferred in the prior quarter by both pounds and by net sales. Net Sales is defined as Nulaid Foods Inc.'s billings for the Product less: discounts; sales and/or use taxes; tariff duties or taxes directly imposed on sales of the product; prepaid outbound transportation; and returns. On the effective date of this agreement, Nulaid Foods, Inc. shall tender the royalty report and check under this section for 1/1/2000-6/30/2000.     d.  With respect to the Paragraph 3(b) Royalties, Nulaid Foods, Inc. shall provide to Michael Foods a certified public accountant's verified audit of each year's production within six months following the close of the year. Shortages shall be paid with the provision of the CPA's verified audit. Overages shall be posted to the current year. All information contained in such verified audit shall be kept confidential by Michael Foods and shall not be disclosed to anyone outside Michael Foods.     4.  Audit.     a.  At Michael Foods' sole cost and expense, and upon reasonable notice, Nulaid Foods, Inc. agrees to allow an independent, certified public accountant selected by Michael Foods to audit Nulaid Foods, Inc.'s books and records, during Nulaid Foods, Inc.'s normal business hours, to ascertain compliance with Nulaid Foods, Inc.'s reporting and royalty payment obligations under this Agreement, provided, however, that said certified public accountant shall first agree in writing (1) to retain Nulaid Foods, Inc.'s confidential customer information in confidence and not disclose it to Michael Foods or any other party and (2) to retain all other information in confidence and not disclose it to any party other than Michael Foods. All information reviewed during, and all reports based on the audit shall be kept confidential by Michael Foods and shall not be disclosed to anyone outside Michael Foods. Michael Foods will only audit for the time periods covered by or previous to the last verified audit provided by Nulaid Foods, Inc. pursuant to paragraph 3(d). 4 --------------------------------------------------------------------------------     b.  Although allowed to audit, Michael Foods is not required to audit and may rely upon figures and reports submitted on behalf of Nulaid Foods, Inc. Nulaid Foods, Inc. will report in good faith. Should an audit disclose that Nulaid has underreported annual amounts due by more than 10% or $10,000 of royalties due, Nulaid Foods, Inc. shall reimburse Michael Foods for the reasonable costs of the audit. If Michael Foods elects to use an accounting firm not located in Northern California, Nulaid Foods, Inc. shall not be required to pay the travel related expenses incurred by that firm.     5.  Adjustment of Royalties.  Royalties shall not be adjusted based on any future license or settlement absent written consent of each of Nulaid Foods, Inc., Michael Foods and NCSU.     6.  Termination of Sublicense.  The sublicense terminates automatically on the filing of bankruptcy by Nulaid Foods, Inc. or upon the assignment of the license or any rights under it to the benefit of creditors or any pledge or hypothecation of the license. Michael Foods shall have the right to terminate the sublicense granted by this Agreement by giving written notice upon the failure of Nulaid Foods, Inc. to make any payment required under this agreement when due, provided that Michael Foods shall first have given written notice of said failure to Nulaid Foods, Inc. and Nulaid Foods, Inc. shall have failed to cure the non-payment within thirty (30) days of receipt of said notice. In order to preserve its right to contest whether a disputed payment is due, Nulaid Foods, Inc. shall have the right to cure any default in payment by paying Michael Foods under protest.     7.  Cooperation.  Nulaid Foods, Inc. and Valley Fresh Foods will not aid third parties in subsequent suits or proceedings where those third parties are trying to prove the Patents-in-Suit, or any of them, are invalid, unenforceable or not infringed, except in accordance with service of process or court order and after notification to Michael Foods and NCSU.     8.  Agreement To Have Preclusive Effect.  Nulaid Foods, Inc. and Valley Fresh Foods will not contest the validity or enforceability of any claim or claims of the Patents-in-Suit in any subsequent suit or proceeding. Nulaid Foods, Inc. and Valley Fresh Foods will not contest their infringement of the claims of the Patents-in-Suit by its current and previous methods in any subsequent suits or proceedings. The parties intend this resolution of validity, enforceability, and infringement to be res judicata between the parties and to have preclusive effect so any party is foreclosed from challenging validity, enforceability, and/or infringement in a subsequent suit under the doctrine of collateral estoppel.     9.  Michael Foods' General Release.  In consideration of the promises and covenants set forth in this Agreement, Michael Foods hereby fully releases and forever discharges Nulaid Foods, Inc., Valley Fresh Foods, Nulaid Nest-Best, their successors, assigns, officers, and directors, from any and all liabilities, claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claim of liability for any alleged past infringement of the Patents-in-Suit.     10.  NCSU's General Release.  In consideration of the promises and covenants set forth in this Agreement, NCSU hereby fully releases and forever discharges Nulaid Foods, Inc., Valley Fresh Foods, Nulaid Nest-Best, their successors, assigns, officers, and directors, from any and all liabilities, claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claim of liability for any alleged past infringement of the Patents-in-Suit.     11.  Nulaid Foods, Inc.'s General Release.  In consideration of the promises and covenants set forth in this Agreement, Nulaid Foods, Inc. hereby fully releases and forever discharges Michael Foods, NCSU, their affiliates, successors, assigns, officers, and directors from any and all liabilities, claims, 5 -------------------------------------------------------------------------------- demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claims for declaratory relief regarding the validity, infringement, or enforceability of the Patents-in-Suit.     12.  Valley Fresh Foods' General Release.  In consideration of the promises and covenants set forth in this Agreement, Valley Fresh Foods hereby fully releases and forever discharges Michael Foods, NCSU, their affiliates, successors, assigns, officers, and directors from any and all liabilities, claims, demands, contracts, debts, obligations, arbitrations, actions, or causes of action, known or unknown, in law or equity, asserted or unasserted, arising out of, or in any way connected with, or related to the claims alleged in the Pending Litigation, including but not limited to any claims for declaratory relief regarding the validity, infringement, or enforceability of the Patents-in-Suit.     13.  Consent Judgment and Dismissal of the Pending Litigation.  With the execution of this Agreement, Nulaid Foods, Inc., Valley Fresh Foods, and a representative for the now defunct entity Nulaid Nest-Best shall execute the Consent Judgement and Injunction in the form of Attachment A and deliver it to counsel for Michael Foods and NCSU in the Pending Litigation upon receipt of the Agreement executed by Michael Foods and NCSU. Within two (2) business days of the execution of the consent judgment, Michael Foods and/or NCSU shall file the executed Consent Judgment and Injunction with the Court for entry.     14.  No Other Pending Claims.  The parties hereto hereby represent and warrant that they have not filed or served any claim, demand, suit or legal proceeding against any other party hereto which is now pending, other than the Pending Litigation.     15.  No Prior Assignments.  The parties hereto represent and warrant that they have not heretofore assigned or transferred, or purported to assign or transfer, to any other person, entity, firm or corporation whatsoever, any claim, debt, liability, demand, obligation, expense, action or cause of action herein released.     16.  Confidentiality.  The parties shall have the right to disclose the existence of this Agreement; however, the parties, including their counsel and employees, shall keep the specific terms of this Agreement confidential and shall not now or hereafter divulge these terms to any third party except (a) with the prior written consent of the other parties; or (b) to any governmental body having jurisdiction to call therefor; or (c) in confidence to their legal counsel, accountants, banks and financing sources and their advisors solely in connection with complying with financial transactions; or (d) as otherwise may be required by law or legal process, including to legal and financial advisors in their capacity of advising a party in such matters, except that if disclosure is sought in any legal proceeding, it shall be pursuant to a court-endorsed protective order.     17.  Advice of Counsel.  The parties hereto have made such investigation of the facts pertaining to the settlement and this Agreement, and all matters pertaining thereto, as they deem necessary. The parties represent that: (1) they are represented by the attorneys of their choice; (2) prior to the execution of this Agreement each party's attorney reviewed this Agreement, made all desired changes, and approved this Agreement as to substance and form; (3) the terms of this Agreement and its consequences (including risks, complications, and costs) have been fully explained to them by their attorneys; (4) they fully understand the terms and consequences of this Agreement; (5) they are not relying upon any representation or statement made by any other party hereto, or by such other party's employees, agents, representatives or attorneys regarding this Agreement or its preparation except to the extent such representations are expressly and explicitly incorporated herein; (6) they are not relying upon a legal duty, if one exists, on the part of any other party, or upon the part of such other party's employees, agents, representatives or attorneys, to disclose any information in connection with the execution of this Agreement or its preparation; and (7) they have freely signed this Agreement. It is 6 -------------------------------------------------------------------------------- expressly understood that no party shall ever assert any failure to disclose information by any other party as a ground for challenging this Agreement.     18.  Construction.  The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party.     19.  Captions.  The parties acknowledge, agree and understand that the captions of the various portions of this Agreement are for convenience and organization only, are not intended to constitute the substance of this Agreement, and are not intended to be referred to in construing or interpreting any provision contained in this Agreement.     20.  Terms.  The terms of this Agreement are contractual in nature and not a mere recital.     21.  Authority.  Each signer of this Agreement hereby represents and covenants that he or she is authorized to execute this Agreement on behalf of the party for which he or she is signing and that all necessary approvals have been obtained.     22.  Successors Bound.       This Settlement Agreement is binding upon and inures to the benefit of Michael Foods and NCSU, as well as their successors, assigns, officers, directors, agents, servants, employees, and representatives.     23.  Severability.  If any provision of this Agreement is found to be unenforceable in any respect, such unenforceability shall not affect any other provision of this Agreement, and this Agreement shall be construed as if the unenforceable provision had not been contained herein.     24.  Integrated Agreement.  This Agreement supersedes all prior agreements, if any, whether oral or written, pertaining to all or any portion of its provisions. This Agreement may not be changed, modified, altered, interlineated, or supplemented, nor may any covenant, representation, warranty, or other provision be waived, except by agreement in writing signed by the party against whom enforcement of the change, modification, alteration, interlineation, supplementation or waiver is charged. 7 --------------------------------------------------------------------------------     25.  Notices.  All notices required under this Agreement must be in writing, and may be given either personally or by registered or certified (return receipt requested) mail as follows: For Nulaid:   Chief Executive Officer Nulaid Foods, Inc. 200 W. Fifth St. Ripon, CA 95366 For Valley Fresh Foods:   Chief Executive Officer Valley Fresh Foods, Inc. P.O. Box 910 Turlock, CA 95381 For Michael Foods:   Chief Executive Officer Michael Foods, Inc. 324 Park National Bank Bldg. 5353 Wayzata Blvd. Minneapolis, MN 55416 For NCSU:   Associate Vice Chancellor for Technology Transfer North Carolina State University Box 7003 Raleigh, North Carolina 27695-7003     With copy to: Office of Legal Affairs North Carolina State University Box 7008 Raleigh, North Carolina 27695-7008     26.  Choice of Law and Forum Selection.  This Agreement shall be governed by and interpreted pursuant to North Carolina law. The parties hereto submit to venue and personal jurisdiction in North Carolina for any enforcement action under this Agreement.     Any action for violation of the Consent Judgement and Injunction is subject to the full enforcement powers of the Federal Court for the Eastern District of California.     27.  Attorneys Fees and Costs.  The parties agree that they will each bear their own attorneys' fees and cost related to the Pending Agreement and this Agreement. In the event of any dispute under this Agreement in which either the claimed amount or the award is less than One Hundred Thousand dollars ($100,000), the prevailing party shall be entitled to recover its reasonable attorneys' fees, costs, costs of investigation, expert expenses, and other related expenses. 8 --------------------------------------------------------------------------------     28.  Counterparts.  This Agreement may be executed in one or more counterparts, including by facsimile copies, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. DATED: August  , 2000   NULAID NEST-BEST, a California partnership By Nulaid Foods, Inc. Its General Partner           By       --------------------------------------------------------------------------------     Its   --------------------------------------------------------------------------------   DATED: August  , 2000.       NULAID FOODS, INC.           By       --------------------------------------------------------------------------------     Its   --------------------------------------------------------------------------------   DATED: August  , 2000.       VALLEY FRESH FOODS, INC.           By       --------------------------------------------------------------------------------     Its   --------------------------------------------------------------------------------   DATED: August  , 2000.       MICHAEL FOODS, INC.           By       --------------------------------------------------------------------------------     Its   --------------------------------------------------------------------------------   DATED: August  , 2000.       NORTH CAROLINA STATE UNIVERSITY           By       --------------------------------------------------------------------------------     Its   -------------------------------------------------------------------------------- 9 -------------------------------------------------------------------------------- QUICKLINKS SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE RECITALS AGREEMENT
  EXHIBIT 10.4   CONSULTING SERVICES AGREEMENT FOR PROFESSIONAL/ADMINISTRATIVE SERVICES           This Consulting Services Agreement (“Agreement”) is made and entered into as of the 1st day of May, 2000 (the “ Effective Date”), by and between Peritus Software Services, Inc. (“Peritus”), a Massachusetts corporation, with its principal place of business at 112 Turnpike Road, Suite 111, Westborough, MA 01581 and Rocket Software, Inc. (“ Client”), a Massachusetts corporation, with its principal place of business at Two Apple Hill Drive, Natick, Massachusetts 01760.           Peritus and Client agree that the following terms and conditions will apply to the services provided by Peritus for Client as specified in Statement of Work No. 1, attached hereto and incorporated herein by reference, and any future Statement of Work which may be agreed to in writing between the parties (collectively, the “Services”).           1.    Term and Termination.    The Agreement shall commence as of the Effective Date and shall remain in effect unless terminated in accordance with the provisions of this paragraph. Either party may terminate this Agreement or any Statement or Work attached hereto for any reason upon written notice to the other party. Peritus’ performance of Services hereunder shall continue until the effective date of termination and Client shall be obligated to pay Peritus for all Services performed through such termination date. Upon the expiration or termination of this Agreement or any Statement or Work hereunder, each party shall promptly return to the other all data, material, and other properties of the other party which relate to the Agreement or such expired or terminated Statement(s) of Work, as the case may be.           2.    Site of Services.    The Services provided under this Agreement shall be performed either at the offices of Peritus in Westborough, MA or at the Client’s site designated in the applicable Statement of Work, unless otherwise agreed upon in writing by the parties.           3.    Fees and Payment Terms.    In consideration of the Services rendered by Peritus hereunder, Client will pay to Peritus a fee(s) as set forth in the applicable Statement of Work. Such fee(s) will be invoiced upon completion of the Services (or on a monthly basis if Services are being performed for longer than a month) and shall be due upon receipt of such invoice(s).           4.    Expenses.    Any out-of-pocket expenses incurred by Peritus shall be paid by Client promptly after receipt of an invoice therefor. Out-of-pocket expenses shall mean any reasonable and documented expenses incurred in connection with the performance of the Services under this Agreement such as travel, meals and lodging expenses, in the event the Services are to be performed at a location other than the offices of Peritus. All travel by Peritus staff shall be in accordance with Peritus’ standard policies governing travel and business expenses.           5.    Confidentiality.    Peritus agrees to treat any information received from Client during the performance of Services hereunder which has been identified in writing as confidential or proprietary in the same manner as it would treat its own confidential or proprietary information of a similar nature and shall not disclose such information except to those employees or agents with a need to know. The foregoing shall not apply to information which (i) is publicly known through no breach of the confidentiality provisions of this Agreement by Peritus, (ii) was previously known by or in the possession of Peritus without use of confidential or proprietary information obtained though the performance of Services under this Agreement, (iii) is independently developed by Peritus without use of confidential or proprietary information obtained through the performance of Services under this Agreement, (iv) is approved for release by written authorization by Client, or (v) is released by Peritus pursuant to a good faith adherence to a court order. The confidentiality obligations imposed herein shall extend for a period of three (3) years following disclosure of the confidential and proprietary information to Peritus.           6.    Ownership Rights.    Client shall retain all right, title or interest in and to any materials furnished by Client to Peritus under this Agreement.           Except as set forth in the previous paragraph, Peritus retains all right, title and interest in and to any software, methods, techniques, systems, data and materials used or developed by it in the performance of the Services. Peritus shall retain all rights to and be entitled to use, disclose, and otherwise employ any and all ideas, concepts, know-how, knowledge bases, methods, techniques, processes, skills, and adaptations, including generalized features of sequence, structure, and organization, in conducting its business, providing the Services or pertaining to its software or methodologies. Nothing in this Agreement shall be deemed to implicitly or explicitly grant any license or other right to Client to use, possess, copy or own any of Peritus’ software, products, processes, techniques, methodologies, knowledge bases or intellectual property. This Agreement shall not limit Peritus’ ability to market, develop and provide functionally comparable deliverables, work products or services to others based on the same general concepts, techniques and routines as are used hereunder. This Agreement shall not preclude Peritus from developing or providing deliverables, work products or services which are competitive to deliverables, work products or services which might be provided to Client, irrespective of their similarity.           7.    Limitation of Liability.    Peritus’ liability for any and all claims of damages arising out of this Agreement shall be limited to direct damages and shall not exceed the amount paid to Peritus for the performance of Services hereunder.           IN NO EVENT SHALL PERITUS BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING ANY DAMAGES RESULTING FROM THE LOSS OF USE, LOSS OF DATA, LOSS OF PROFITS, OR LOSS OF BUSINESS, EVEN IF PERITUS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.           8.    Warranty of Performance.    Peritus warrants that the Services performed under this Agreement will be performed in a good and workmanlike manner, subject to the supervision and instructions provided by Client, and that the Services will be performed substantially as specified under this Agreement.           THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 8 IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.           9.    Non-Solicitation.    The parties agree that during the performance of Services by Peritus hereunder and for a period of one year thereafter, neither party shall directly or indirectly solicit, hire or otherwise retain as an employee or independent contractor, a staff member of the other party or a former staff member who was assigned to such Services, without the prior written consent of such other party.           10.    Independent Contractors.    The relationship between Peritus and Client is that of independent contractors, and nothing in this Agreement shall be construed to create a relationship of employer and employee, agency, joint venturers or partners between the parties. Neither party shall have the right, power or authority to enter into agreements of any kind on behalf of the other party, or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.           11.    Assignment.    This Agreement may not be assigned by either party, whether by merger, consolidation, sale of assets or otherwise, without the prior written consent of the other party.           12.    General.    The provisions of paragraphs 1, 5, 6, 7, 8, 9 and 12 shall survive any termination or expiration of this Agreement. This Agreement and any fully executed Statement of Work attached hereto set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersede any and all oral and prior written agreements, understandings and quotations relating thereto. No alteration, modification, or cancellation of any of the provisions of this Agreement shall be binding unless made in writing and signed by officers of the parties. Printed terms and conditions on Client’s purchase order(s) shall not apply to the Services performed hereunder. This Agreement will be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts, U.S.A.           The Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns and legal representatives.   Client: Rocket Software, Inc.   By -------------------------------------------------------------------------------- (Authorized Signature)   Name: --------------------------------------------------------------------------------   Title: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------   Peritus Software Services, Inc.   By: -------------------------------------------------------------------------------- (Authorized Signature)   Name: --------------------------------------------------------------------------------   Title: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------
Exhibit 10.24 AMENDMENT NO. 1 TO MASTER LEASE AGREEMENT DATED AUGUST 2, 2000 ( the "Lease") BY AND BETWEEN EXELIXIS, INC. ("Lessee") ACTING ON BEHALF OF ITSELF AND ITS AFFILIATES, AND COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO, INC. ("Lessor') WHEREAS, Lessor and Lessee desire to enter into the Lease; and WHEREAS, Lessor and Lessee desire to amend certain provisions of the Lease as hereafter provided; and WHEREAS, the Amendment shall be deemed to have been entered into contemporaneously with and integrated into the terms and conditions of the Lease. NOW THEREFORE, for good and valuable consideration, Lessor and Lessee hereby agree to amend the Lease as follows: 1. Lessee agrees to maintain a financial status of all of the following during the term of the Lease and any extension or renewal thereof a. Tangible net worth of not less than $20,000,000.00; b. Cash or equivalents of not less than $20,000,000.00. 2. In addition, Lessee agrees to provide Lessor with quarterly financial statements within forty-five (45) days after the end of each fiscal quarter and audited annual financial statements within one hundred twenty (120) days of the end of each fiscal year. 3. Failure of Lessee to maintain any one of the above at any time during the Lease term and any extension or renewal thereof or the failure to make any payment due under the Lease is an Event of Default under the Lease which Lessee must, within ten (10) business days, provide a Letter of Credit from a bank acceptable to Lessor for one hundred percent (100%) of all rent then due or to become due under the lease as of the date of the default. Along with the Letter of Credit, Lessee shall also execute a Letter of Credit Agreement with Lessor. The Letter of Credit and Letter of Credit Agreement shall be in a form substantially similar to Exhibits A & B attached and incorporated herein but in any event approved by Lessor. 4. Lessor shall also be entitled to any or all remedies or actions in the event of default, as provided in the Lease, and this Amendment shall not be construed to limit Lessor's rights in any way. Except as set out herein, Lessor and Lessee hereby agree that the terms and conditions of the Lease shall remain in full force and effect as entered into by the parties on or prior to the date hereof. EXELIXIS, INC. as Lessee By: Title: Date: COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO, INC. as Lessor By: Title: Date: EXHIBIT A (On Bank Letterhead) {DATE} BENEFICIARY: Comdisco Laboratory and Scientific Group, a division of Comdisco, Inc., or Transferee 6111 N. River Road Rosemont, IL 60018 Gentlemen: We hereby establish our Irrevocable Standby Letter of Credit No. _________ in your favor for account of , for a sum not to exceed AND /100 DOLLARS ($) available by your draft drawn at sight on us. Draft must be accompanied by: Your statement signed by an officer of Comdisco Laboratory and Scientific Group, a division of Comdisco, Inc. certifying that Exelixis, Inc. has defaulted under that certain Master Lease Agreement dated August 2, 2000 between Exelixis, Inc. and Comdisco Laboratory and Scientific Group, a division of Comdisco, Inc., and the original of this Letter of Credit This Letter of Credit expires __________. All drafts drawn hereunder must be present for payment at our office at ___________________________________________________ on or before that date. It is a condition of this Irrevocable Standby Letter of Credit that it shall be deemed automatically extended without amendment for one (1) year from the present or any future expiration date hereof but not beyond end of lease term. Should we elect not to renew this Standby Letter of Credit, we shall notify you of such election 45 days prior to any such date. All notices shall be in writing, sent by certified mail, return receipt requested and addressed to you at the above address, ATTENTION: Credit Manager. Notwithstanding receipt by you of such notice, you may draw hereby by means of your draft on us at sight accompanied by the documents required herein, until such expiration date. This Letter of Credit may be transferred by you at any time and such transfer shall be deemed effective and binding on us upon receipt of written notice of such transfer from you when accompanied by the original of this Letter of Credit. We hereby agree that drafts drawn strictly in compliance with the terms of this credit and any amendments thereto shall meet with due honor upon presentation at our office at . Title EXHIBIT B LETTER OF CREDIT AGREEMENT Stand-by Letter of Credit Agreement dated __________, by and between Exelixis, Inc. ("Lessee") located at 170 Harbor Way, South San Francisco, CA 94083 and Comdisco Laboratory and Scientific Group, a division of Comdisco, Inc. ("Lessor") with offices at 6111 N. River Road, Rosemont, IL 60018. WHEREAS, Lessee has requested that Lessor lease various equipment, as further described in the Lease (the "Equipment"), to Lessee; and WHEREAS, Lessor has agreed to lease the Equipment to Lessee upon the condition that an Irrevocable Stand-by Letter of Credit shall be outstanding for the full term of the Master Lease Agreement to additionally secure Lessee's performance under the Lease. NOW THEREFORE, in consideration of and as an inducement to Lessor to lease the Equipment to Lessee, the parties hereto agree as follows: Lessee and Lessor have entered or shall enter into a Master Lease Agreement and one or more Schedules thereunder for leasing the Equipment, (together the "Lease"), all of which shall be covered by the terms of this Agreement Concurrently with the execution for this Agreement, Lessee shall cause to be delivered to Lessor in the form attached hereto as Exhibit A, an Irrevocable Stand-by Letter of Credit issued by a bank acceptable to Lessor, which Letter of Credit shall be in the amount of AND /100 dollars ($) ("Letter of Credit") and shall be outstanding until ____________________, with annual renewals until end of lease term. Receipt by Lessor of notice that the Letter of Credit will not be renewed on any expiration date, as provided therein, shall constitute a material default by Lessee under the terms and conditions of the Lease. Lessor shall then have the right to draw upon the Letter of Credit up to its full amount and to apply the proceeds as set out in paragraph 4, below, unless at least thirty (30) days prior to said expiration date Lessee replaces the Letter of Credit with a Letter of Credit which has been issued by a bank acceptable to Lessor and has the same terms and conditions as the replaced Letter of Credit Upon the occurrence of any Event of Default under the Lease which shall include Amendment 001, and at any time while a default is continuing, Lessor shall have the right to draw upon the Letter of Credit up to its full amount and to apply the proceeds thereof first to any reasonable costs and expenses incurred by Lessor in the enforcement of the terms of the Lease and the exercise of its rights and remedies, then to the unpaid balance of all sums payable under the Lease, whether by acceleration or otherwise, with any excess proceeds being refundable to Lessee, and Lessee remaining liable for any deficiency. Waiver by Lessor of a default shall not constitute a continuing waiver of default, of the same provision or any other provision of the Lease. Additionally, failure of Lessor to draw upon the Letter of Credit at any time shall not be construed as a waiver of Lessor's right to draw upon the Letter of Credit as herein set forth at any other time. The exercise by Lessor of its rights under this Agreement shall be deemed to be in addition to and not in lieu of any other rights and remedies of Lessor under the Lease, or any other document relating to the Lease and shall not be construed in any manner to represent satisfaction of the obligations of Lessee under or with respect to the Lease. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date set forth above. EXELIXIS, INC. as Lessee By: Title: Date: COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO, INC. as Lessor By: Title: Date:     --------------------------------------------------------------------------------
EXHIBIT 10.1 CREDIT AGREEMENT     THIS CREDIT AGREEMENT dated as of September 15, 2000 (this "Agreement") is entered into among Fargo Electronics, Inc., a Delaware corporation (the "Company"), the financial institutions that are or may from time to time become parties hereto (together with their respective successors and assigns, the "Banks") and LASALLE BANK NATIONAL ASSOCIATION (in its individual capacity, "LaSalle"), as agent for the Banks.     WHEREAS, the Banks have agreed to make available to the Company a revolving credit facility (which includes letters of credit) upon the terms and conditions set forth herein;     NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: SECTION 1 DEFINITIONS.     1.1  Definitions.  When used herein the following terms shall have the following meanings:     Account Debtor means any Person who is obligated to the Company or any Subsidiary under an Account Receivable.     Account Receivable means, with respect to any Person, any right of such person to payment for goods sold or leased or for services rendered, whether or not evidenced by an instrument or chattel paper and whether or not yet earned by performance.     Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary).     Affected Loan—see Section 8.3.     Affiliate of any Person means (i) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person and (ii) any officer or director of such Person. A Person shall be deemed to be "controlled by" any other Person if such Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.     Agent means LaSalle in its capacity as agent for the Banks hereunder and any successor thereto in such capacity.     Agreement—see the Preamble.     Asset Sale means the sale, lease, assignment or other transfer for value (each a "Disposition") by the Company or any Subsidiary to any Person (other than the Company or any Subsidiary) of any asset or right of the company or such Subsidiary other than (a) the Disposition of any asset which is to be replaced, and is in fact replaced, within 90 days with another asset performing the same or a similar function, (b) the sale or lease of inventory in the ordinary course of business and (c) other Dispositions in any Fiscal Year the Net Cash Proceeds of which do not in the aggregate exceed $250,000.00.     Assignment Agreement—see Section 14.9.1. --------------------------------------------------------------------------------     Attorney Costs means, with respect to any Person, all reasonable fees and charges of any counsel to such Person, the reasonable allocable cost of internal legal services of such Person, all reasonable disbursements of such internal counsel and all court costs and similar legal expenses.     Bank—see the Preamble. References to the "Banks" shall include the Issuing Bank; for purposes of clarification only, to the extent that LaSalle (or any successor Issuing Bank) may have any rights or obligations in addition to those of the other Banks due to its status as Issuing Bank, its status as such will be specifically referenced.     Base Rate means at any time the greater of (a) the Federal Funds Rate plus 0.5% and (b) the Prime Rate.     Base Rate Loan means any Loan which bears interest at or by reference to the Base Rate.     Base Rate Margin—see the Pricing Schedule.     Borrowing Base means, at any date of determination during any Fiscal Month in one of the periods set forth below, the amount determined by multiplying the factor set forth in the following table for the specified period times the Company's EBITDA for the twelve Fiscal Month Period ending on the last day of the second Fiscal Month immediately preceding such date of determination. Period --------------------------------------------------------------------------------   Multiple Factor -------------------------------------------------------------------------------- Closing Date to and including December 31, 2000   2.50 January 1, 2001 to and including June 30, 2001   2.25 At all times thereafter   2.00.     Borrowing Base Certificate means a certificate substantially in the form of Exhibit D.     Business Day means any day on which LaSalle is open for commercial banking business in Chicago, Illinois and Minneapolis, Minnesota and, in the case of a Business Day which relates to a Eurodollar Loan, on which dealings are carried on in the London interbank eurodollar market.     Capital Expenditures means all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Company, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.     Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.     Cash Collateralize means to deliver cash collateral to the Agent, to be held as cash collateral for outstanding Letters of Credit, pursuant to documentation satisfactory to the Agent, derivatives of such term have corresponding meanings.     Cash Equivalent Investment means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by a Bank or its holding company) rated at least A-l by Standard & Poor's Ratings Group or P-l by Moody's Investors Service, Inc., (c) any deposit account, certificate of deposit (or time deposits represented by such certificates of deposit) or banker's acceptance, maturing not more than one year after such time, or overnight Federal Funds transactions that are issued or sold by any Bank or its holding company or by a commercial banking institution that is a member of the 2 -------------------------------------------------------------------------------- Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000 and (d) any repurchase agreement entered into with any Bank (or other commercial banking institution of the stature referred to in clause (c)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Bank (or other commercial banking institution) thereunder.     CERCLA—see Section 9.15.     Closing Date—see Section 11.1.     Code means the Internal Revenue Code of 1986.     Collateral Access Agreement means an agreement in form and substance reasonably satisfactory to the Agent pursuant to which a mortgagee or lessor of real property on which collateral is stored or otherwise located, or a warehouseman, processor or other bailee of Inventory, acknowledges the Liens of the Agent and waives any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits the Agent access to and use of such real property for a reasonable amount of time following the occurrence and during the continuance of an Event of Default to assemble, complete and sell any collateral stored or otherwise located thereon.     Collateral Documents means the Security Agreement and any other agreement or instrument pursuant to which the Company, any Subsidiary or any other Person grants collateral to the Agent for the benefit of the Banks.     Commitment means, as to any Bank, such Bank's commitment to make Loans, and to issue or participate in Letters of Credit, under this Agreement. The initial amount of each Bank's Pro Rata Share of the Revolving Commitment Amount is set forth on Schedule 2.1.     Company—see the Preamble.     Computation Period means each period of four consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter thereafter except that respect to the Computation Period for the Interest Coverage Ratio, Computation Period means each of the following periods: (i) the Fiscal Quarter ending September 30, 2000; (ii) the period of two consecutive Fiscal Quarters ending December 31, 2000; (iii) the period of three consecutive Fiscal Quarters ending March 31,2001; and (iv) each period of four consecutive Fiscal Quarters ending on June 30, 2001 or on the last day of a Fiscal Quarter thereafter.     Consolidated Net Income means, with respect to the Company and its Subsidiaries for any period, the net income (or loss) of the Company and its Subsidiaries for such period, excluding any gains from Asset Sales, any extraordinary gains or extraordinary non-cash losses, any gains or non-cash losses from discontinued operations and any other non-recurring gains or non-cash losses.     Controlled Group means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.     Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP or under any lease treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes; (c) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, 3 -------------------------------------------------------------------------------- whether or not such indebtedness shall have been assumed by such Person, (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person (including the Letters of Credit), (f) all Hedging Obligations of such Person, (g) all Suretyship Liabilities of such Person and (h) all Debt of any partnership of which such Person is a general partner and for which such Person is or may become personally liable.     Debt to be Repaid means Debt listed on Schedule 11.1.     Designated Person means the Company's Chief Financial Officer, Treasurer, Vice President of Administration or Director of Finance.     Designated Proceeds—see Section 6.2.2(a).     Disposal—see the definition of "Release".     Dollar and the sign "$" mean lawful money of the United States of America.     EBITDA means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income, Interest Expense, income tax expense, depreciation and amortization for such period.     Environmental Claims means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.     Environmental Laws means all present or future 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 authority, in each case relating to Environmental Matters.     Environmental Matters means any matter arising out of or relating to health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, release, control or cleanup of any Hazardous Substance.     ERISA means the Employee Retirement Income Security Act of 1974.     Eurocurrency Reserve Percentage means, with respect to any Eurodollar Loan for any Interest Period, a percentage (expressed as a decimal) equal to the daily average during such Interest Period of the percentage in effect on each day of such Interest Period, as prescribed by the FRB, for determining the aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other then applicable regulation of the FRB which prescribes reserve requirements applicable to "Eurocurrency Liabilities" as presently defined in Regulation D.     Eurodollar Loan means any Loan which bears interest at a rate determined by reference to the Eurodollar Rate (Reserve Adjusted).     Eurodollar Margin—see the Pricing Schedule.     Eurodollar Office means with respect to any Bank the office or offices of such Bank which shall be making or maintaining the Eurodollar Loans of such Bank hereunder. A Eurodollar Office of any Bank may be, at the option of such Bank, either a domestic or foreign office.     Eurodollar Rate means, with respect to any Eurodollar Loan for any Interest Period, a rate per annum equal to the offered rate for deposits in Dollars for a period equal or comparable to such 4 -------------------------------------------------------------------------------- Interest Period which appears on Telerate page 3750 as of 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period. "Telerate Page 3750" means the display designated as "Page 3750" on the Telerate Service (or such other page as may replace page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for Dollar deposits).     Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) determined pursuant to the following formula: Eurodollar Rate (Reserve Adjusted)   =   Eurodollar Rate -------------------------------------------------------------------------------- 1-Eurocurrency Reserve Percentage.     Event of Default means any of the events described in Section 12.1.     Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 A.M. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent.     Fiscal Month means a fiscal month of a Fiscal Year.     Fiscal Quarter means a fiscal quarter of a Fiscal Year.     Fiscal Year means the fiscal year of the Company and its Subsidiaries, which period shall be the 12-month period ending on December 31 of each year. References to a Fiscal Year with a number corresponding to any calendar year (e.g., "Fiscal Year 2000") refer to the Fiscal Year ending on December 31 of such calendar year.     FRB means the Board of Governors of the Federal Reserve System or any successor thereto.     GAAP means generally accepted accounting principles set forth from time to time 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 agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.     Group—see Section 2.2.1.     Guaranty means a guaranty in the form approved by the Agent and Required Banks.     Hazardous Substances—see Section 9.15.     Hedging Agreement means any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.     Hedging Obligation means, with respect to any Person, any liability of such Person under any Hedging Agreement. 5 --------------------------------------------------------------------------------     Interest Coverage Ratio means, for any Computation Period, the ratio of (a) EBITDA for such Computation Period to (b) Interest Expense for such Computation Period; provided that for the Computation Periods ending September 30, 2000, December 31, 2000 and March 31, 2001, both EBITDA and Interest Expense shall be multiplied by 4, 2 and 1.33, respectively.     Interest Expense means for any period the consolidated interest expense of the Company and its Subsidiaries for such period (including all imputed interest on Capital Leases and synthetic leases) and all commitment fees, letter of credit fees, agency fees, facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money.     Interest Period means, as to any Eurodollar Loan, the period commencing on the date such Loan is borrowed or continued as, or converted into, a Eurodollar Loan and ending on the date one, two, three or six months thereafter as selected by the Company pursuant to Section 2.2.2 or 2.2.3, as the case may be; provided that:      (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following 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 preceding Business Day;     (ii) any Interest Period that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; and     (iii) the Company may not select any Interest Period for a Revolving Loan which would extend beyond the scheduled Termination Date.     Inventory has the meaning assigned to such term in the Uniform Commercial Code as in effect in the State of Minnesota on the date hereof.     Investment means, relative to any Person, any investment in another Person, whether by acquisition of any debt or equity security, by making any loan or advance or by becoming obligated with respect to a Suretyship Liability in respect of obligations of such other Person (other than travel, relocation and similar advances to employees and agents in the ordinary course of business).     Issuing Bank means LaSalle in its capacity as the issuer of Letters of Credit hereunder and its successors and assigns in such capacity.     LaSalle—see the Preamble.     L/C Application means, with respect to any request for the issuance of a Letter of Credit, a letter of credit application in the form being used by the Issuing Bank at the time of such request for the type of letter of credit requested.     LC Fee Rate—see the Pricing Schedule.     Letter of Credit—see Section 2.1.3.     Lien means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.     Loan Documents means this Agreement, the Notes, the Guaranty, the L/C Applications and the Collateral Documents. 6 --------------------------------------------------------------------------------     Loan Party means the Company and each Subsidiary.     Loans means Revolving Loans.     Mandatory Prepayment Event—see Section 6.2.2(a).     Margin Stock means any "margin stock" as defined in Regulation U.     Master Letter of Credit Agreement means a Master Letter of Credit Agreement substantially in the form of Exhibit H.     Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business, properties or prospects of the Company and its Subsidiaries taken as a whole, (b) a material impairment of the ability of the Company or any Subsidiary to perform any of its obligations under any Loan Document or (c) a material adverse effect upon any substantial portion of the collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against the Company or any Subsidiary of any Loan Document.     Multiemployer Pension Plan means a multi-employer plan, as defined in Section 4001(a)(3) of ERISA, to which the Company or any member of the Controlled Group may have any liability.     Net Cash Proceeds means:     (a) with respect to any Asset Sale the aggregate cash proceeds (including cash proceeds received by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by the Company or any Subsidiary pursuant to such Asset Sale net of (i) the direct costs relating to such sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees), (ii) taxes paid or reasonably estimated by the Company to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to such Asset Sale (other than the Loans); and     (b) with respect to any issuance of equity securities, the aggregate cash proceeds received by the Company or any Subsidiary pursuant to such issuance, net of the direct costs relating to such issuance (including sales and underwriter's commission.     Non-Use Fee Rate—see the Pricing Schedule.     Note—see Section 3.1.     Operating Lease means any lease of (or other agreement conveying the right to use) any real or personal property by the Company or any Subsidiary, as lessee, other than any Capital Lease.     PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.     Pension Plan means a defined-benefit "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which the Company or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.     Person means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. 7 --------------------------------------------------------------------------------     Prime Rate means, for any day, the rate of interest in effect for such day as publicly announced from time to time by LaSalle as its prime rate (whether or not such rate is actually charged by LaSalle). Any change in the Prime Rate announced by LaSalle shall take effect at the opening of business on the day specified in the public announcement of such change.     Pro Rata Share means, with respect to any Bank, the percentage specified opposite such Bank's name on Schedule 2.1 hereto, as adjusted from time to time in accordance with the terms hereof.     RCRA—see Section 9.15.     Regulation D means Regulation D of the FRB.     Regulation U means Regulation U of the FRB.     Release has the meaning specified in CERCLA and the term "Disposal" (or "Disposed") has the meaning specified in RCRA; provided that in the event either CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply as of the effective date of such amendment; and provided, further, that to the extent that the laws of a state wherein any affected property lies establish a meaning for "Release" or "Disposal" which is broader than is specified in either CERCLA or RCRA, such broader meaning shall apply.     Required Banks means Banks having Pro Rata Shares aggregating 60% or more; provided, however, that if there are only two Banks party to this Agreement, then the Required Banks shall be defined as Banks having Pro Rata Shares aggregating 100%.     Revolving Commitment Amount means $30,000,000.00, as reduced from time to time pursuant to Section 6.1.     Revolving Loan—see Section 2.1.1.     Revolving Outstandings means, at any time, the sum of (a) the aggregate principal amount of all outstanding Revolving Loans, plus (b) the Stated Amount of all Letters of Credit.     SEC means the Securities and Exchange Commission or any other governmental authority succeeding to any of the principal functions thereof.     Security Agreement means a security agreement substantially in the form of Exhibit C.     Stated Amount means, with respect to any Letter of Credit at any date of determination, (a) the maximum aggregate amount available for drawing thereunder under any and all circumstances plus (b) the aggregate amount of all unreimbursed payments and disbursements under such Letter of Credit.     Subordinated Debt means any unsecured Debt of the Company which has subordination terms, covenants, pricing and other terms which have been approved in writing by the Required Banks.     Subsidiary means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares or other ownership interests as have more than 50% of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Company.     Suretyship Liability means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other 8 -------------------------------------------------------------------------------- liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation in respect of any Suretyship Liability shall (subject to any limitation set forth therein) be deemed to be the principal amount of the debt, obligation or other liability supported thereby.     Termination Date means the earlier to occur of (a) April 1, 2003 or (b) such other date on which the Commitments terminate pursuant to Section 6 or 12.     Total Debt means all Debt of the Company and its Subsidiaries, determined on a consolidated basis, excluding (i) contingent obligations in respect of Suretyship Liabilities (except to the extent constituting Suretyship Liabilities in respect of Debt of a Person other than the Company or any Subsidiary), (ii) Hedging Obligations and (iii) Debt of the Company to Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries.     Total Debt to EBITDA Ratio means, as of the last day of any Fiscal Quarter, the ratio of (i) Total Debt as of such day to (ii) EBITDA for the Computation Period ending on such day.     Type of Loan or Borrowing—see Section 2.2.1. The types of Loans or borrowings under this Agreement are as follows: Base Rate Loans or borrowings and Eurodollar Loans or borrowings.     Unmatured Event of Default means any event that, if it continues uncured, will, with lapse of time or notice or both, constitute an Event of Default.     Wholly-Owned Subsidiary means, as to any Person, another Person all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such Person.     1.2  Other Interpretive Provisions.  (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.     (b) Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.     (c) The term "including" is not limiting and means "including without limitation."     (d) 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."     (e) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation.     (f)  This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms.     (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company, the Banks and the other parties thereto and are the products of all parties. Accordingly, they shall not be construed against the Agent or the Banks merely because of the Agent's or Banks' involvement in their preparation. 9 -------------------------------------------------------------------------------- SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND LETTER OF CREDIT PROCEDURES.     2.1  Commitments.  On and subject to the terms and conditions of this Agreement, each of the Banks, severally and for itself alone, agrees to make loans to, and to issue or participate in letters of credit for the account of, the Company as follows:     2.1.1  Revolving Loan Commitment.  Each Bank will make loans on a revolving basis ("Revolving Loans") from time to time until the Termination Date in such Bank's Pro Rata Share of such aggregate amounts as the Company may request from all Banks; provided that the Revolving Outstandings will not at any time exceed the lesser of (x) the Revolving Commitment Amount and (y) the Borrowing Base.     2.1.2  L/C Commitment.  (a) The Issuing Bank will issue standby letters of credit, in each case containing such terms and conditions as are permitted by this Agreement and are reasonably satisfactory to the Issuing Bank (each a "Letter of Credit"), at the request of and for the account of the Company from time to time before the date which is 30 days prior to the Termination Date and (b) as more fully set forth in Section 2.3.2, each Bank agrees to purchase a participation in each such Letter of Credit; provided that (i) the aggregate Stated Amount of all Letters of Credit shall not at any time exceed $500,000.00 and (ii)  the Revolving Outstandings will not at any time exceed the lesser of (x) the Revolving Commitment Amount and (y) the Borrowing Base.     2.2  Loan Procedures.       2.2.1  Various Types of Loans.  Each Revolving Loan shall be divided into tranches which are, either a Base Rate Loan or a Eurodollar Loan (each a "type" of Loan), as the Company shall specify in the related notice of borrowing or conversion pursuant to Section  2.2.2 or 2.2.3. Eurodollar Loans having the same Interest Period are sometimes called a "Group" or collectively "Groups". Base Rate Loans and Eurodollar Loans may be outstanding at the same time, provided that not more than four (4) different Groups of Eurodollar Loans shall be outstanding at any one time. All borrowings, conversions and repayments of Revolving Loans shall be effected so that each Bank will have a pro rata share (according to its Pro Rata Share) of all types and Groups of Loans.     2.2.2  Borrowing Procedures.  The Company shall give written notice or telephonic notice (followed immediately by written confirmation thereof) to the Agent of each proposed borrowing not later than (a) in the case of a Base Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such borrowing, and (b) in the case of a Eurodollar borrowing, 11:00 A.M., Chicago time, at least three Business Days prior to the proposed date of such borrowing. Each such notice shall be effective upon receipt by the Agent, shall be irrevocable, and shall specify the date, amount and type of borrowing and, in the case of a Eurodollar borrowing, the initial Interest Period therefor. Promptly upon receipt of such notice, the Agent shall advise each Bank thereof. Not later than 1:00 P.M., Chicago time, on the date of a proposed borrowing, each Bank shall provide the Agent at the office specified by the Agent with immediately available funds covering such Bank's Pro Rata Share of such borrowing and, so long as the Agent has not received written notice that the conditions precedent set forth in Section 11 with respect to such borrowing have not been satisfied, the Agent shall pay over the funds received by the Agent to the Company on the requested borrowing date. Each borrowing shall be on a Business Day. Each Base Rate borrowing shall be in an aggregate amount of at least $100,000.00 and an integral multiple of $25,000.00, and each Eurodollar borrowing shall be in an aggregate amount of at least $500,000.00 and an integral multiple of at least $100,000.00. 10 --------------------------------------------------------------------------------     2.2.3  Conversion and Continuation Procedures.       (a) Subject to Section 2.2.1, the Company may, upon irrevocable written notice to the Agent in accordance with clause (b) below:      (i) elect, as of any Business Day, to convert any Loans (or, for conversion into Eurodollar Loans, any part thereof in an aggregate amount not less than $100,000.00 or a higher integral multiple of $100,000.00) into Loans of the other type; or     (ii) elect, as of the last day of the applicable Interest Period, to continue any Eurodollar Loans having Interest Periods expiring on such day (or any part thereof in an aggregate amount not less than $100,000.00 or a higher integral multiple of $100,000.00) for a new Interest Period; provided that after giving effect to any prepayment, conversion or continuation, the aggregate principal amount of each Group of Eurodollar Loans shall be at least $100,000.00 and an integral multiple of $100,000.00.     (b) The Company shall give written or telephonic (followed immediately by written confirmation thereof) notice to the Agent of each proposed conversion or continuation not later than (i) in the case of conversion into Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of such conversion and (ii) in the case of conversion into or continuation of Eurodollar Loans, 11:00 A.M., Chicago time, at least three Business Days prior to the proposed date of such conversion or continuation, specifying in each case:      (i) the proposed date of conversion or continuation;     (ii) the aggregate amount of Loans to be converted or continued;     (iii) the type of Loans resulting from the proposed conversion or continuation; and     (iv) in the case of conversion into, or continuation of, Eurodollar Loans, the duration of the requested Interest Period therefor.     (c) If upon the expiration of any Interest Period applicable to Eurodollar Loans, the Company has failed to select timely a new Interest Period to be applicable to such Eurodollar Loans, the Company shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective on the last day of such Interest Period.     (d) The Agent will promptly notify each Bank of its receipt of a notice of conversion or continuation pursuant to this Section 2.2.3 or, if no timely notice is provided by the Company, of the details of any automatic conversion.     (e) Any conversion of a Eurodollar Loan on a day other than the last day of an Interest Period therefor shall be subject to Section 8.4.     2.3  Letter of Credit Procedures.       2.3.1  L/C Applications.  The Company shall give notice to the Agent and the Issuing Bank of the proposed issuance of each Letter of Credit on a Business Day which is at least three Business Days (or such lesser number of days as the Agent and the Issuing Bank shall agree in any particular instance in their sole discretion) prior to the proposed date of issuance of such Letter of Credit. Each such notice shall be accompanied by an L/C Application, duly executed by the Company and in all respects satisfactory to the Agent and the Issuing Bank, together with such other documentation as the Agent or the Issuing Bank may request in support thereof, it being understood that each L/C Application shall specify, among other things, the date on which the proposed Letter of Credit is to be issued, the expiration date of such Letter of Credit (which shall not be later than the earlier to occur of (x) one year after the date of issuance thereof and 11 -------------------------------------------------------------------------------- (y) thirty days prior to the scheduled Termination Date) and whether such Letter of Credit is to be transferable in whole or in part. So long as the Issuing Bank has not received written notice that the conditions precedent set forth in Section 11 with respect to the issuance of such Letter of Credit have not been satisfied, the Issuing Bank shall issue such Letter of Credit on the requested issuance date. The Issuing Bank shall promptly advise the Agent of the issuance of each Letter of Credit and of any amendment thereto, extension thereof or event or circumstance changing the amount available for drawing thereunder. In the event of any inconsistency between the terms of any L/C Application or the Master Letter of Credit Agreement, on the one hand, and the terms of this Agreement, on the other hand, the terms of this Agreement shall control.     2.3.2  Participations in Letters of Credit.  Concurrently with the issuance of each Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each other Bank, and each other Bank shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such other Bank's Pro Rata Share, in such Letter of Credit and the Company's reimbursement obligations with respect thereto. For the purposes of this Agreement, the unparticipated portion of each Letter of Credit shall be deemed to be the Issuing Bank's "participation" therein. The Issuing Bank hereby agrees, upon request of the Agent or any Bank, to deliver to the Agent or such Bank a list of all outstanding Letters of Credit issued by the Issuing Bank, together with such information related thereto as the Agent or such Bank may reasonably request.     2.3.3  Reimbursement Obligations.  The Company hereby unconditionally and irrevocably agrees to reimburse the Issuing Bank for each payment or disbursement made by the Issuing Bank under any Letter of Credit honoring any demand for payment made by the beneficiary thereunder, in each case on the date that such payment or disbursement is made. Any amount not reimbursed on the date of such payment or disbursement shall bear interest from the date of such payment or disbursement to the date that the Issuing Bank is reimbursed by the Company therefor, payable on demand, at a rate per annum equal to the Base Rate from time to time in effect plus the Base Rate Margin from time to time in effect plus, beginning on the third Business Day after receipt of notice from the Issuing Bank of such payment or disbursement, 2% per annum. The Issuing Bank shall notify the Company and the Agent whenever any demand for payment is made under any Letter of Credit by the beneficiary thereunder; provided that the failure of the Issuing Bank to so notify the Company shall not affect the rights of the Issuing Bank or the Banks in any manner whatsoever.     2.3.4  Limitation on Obligations of Issuing Bank.  In determining whether to pay under any Letter of Credit, the Issuing Bank shall not have any obligation to the Company or any Bank other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence and willful misconduct, shall not impose upon the Issuing Bank any liability to the Company or any Bank and shall not reduce or impair the Company's reimbursement obligations set forth in Section 2.3.3 or the obligations of the Banks pursuant to Section 2.3.5.     2.3.5  Funding by Banks to Issuing Bank.  If the Issuing Bank makes any payment or disbursement under any Letter of Credit and the Company has not reimbursed the Issuing Bank in full for such payment or disbursement by 11:00 A.M., Chicago time, on the date of such payment or disbursement, or if any reimbursement received by the Issuing Bank from the Company is or must be returned or rescinded upon or during any bankruptcy or reorganization of the Company or otherwise, each other Bank shall be obligated to pay to the Agent for the account of the Issuing Bank, in full or partial payment of the purchase price of its participation in such Letter of Credit, 12 -------------------------------------------------------------------------------- its Pro Rata Share of such payment or disbursement (but no such payment shall diminish the obligations of the Company under Section 2.3.3), and, upon notice from the Issuing Bank, the Agent shall promptly notify each other Bank thereof. Each other Bank irrevocably and unconditionally agrees to so pay to the Agent in immediately available funds for the Issuing Bank's account the amount of such other Bank's Percentage of such payment or disbursement. If and to the extent any Bank shall not have made such amount available to the Agent by 2:00 P.M., Chicago time, on the Business Day on which such Bank receives notice from the Agent of such payment or disbursement (it being understood that any such notice received after noon, Chicago time, on any Business Day shall be deemed to have been received on the next following Business Day), such Bank agrees to pay interest on such amount to the Agent for the Issuing Bank's account forthwith on demand, for each day from the date such amount was to have been delivered to the Agent to the date such amount is paid, at a rate per annum equal to (a) for the first three days after demand, the Federal Funds Rate from time to time in effect and (b) thereafter, the Base Rate from time to time in effect. Any Bank's failure to make available to the Agent its Pro Rata Share of any such payment or disbursement shall not relieve any other Bank of its obligation hereunder to make available to the Agent such other Bank's Pro Rata Share of such payment, but no Bank shall be responsible for the failure of any other Bank to make available to the Agent such other Bank's Pro Rata Share of any such payment or disbursement.     2.4  Commitments Several.  The failure of any Bank to make a requested Loan on any date shall not relieve any other Bank of its obligation (if any) to make a Loan on such date, but no Bank shall be responsible for the failure of any other Bank to make any Loan to be made by such other Bank.     2.5  Certain Conditions.  Notwithstanding any other provision of this Agreement, no Bank shall have an obligation to make any Loan, or to permit the continuation of or any conversion into any Eurodollar Loan, and the Issuing Bank shall not have any obligation to issue any Letter of Credit, if an Event of Default or Unmatured Event of Default exists. SECTION 3 NOTES EVIDENCING LOANS.     3.1  Notes.  The Loans of each Bank shall be evidenced by a promissory note (each a "Note") substantially in the form set forth in Exhibit A, with appropriate insertions, payable to the order of such Bank in a face principal amount equal to the sum of such Bank's Pro Rata Share of the Revolving Commitment Amount in full on the Termination Date.     3.2  Recordkeeping.  Each Bank shall record in its records, or at its option on the schedule attached to its Note, the date and amount of each Loan made by such Bank, each repayment or conversion thereof and, in the case of each Eurodollar Loan, the dates on which each Interest Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of the Company hereunder or under any Note to repay the principal amount of the Loans evidenced by such Note together with all interest accruing thereon. 13 -------------------------------------------------------------------------------- SECTION 4 INTEREST.     4.1  Interest Rates.  The Company promises to pay interest on the unpaid principal amount of each Loan for the period commencing on the date of such Loan until such Loan is paid in full as follows:     (a) at all times while such Loan is a Base Rate Loan, at a rate per annum equal to the sum of the Base Rate from time to time in effect plus the Base Rate Margin from time to time in effect; and     (b) at all times while such Loan is a Eurodollar Loan, at a rate per annum equal to the sum of the Eurodollar Rate (Reserve Adjusted) applicable to each Interest Period for such Loan plus the Eurodollar Margin from time to time in effect; provided that at any time an Event of Default exists, if requested by the Required Banks, the interest rate applicable to each Loan shall be increased by 2% per annum.     4.2  Interest Payment Dates.  Accrued interest on each Base Rate Loan shall be payable in arrears on the last day of each calendar month and at maturity. Accrued interest on each Eurodollar Loan shall be payable on the last day of each Interest Period relating to such Loan (and, in the case of a Eurodollar Loan with a six-month Interest Period, on the three-month anniversary of the first day of such Interest Period) and at maturity. After maturity, accrued interest on all Loans shall be payable on demand.     4.3  Setting and Notice of Eurodollar Rates.  The applicable Eurodollar Rate for each Interest Period shall be determined by the Agent, and notice thereof shall be given by the Agent promptly to the Company and each Bank. Each determination of the applicable Eurodollar Rate by the Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Agent shall, upon written request of the Company or any Bank, deliver to the Company or such Bank a statement showing the computations used by the Agent in determining any applicable Eurodollar Rate hereunder.     4.4  Computation of Interest.  Interest shall be computed for the actual number of days elapsed on the basis of a year of 360 days. The applicable interest rate for each Base Rate Loan shall change simultaneously with each change in the Base Rate. SECTION 5 FEES.     5.1  Non-Use Fee.  The Company agrees to pay to the Agent for the account of each Bank a non-use fee, for the period from the Closing Date to the Termination Date, at the Non-Use Fee Rate in effect from time to time of such Bank's Pro Rata Share (as adjusted from time to time) of the unused amount of the Revolving Commitment Amount on each day. For purposes of calculating usage under this Section, the Revolving Commitment Amount shall be deemed used to the extent of the aggregate principal amount of all outstanding Revolving Loans plus the Stated Amount of all Letters of Credit. Such non-use fee shall be payable in arrears on the last day of each calendar quarter and on the Termination Date for any period then ending for which such non-use fee shall not have previously been paid. The non-use fee shall be computed for the actual number of days elapsed on the basis of a year of 360 days. 14 --------------------------------------------------------------------------------     5.2  Letter of Credit Fees.       (a) The Company agrees to pay to the Agent for the account of each Bank a letter of credit fee for each Letter of Credit equal to the LC Fee Rate in effect from time to time of such Bank's Pro Rata Share (as adjusted from time to time) of the undrawn amount of such Letter of Credit (computed for the actual number of days elapsed on the basis of a year of 360 days) as of each day; provided that, if requested by the Required Banks, the rate applicable to each Letter of Credit shall be increased by 2% per annum at any time that an Event of Default exists. Such letter of credit fee shall be payable in arrears on the last day of each calendar quarter and on the Termination Date for the period from the date of the issuance of each Letter of Credit (or the last day on which the letter of credit fee was paid with respect thereto) to the date such payment is due or, if earlier, the date on which such Letter of Credit expired or was terminated.     (b) In addition, with respect to each Letter of Credit, the Company agrees to pay to the Issuing Bank, for its own account, (i) such fees and expenses as the Issuing Bank customarily requires in connection with the issuance, negotiation, processing and/or administration of letters of credit in similar situations and (ii) a letter of credit fronting fee in the amount and at the times agreed to by the Company and the Issuing Bank.     5.3  Upfront Fees.  The Company agrees to pay to the Agent for the account of each Bank on the Closing Date an upfront fee in the amount previously agreed to between the Company and the Agent (and the Agent agrees to promptly forward to each Bank a portion of such upfront fee in the amount previously agreed to between the Agent and such Bank).     5.4  Agent's Fees.  The Company agrees to pay to the Agent such agent's fees as are mutually agreed to from time to time by the Company and the Agent. SECTION 6 REDUCTION OR TERMINATION OF THE REVOLVING COMMITMENT AMOUNT; PREPAYMENTS.     6.1  Reduction or Termination of the Revolving Commitment Amount.       6.1.1  Voluntary Reduction or Termination of the Revolving Commitment Amount.  The Company may from time to time on at least three Business Days' prior written notice received by the Agent (which shall promptly advise each Bank thereof) permanently reduce the Revolving Commitment Amount to an amount not less than the Revolving Outstandings. Any such reduction shall be in an amount not less than $500,000.00 or a higher integral multiple of $100,000.00. Concurrently with any reduction of the Revolving Commitment Amount to zero, the Company shall pay all interest on the Revolving Loans, all non-use fees and all letter of credit fees and shall Cash Collateralize in full all obligations arising with respect to the Letters of Credit.     6.1.2  Mandatory Reductions of Revolving Commitment Amount.  The Revolving Commitment Amount shall be permanently reduced by:     (a) $1,000,000.00 on the last day of each Fiscal Quarter, commencing September 30, 2000; and     (b) an amount (if any) equal to the Net Cash Proceeds payable pursuant to a Mandatory Prepayment Event.     6.1.3  All Reductions of the Revolving Commitment Amount.  All reductions of the Revolving Commitment Amount shall reduce the Commitments pro rata among the Banks according to their respective Pro Rata Shares. 15 --------------------------------------------------------------------------------     6.2  Prepayments.       6.2.1  Voluntary Prepayments.  The Company may from time to time prepay the Loans in whole or in part; provided that the Company shall give the Agent (which shall promptly advise each Bank) notice thereof not later than 11:00 A.M., Chicago time, on the day of such prepayment (which shall be a Business Day), specifying the Loans to be prepaid and the date and amount of prepayment. Any such partial prepayment shall be in an amount equal to $100,000.00 or a higher integral multiple of $25,000.00.      6.2.2  Mandatory Prepayments.       (a) The Company shall make a prepayment of the Revolving Loans upon the occurrence of any of the following (each a "Mandatory Prepayment Event") at the following times and in the following amounts (such applicable amounts being referred to as "Designated Proceeds"):      (i) Concurrently with the receipt by the Company or any Subsidiary of any Net Cash Proceeds from any Asset Sale, in an amount equal to 90% of such Net Cash Proceeds.     (ii) Concurrently with the receipt by the Company or any Subsidiary of any Net Cash Proceeds from any issuance of equity securities of the Company or any Subsidiary (excluding (x) any issuance of shares of capital stock pursuant to any employee or director stock option program, benefit plan or compensation program and (y) any issuance by a Subsidiary to the Company or another Subsidiary), in an amount equal to 25% of such Net Cash Proceeds.     (b) If on any day the Revolving Outstandings exceed the Borrowing Base, the Company shall immediately prepay Revolving Loans and/or Cash Collateralize the outstanding Letters of Credit, or do a combination of the foregoing, in an amount sufficient to eliminate such excess.     (c) If on any day on which the Revolving Commitment Amount is reduced pursuant to Section 6.1.2 the Revolving Outstandings exceed the Revolving Commitment Amount, the Company shall immediately prepay Revolving Loans or Cash Collateralize the outstanding Letters of Credit, or do a combination of the foregoing, in an amount sufficient to eliminate such excess.     6.3  All Prepayments.  Each voluntary partial prepayment shall be in a principal amount of $100,000.00 or a higher integral multiple of $25,000.00. Any partial prepayment of a Group of Eurodollar Loans shall be subject to the proviso to Section 2.2.3(a). Any prepayment of a Eurodollar Loan on a day other than the last day of an Interest Period therefor shall include interest on the principal amount being repaid and shall be subject to Section 8.4. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.     7.1  Making of Payments.  All payments of principal of or interest on the Notes, and of all fees, shall be made by the Company to the Agent in immediately available funds at the office specified by the Agent not later than 1:00 p.m., Chicago time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the following Business Day. The Agent shall promptly remit to each Bank its share of all such payments received in collected funds by the Agent for the account of such Bank. All payments under Section 8.1 shall be made by the Company directly to the Bank entitled thereto.     7.2  Application of Certain Payments.  Each payment of principal shall be applied to such Loans as the Company shall direct by notice to be received by the Agent on or before the date of such payment or, in the absence of such notice, as the Agent shall determine in its discretion. Concurrently with each remittance to any Bank of its share of any such payment, the Agent shall advise such Bank as to the application of such payment. 16 --------------------------------------------------------------------------------     7.3  Due Date Extension.  If any payment of principal or interest with respect to any of the Loans, or of any fees, falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day (unless, in the case of a Eurodollar Loan, such immediately following Business Day is the first Business Day of a calendar month, in which case such due date shall be the immediately preceding Business Day) and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension.     7.4  Setoff.  The Company agrees that the Agent and each Bank have all rights of set-off and bankers' lien provided by applicable law, and in addition thereto, the Company agrees that at any time any Event of Default exists, the Agent and each Bank may apply to the payment of any obligations of the Company hereunder, whether or not then due, any and all balances, credits, deposits, accounts or moneys of the Company then or thereafter with the Agent or such Bank.     7.5  Proration of Payments.  If any Bank shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise, but excluding any payment pursuant to Section 8.7 or 14.9 and payments of interest on any Affected Loan) on account of principal of or interest on any Loan (or on account of its participation in any Letter of Credit) in excess of its pro rata share of payments and other recoveries obtained by all Banks on account of principal of and interest on the Loans (or such participation) then held by them, such Bank shall purchase from the other Banks such participations in the Loans (or sub-participations in Letters of Credit) held by them as shall be necessary to cause such purchasing Bank to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank, the purchase shall be rescinded and the purchase price restored to the extent of such recovery.     7.6  Taxes.  All payments of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, excluding franchise taxes and taxes imposed on or measured by any Bank's net income or receipts (all non-excluded items being called "Taxes"). If any withholding or deduction from any payment to be made by the Company hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Company will:     (a) pay directly to the relevant authority the full amount required to be so withheld or deducted;     (b) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and     (c) pay to the Agent for the account of the Banks such additional amount or amounts as is necessary to ensure that the net amount actually received by each Bank will equal the full amount such Bank would have received had no such withholding or deduction been required.     Moreover, if any Taxes are directly asserted against the Agent or any Bank with respect to any payment received by the Agent or such Bank hereunder, the Agent or such Bank may pay such Taxes and the Company will promptly pay such additional amounts (including any penalty, interest or expense) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had such Taxes not been asserted.     If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the respective Banks, the required receipts or other required documentary evidence, the Company shall indemnify the Banks for any incremental Taxes, interest or penalties that may become payable by any Bank as a result of any such failure. Such indemnity shall be payable upon demand by the Agent (which demand shall be accompanied by a statement setting forth 17 -------------------------------------------------------------------------------- the basis for such demand and a calculation of the amount thereof in reasonable detail). For purposes of this Section 7.6, a distribution hereunder by the Agent or any Bank to or for the account of any Bank shall be deemed a payment by the Company.     Each Bank that (a) is organized under the laws of a jurisdiction other than the United States of America and (b)(i) is a party hereto on the Closing Date or (ii) becomes an assignee of an interest under this Agreement under Section 14.9.1 after the Closing Date (unless such Bank was already a Bank hereunder immediately prior to such assignment) shall execute and deliver to the Company and the Agent one or more (as the Company or the Agent may reasonably request) United States Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or documents, appropriately completed, as may be applicable to establish that such Bank is exempt from withholding or deduction of Taxes. The Company shall not be required to pay additional amounts to any Bank pursuant to this Section 7.6 to the extent that the obligation to pay such additional amounts would not have arisen but for the failure of such Bank to comply with this paragraph. SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.          8.1  Increased Costs.       (a) If, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or any Eurodollar Office of such Bank) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency      (i) shall subject any Bank (or any Eurodollar Office of such Bank) to any tax, duty or other charge with respect to its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans, or shall change the basis of taxation of payments to any Bank of the principal of or interest on its Eurodollar Loans or any other amounts due under this Agreement in respect of its Eurodollar Loans or its obligation to make Eurodollar Loans (except for changes in the rate of tax on the overall net income of such Bank or its Eurodollar Office imposed by the jurisdiction in which such Bank's principal executive office or Eurodollar Office is located);     (ii) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB, but excluding any reserve included in the determination of interest rates pursuant to Section 4), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Bank (or any Eurodollar Office of such Bank); or     (iii) shall impose on any Bank (or its Eurodollar Office) any other condition affecting its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans; and the result of any of the foregoing is to increase the cost to (or to impose a cost on) such Bank (or any Eurodollar Office of such Bank) of making or maintaining any Eurodollar Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Eurodollar Office) under this Agreement or under its Note with respect thereto, then upon demand by such Bank (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Company shall pay directly to such Bank such additional amount as will compensate such Bank for such increased cost or such reduction. If any Bank fails to demand such payment within 60 days after it obtains knowledge of such an event, such Bank shall, with respect to compensation payable pursuant to this Section, only be entitled to payment under this Section for 18 -------------------------------------------------------------------------------- costs incurred from and after the date 60 days prior to the date that such Bank makes its demand for payment.     (b) If any Bank shall reasonably determine that any change in, the adoption or phase-in of, any applicable law, rule or regulation regarding capital adequacy, 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 any Bank or any Person controlling such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or such controlling Person's capital as a consequence of such Bank's obligations hereunder or under any Letter of Credit to a level below that which such Bank or such controlling Person could have achieved but for such change, adoption, phase-in or compliance (taking into consideration such Bank's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by such Bank or such controlling Person to be material, then from time to time, upon demand by such Bank (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to the Agent), the Company shall pay to such Bank such additional amount as will compensate such Bank or such controlling Person for such reduction. If any Bank fails to demand such payment within 60 days after it obtains knowledge of such an event, such Bank shall, with respect to compensation payable pursuant to this Section, only be entitled to payment under this Section for costs incurred from and after the date 60 days prior to the date that such Bank makes its demand for payment.     8.2  Basis for Determining Interest Rate Inadequate or Unfair.  If with respect to any Interest Period:     (a) deposits in Dollars (in the applicable amounts) are not being offered to the Agent in the interbank eurodollar market for such Interest Period, or the Agent otherwise reasonably determines (which determination shall be binding and conclusive on the Company) that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable Eurodollar Rate; or     (b) any Bank advises the Agent that the Eurodollar Rate (Reserve Adjusted) as determined by the Agent will not adequately and fairly reflect the cost to such Bank of maintaining or funding Eurodollar Loans for such Interest Period (taking into account any amount to which such Banks may be entitled under Section 8.1) or that the making or funding of Eurodollar Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of such Bank materially affects such Loans; then the Agent shall promptly notify the other parties thereof and, so long as such circumstances shall continue, (i) no affected Bank shall be under any obligation to make or convert into Eurodollar Loans and (ii) on the last day of the current Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in full, automatically convert to a Base Rate Loan.     8.3  Changes in Law Rendering Eurodollar Loans Unlawful.  If any change in, or the adoption of any new, law or regulation, or any change in the interpretation of any applicable law or regulation by any governmental or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Bank cause a substantial question as to whether it is) unlawful for any Bank to make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify each of the other parties hereto and, so long as such circumstances shall continue, (a) such Bank shall have no obligation to make or convert into Eurodollar Loans (but shall make Base Rate Loans concurrently with the making of or conversion into Eurodollar Loans by the Banks which are not so affected, in each case in an amount equal to the amount of Eurodollar Loans which would be made or converted into by such Bank at such time in the absence of such circumstances) and (b) on the last day of the 19 -------------------------------------------------------------------------------- current Interest Period for each Eurodollar Loan of such Bank (or, in any event, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Loan shall, unless then repaid in full, automatically convert to a Base Rate Loan. Each Base Rate Loan made by a Bank which, but for the circumstances described in the foregoing sentence, would be a Eurodollar Loan (an "Affected Loan") shall remain outstanding for the same period as the Group of Eurodollar Loans of which such Affected Loan would be a part absent such circumstances.     8.4  Funding Losses.  The Company hereby agrees that upon demand by any Bank (which demand shall be accompanied by a statement setting forth the basis for the amount being claimed, a copy of which shall be furnished to the Agent), the Company will indemnify such Bank against any net loss or expense which such Bank may sustain or incur (including any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain any Eurodollar Loan), as reasonably determined by such Bank, as a result of (a) any payment, prepayment or conversion of any Eurodollar Loan of such Bank on a date other than the last day of an Interest Period for such Loan (including any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow, convert or continue any Loan on a date specified therefor in a notice of borrowing, conversion or continuation pursuant to this Agreement. For this purpose, all notices to the Agent pursuant to this Agreement shall be deemed to be irrevocable.     8.5  Right of Banks to Fund through Other Offices.  Each Bank may, if it so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign branch or Affiliate of such Bank to make such Loan; provided that in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Bank and the obligation of the Company to repay such Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Loan, for the account of such branch or Affiliate.     8.6  Discretion of Banks as to Manner of Funding.  Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Eurodollar Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period.      8.7  Mitigation of Circumstances; Replacement of Banks.       (a) Each Bank shall promptly notify the Company and the Agent of any event of which it has knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Bank's sole judgment, otherwise disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstances described in Section 8.2 or 8.3 (and, if any Bank has given notice of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Bank shall promptly so notify the Company and the Agent). Without limiting the foregoing, each Bank will designate a different funding office if such designation will avoid (or reduce the cost to the Company of) any event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Bank's sole judgment, be otherwise disadvantageous to such Bank.     (b) If the Company becomes obligated to pay additional amounts to any Bank pursuant to Section 7.6 or 8.1, or any Bank gives notice of the occurrence of any circumstances described in Section 8.2 or 8.3, the Company may designate another bank which is acceptable to the Agent and the Issuing Bank in their reasonable discretion (such other bank being called a "Replacement Bank") to purchase the Loans of such Bank and such Bank's rights hereunder, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the outstanding principal 20 -------------------------------------------------------------------------------- amount of the Loans payable to such Bank plus any accrued but unpaid interest on such Loans and all accrued but unpaid fees owed to such Bank and any other amounts payable to such Bank under this Agreement, and to assume all the obligations of such Bank hereunder, and, upon such purchase and assumption (pursuant to an Assignment Agreement), such Bank shall no longer be a party hereto or have any rights hereunder (other than rights with respect to indemnities and similar rights applicable to such Bank prior to the date of such purchase and assumption) and shall be relieved from all obligations to the Company hereunder, and the Replacement Bank shall succeed to the rights and obligations of such Bank hereunder.     8.8  Conclusiveness of Statements; Survival of Provisions.  Determinations and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Banks may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes, expiration or termination of the Letters of Credit and termination of this Agreement. SECTION 9 WARRANTIES.     To induce the Agent and the Banks to enter into this Agreement and to induce the Banks to make Loans and issue and participate in Letters of Credit hereunder, the Company warrants to the Agent and the Banks that:     9.1  Organization.  The Company is a corporation validly existing and in good standing under the laws of the State of Delaware; each Subsidiary is validly existing and in good standing under the laws of the jurisdiction of its organization; and each of the Company and each Subsidiary is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required, except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect.     9.2  Authorization; No Conflict.  Each of the Company and each other Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, the Company is duly authorized to borrow monies hereunder and each of the Company and each other Loan Party is duly authorized to perform its obligations under each Loan Document to which it is a party. The execution, delivery and performance by the Company of this Agreement and by each of the Company and each other Loan Party of each Loan Document to which it is a party, and the borrowings by the Company hereunder, do not and will not (a) require any consent or approval of any governmental agency or authority (other than any consent or approval which has been obtained and is in full force and effect), (b) conflict with (i) any provision of law, (ii) the charter, by-laws or other organizational documents of the Company or any other Loan Party or (iii) any agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon the Company or any other Loan Party or any of their respective properties or (c) require, or result in, the creation or imposition of any Lien on any asset of the Company, any Subsidiary or any other Loan Party (other than Liens in favor of the Agent created pursuant to the Collateral Documents).     9.3  Validity and Binding Nature.  Each of this Agreement and each other Loan Document to which the Company or any other Loan Party is a party is the legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors' rights generally and to general principles of equity.     9.4  Financial Condition.  The audited consolidated financial statements of the Company and its Subsidiaries as at December 31, 1999 and the unaudited consolidated financial statements of the Company and the Subsidiaries as at March 31, 2000, copies of each of which have been delivered to each Bank, were prepared in accordance with GAAP (subject, in the case of such unaudited 21 -------------------------------------------------------------------------------- statements, to the absence of footnotes and to normal year-end adjustments) and present fairly the consolidated financial condition of the Company and its Subsidiaries as at such dates and the results of their operations for the periods then ended.     9.5  No Material Adverse Change.  Since December 31, 1999 there has been no material adverse change in the financial condition, operations, assets, business, properties or prospects of the Company and its Subsidiaries taken as a whole.     9.6  Litigation and Contingent Liabilities.  No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to the Company's knowledge, threatened against the Company or any Subsidiary which might reasonably be expected to have a Material Adverse Effect, except as set forth in Schedule 9.6. Other than any liability incident to such litigation or proceedings, neither the Company nor any Subsidiary has any material contingent liabilities not listed on Schedule 9.6 or permitted by Section 10.7.     9.7  Ownership of Properties; Liens.  Each of the Company and each Subsidiary owns good and, in the case of real property, marketable title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges and claims (including infringement claims with respect to patents, trademarks, service marks, copyrights and the like) except as permitted by Section  10.8.     9.8  Subsidiaries.  As of the Closing Date, the Company has no Subsidiaries other than those listed on Schedule 9.8.     9.9  Pension Plans.  During the five year period prior to the date of the execution and delivery of this Agreement or the making of any Loan or the issuance of any Letter of Credit, neither the Company nor any member of its Controlled Group has maintained, established, sponsored or contributed to any Pension Plan or Multiemployer Pension Plan.     9.10  Investment Company Act.  Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940.     9.11  Public Utility Holding Company Act.  Neither the Company nor any Subsidiary 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.     9.12  Regulation U.  The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.     9.13  Taxes.  Each of the Company and each Subsidiary has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.     9.14  Solvency, etc.  On the Closing Date, and immediately prior to and after giving effect to the issuance of each Letter of Credit and each borrowing hereunder and the use of the proceeds thereof, (a) each of the Company's and each other Loan Party's assets will exceed its liabilities and (b) each of the Company and each other Loan Party will be solvent, will be able to pay its debts as they mature, will own property with fair saleable value greater than the amount required to pay its debts and will have capital sufficient to carry on its business as then constituted. 22 --------------------------------------------------------------------------------     9.15  Environmental Matters.       (a)  No Violations.  Except as set forth on Schedule 9.15, neither the Company nor any Subsidiary, nor any operator of the Company's or any Subsidiary's properties, is in violation, or alleged violation, of any judgment, decree, order, law, permit, license, rule or regulation pertaining to environmental matters, including those arising under 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 or any other Environmental Law which (i) in any single case, requires expenditures in any three-year period of $100,000.00 or more by the Company and its Subsidiaries in penalties and/or for investigative, removal or remedial actions or (ii) individually or in the aggregate otherwise might reasonably be expected to have a Material Adverse Effect.     (b)  Notices.  Except as set forth on Schedule 9.15 and for matters arising after the Closing Date, in each case none of which could singly or in the aggregate be expected to have a Material Adverse Effect, neither the Company nor any Subsidiary has received notice from any third party, including any Federal, state or local governmental authority: (a) that any one of them has been identified by the U.S. Environmental Protection Agency 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; (b) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any hazardous substance as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic substance, oil or hazardous material or other chemical or substance regulated by any Environmental Law (all of the foregoing, "Hazardous Substances") which any one of them has generated, transported or disposed of has been found at any site at which a Federal, state or local agency or other third party has conducted a remedial investigation, removal or other response action pursuant to any Environmental Law; (c) that the Company or any Subsidiary must conduct a remedial investigation, removal, response action or other activity pursuant to any Environmental Law; or (d) of any Environmental Claim.     (c)  Handling of Hazardous Substances.  Except as set forth on Schedule 9.15, (i) no portion of the real property or other assets of the Company or any Subsidiary has been used for the handling, processing, storage or disposal of Hazardous Substances except in accordance in all material respects with applicable Environmental Laws; and no underground tank or other underground storage receptacle for Hazardous Substances is located on such properties; (ii) in the course of any activities conducted by the Company, any Subsidiary or the operators of any real property of the Company or any Subsidiary, no Hazardous Substances have been generated or are being used on such properties except in accordance in all material respects with applicable Environmental Laws; (iii) there have been no Releases or threatened Releases of Hazardous Substances on, upon, into or from any real property or other assets of the Company or any Subsidiary, which Releases singly or in the aggregate might reasonably be expected to have a material adverse effect on the value of such real property or assets; (iv) there have been no Releases on, upon, from or into any real property in the vicinity of the real property or other assets of the Company or any Subsidiary which, through soil or groundwater contamination, may have come to be located on, and which might reasonably be expected to have a material adverse effect on the value of, the real property or other assets of the Company or any Subsidiary; and (v) any Hazardous Substances generated by the Company and its Subsidiaries have been transported offsite only by properly licensed carriers and delivered only to treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are operating in compliance in all material respects with such permits and applicable Environmental Laws.     9.16  Insurance.  Set forth on Schedule 9.16 is a complete and accurate summary of the property and casualty insurance program of the Company and its Subsidiaries as of the Closing Date (including 23 -------------------------------------------------------------------------------- the names of all insurers, policy numbers, expiration dates, amounts and types of coverage, annual premiums, exclusions, deductibles, self-insured retention, and a description in reasonable detail of any self-insurance program, retrospective rating plan, fronting arrangement or other risk assumption arrangement involving the Company or any Subsidiary).     9.17  Real Property.  Set forth on Schedule 9.17 is a complete and accurate list, as of the Closing Date, of the address of all real property owned or leased by the Company or any Subsidiary, together with, in the case of leased property, the name and mailing address of the lessor of such property.     9.18  Information.  All information heretofore or contemporaneously herewith furnished in writing by the Company or any other Loan Party to the Agent or any Bank for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all written information hereafter furnished by or on behalf of the Company or any Subsidiary to the Agent or any Bank pursuant hereto or in connection herewith 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 in light of the circumstances under which made (it being recognized by the Agent and the Banks that any projections and forecasts provided by the Company are based on good faith estimates and assumptions believed by the Company to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).     9.19  Intellectual Property.  The Company and each Subsidiary owns and possesses or has a license or other right to use all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights and copyrights as are necessary for the conduct of the business of the Company and its Subsidiaries, without any infringement upon rights of others which could reasonably be expected to have a Material Adverse Effect.     9.20  Burdensome Obligations.  Neither the Company nor any Subsidiary is a party to any agreement or contract or subject to any corporate or partnership restriction which might reasonably be expected to have a Material Adverse Effect.     9.21  Labor Matters.  Except as set forth on Schedule 9.21, neither the Company nor any Subsidiary is subject to any labor or collective bargaining agreement. There are no existing or threatened strikes, lockouts or other labor disputes involving the Company or any Subsidiary that singly or in the aggregate could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Company and its Subsidiaries are not in violation of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters.     9.22  No Default.  No Event of Default or Unmatured Event of Default exists or would result from the incurring by the Company of any Debt hereunder or under any other Loan Document. SECTION 10 COVENANTS.     Until the expiration or termination of the Commitments and thereafter until all obligations of the Company hereunder and under the other Loan Documents are paid in full and all Letters of Credit have been terminated, the Company agrees that, unless at any time the Required Banks shall otherwise expressly consent in writing, it will:      10.1  Reports, Certificates and Other Information.  Furnish to the Agent and each Bank:     10.1.1  Annual Report.  Promptly when available and in any event within 90 days after the close of each Fiscal Year: (a) a copy (which may be included in the 10K Reports described below) of the annual audit report of the Company and its Subsidiaries for such Fiscal Year, including 24 -------------------------------------------------------------------------------- therein consolidated balance sheets and statements of earnings and cash flows of the Company and its Subsidiaries as at the end of such Fiscal Year, certified without qualification by PriceWaterhouseCoopers LLP or other independent auditors of recognized standing selected by the Company and reasonably acceptable to the Required Banks, together with (i) a written statement from such accountants to the effect that in making the examination necessary for the signing of such annual audit report by such accountants, nothing came to their attention that caused them to believe that the Company was not in compliance with any provision of Section 10.6, 10.7, 10.9 or 10.10 of this Agreement insofar as such provision relates to accounting matters or, if something has come to their attention that caused them to believe that the Company was not in compliance with any such provision, describing such non-compliance in reasonable detail and (ii) a comparison with the budget for such Fiscal Year and a comparison with the previous Fiscal Year; and (b) consolidating balance sheets of the Company and its Subsidiaries as of the end of such Fiscal Year and a consolidating statement of earnings for the Company and its Subsidiaries for such Fiscal Year, certified by a Designated Person.     10.1.2  Interim Reports.  (a) Promptly when available and in any event within 45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal Year), a copy (which may be included in the 10Q Reports described below) of the consolidated and consolidating balance sheets of the Company and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated and consolidating statements of earnings and cash flows for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for such period of the current Fiscal Year, certified by a Designated Person; and (b) promptly when available and in any event within 30 days after the end of each month (except the last month of each Fiscal Quarter), consolidated and consolidating balance sheets of the Company and its Subsidiaries as of the end of such month, together with consolidated and consolidating statements of earnings and a consolidated statement of cash flows for such month and for the period beginning with the first day of such Fiscal Year and ending on the last day of such month, together with the Company's Financial Summary, certified by a Designated Person.     10.1.3  Compliance Certificates.  Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and each set of quarterly statements pursuant to Section 10.1.2, a duly completed compliance certificate in the form of Exhibit B, with appropriate insertions, dated the date of such annual report or such quarterly statements and signed by a Designated Person, containing (i) a computation of each of the financial ratios and restrictions set forth in Section 10.6 and to the effect that such officer has not become aware of any Event of Default or Unmatured Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it and (ii) a written statement of the Company's management setting forth a discussion of the Company's financial condition, changes in financial condition and results of operations.     10.1.4  Reports to the SEC and to Shareholders.  Promptly upon the filing or sending thereof, copies of all regular, periodic or special reports of the Company or any Subsidiary filed with the SEC including, without limitation, copies of the Company's 10K Report and 10Q Report (or, in either case, any successor report) filed with the SEC; copies of all registration statements of the Company or any Subsidiary filed with the SEC (other than on Form S-8); and copies of all proxy statements or other communications made to security holders generally. 25 --------------------------------------------------------------------------------     10.1.5  Notice of Default, Litigation and ERISA Matters.  Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Company or the Subsidiary affected thereby with respect thereto:     (a) the occurrence of an Event of Default or an Unmatured Event of Default;     (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Company to the Banks which has been instituted or, to the knowledge of the Company, is threatened against the Company or any Subsidiary or to which any of the properties of any thereof is subject which might reasonably be expected to have a Material Adverse Effect;     (c) any cancellation or material change in any insurance maintained by the Company or any Subsidiary; or     (d) any other event (including (i) any violation of any Environmental Law or the assertion of any Environmental Claim or (ii) the enactment or effectiveness of any law, rule or regulation) which might reasonably be expected to have a Material Adverse Effect.     10.1.6  Borrowing Base Certificates.  Within 30 days of the end of each Fiscal Month, a Borrowing Base Certificate dated as of the end of such month and executed by a Designated Person on behalf of the Company; provided that at any time an Event of Default exists, the Agent may require the Company to deliver Borrowing Base Certificates more frequently.     10.1.7  Management Reports.  Promptly upon the request of the Agent or any Bank, copies of all detailed financial and management reports submitted to the Company by independent auditors in connection with each annual or interim audit made by such auditors of the books of the Company.     10.1.8  Projections.  As soon as practicable, and in any event within 30 days prior to the commencement of each Fiscal Year, financial projections for the Company and its Subsidiaries for such Fiscal Year (including an operating budget and a cash flow budget) prepared in a manner consistent with the projections delivered by the Company to the Banks prior to the Closing Date or otherwise in a manner reasonably satisfactory to the Agent, accompanied by a certificate of a Designated Person on behalf of the Company to the effect that (a) such projections were prepared by the Company in good faith, (b) the Company has a reasonable basis for the assumptions contained in such projections and (c) such projections have been prepared in accordance with such assumptions, but subject also to the understanding that such projections are not a guarantee of future performance.     10.1.9  Subordinated Debt Notices.  Intentionally Deleted.     10.1.10  Year 2000 Problem.  Intentionally Deleted.     10.1.11  Patent Schedules.  Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and the set of quarterly financial statements pursuant to Section 10.1.2 coinciding with the end of the second Fiscal Quarter of each of the Company's fiscal years: (a) a schedule signed by a Designated Person describing all of the Company's and its Subsidiaries' United States patents and patent applications; and (b) an amendment to the Notice of Security Interest most recently filed in the United States Patent and Trademark Office conforming such filing to the scheduled patent and publicly available patent applications, each of which shall be in form and substance satisfactory to the Agent and, the Company shall also furnish such schedule and amendment contemporaneously with the furnishing of the set of monthly financial statements pursuant to Section 10.1.2 coinciding with the end of any Fiscal Month if the number of non-scheduled patent applications are ten (10) or more. The Agent and each Bank agree that, except as may be required by applicable law or regulation, or by reason of subpoena 26 -------------------------------------------------------------------------------- after providing notice thereof and an opportunity to contest unless such notice is prohibited by the terms of the subpoena or applicable law, court order or government action or as may be necessary or convenient for the enforcement of the Agent's and the Banks' rights and remedies under the Loan Documents or applicable law after the occurrence and during the continuance of any Event of Default, neither the Agent nor such Bank will divulge, publish or otherwise reveal, either directly or through another, to any Person (other than to an Assignee or a Participant or a prospective Assignee or Participant) any of the scheduled non-publicly available patent applications which the Company has identified in writing as being confidential; provided, however, that no such information shall be confidential when it: (x) was known to the public prior to the date of its disclosure to the Agent and the Banks; (y) becomes known to the public subsequent to the date of its disclosure by the Company through no act of the Agent or any Bank, or (z) becomes known to the Agent or any Bank on a non-confidential basis from a source other than the Company.     10.1.12  Other Information.  Promptly from time to time, such other information concerning the Company and its Subsidiaries as any Bank or the Agent may reasonably request.     10.2  Books, Records and Inspections.  Keep, and cause each Subsidiary to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each Subsidiary to permit, any Bank or the Agent or any representative thereof to inspect the properties and operations of the Company or such Subsidiary; and permit, and cause each Subsidiary to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), any Bank or the Agent or any representative thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and the Company hereby authorizes such independent auditors to discuss such financial matters with any Bank or the Agent or any representative thereof), and to examine (and, at the expense of the Company or the applicable Subsidiary, photocopy extracts from) any of its books or other records; and permit, and cause each Subsidiary to permit, the Agent and its representatives to inspect the Inventory and other tangible assets of the Company or such Subsidiary, to perform appraisals of the equipment of the Company or such Subsidiary, and to inspect, audit, check and make copies of and extracts from the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts Receivable and any other collateral. All such inspections or audits by the Agent shall be at the Company's expense, provided that so long as no Event of Default or Unmatured Event of Default exists, the Company shall not be required to reimburse the Agent for appraisals more frequently than twice each calendar year or for more than $10,000.00 per calendar year, with the pre-Closing Date inspection not counting against such limit for the current calender year.     10.3  Maintenance of Property; Insurance.       (a) Keep, and cause each Subsidiary to keep, all property useful and necessary in the business of the Company or such Subsidiary in good working order and condition, ordinary wear and tear excepted.     (b) Maintain, and cause each Subsidiary to maintain, with responsible insurance companies, such insurance as may be required by any law or governmental regulation or court decree or order applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated, but which shall insure against all risks and liabilities of the type identified on Schedule 9.16 and shall have insured amounts no less than, and deductibles no higher than, those set forth on such schedule; and, upon request of the Agent or any Bank, furnish to the Agent or such Bank a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Company and its Subsidiaries. The Company shall cause each issuer of an insurance policy to provide the Agent with an endorsement (i) showing loss payable to the Agent with respect to each policy of property or casualty insurance 27 -------------------------------------------------------------------------------- and naming the Agent and each Bank as an additional insured with respect to each policy of insurance for liability for personal injury or property damage, (ii) providing that 30 days' notice will be given to the Agent prior to any cancellation of, material reduction or change in coverage provided by or other material modification to such policy and (iii) reasonably acceptable in all other respects to the Agent.     (c) UNLESS THE COMPANY PROVIDES THE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE AT THE COMPANY'S EXPENSE TO PROTECT THE AGENT'S AND THE BANKS' INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE COMPANY'S INTERESTS. THE COVERAGE THAT THE AGENT PURCHASES MAY NOT PAY ANY CLAIM THAT IS MADE AGAINST THE COMPANY IN CONNECTION WITH THE COLLATERAL. THE COMPANY MAY LATER CANCEL ANY INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH EVIDENCE THAT THE COMPANY HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE COMPANY WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT MAY BE IMPOSED WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE PRINCIPAL AMOUNT OF THE LOANS OWING HEREUNDER. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF THE INSURANCE THE COMPANY MAY BE ABLE TO OBTAIN ON ITS OWN.     10.4  Compliance with Laws; Payment of Taxes and Liabilities.  (a) Comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply could not reasonably be expected to have a Material Adverse Effect; and (b) pay, and cause each Subsidiary to pay, prior to delinquency, all taxes and other governmental charges against it or any of its property, as well as claims of any kind which, if unpaid, might become a Lien on any of its property; provided that the foregoing shall not require the Company or any Subsidiary to pay any such tax or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings, shall set aside on its books adequate reserves with respect thereto in accordance with GAAP, the Company's or its Subsidiary's title to its property is not materially adversely affected or its use of such property in the ordinary course of its business is not materially interfered with; provided further that, in all events, the Company or its Subsidiary shall pay or cause to be paid all such taxes, assessments, charges or levies forthwith upon the commencement of foreclosure of any lien which may have attached as security therefor     10.5  Maintenance of Existence, etc.  Maintain and preserve, and (subject to Section 10.11) cause each Subsidiary to maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing does not have a Material Adverse Effect).     10.6  Financial Covenants.       10.6.1  Interest Coverage Ratio.  Not permit the Interest Coverage Ratio for any Computation Period to be less than 4.00 to 1.0. 28 --------------------------------------------------------------------------------     10.6.2  Total Debt to EBITDA Ratio.  Not permit the Total Debt to EBITDA Ratio as of the last day of any Computation Period to exceed the applicable ratio set forth below for such Computation Period: Computation Period Ending --------------------------------------------------------------------------------   Total Debt to EBITDA Ratio -------------------------------------------------------------------------------- September 30, 2000 and December 31, 2000   2.50 to 1.00 March 31, 2001 and June 30, 2001   2.25 to 1.00 At any time thereafter   2.00 to 1.00.     10.6.3  Capital Expenditures.  Not permit the aggregate amount of all Capital Expenditures made by the Company and its Subsidiaries to exceed: (a) $3,500,000.00 in the Company's Fiscal Year 2000; (b) $4,000,000.00 in the Company's Fiscal Year 2001; (c) $4,500,000.00 in the Company's Fiscal Year 2002; or (d) $5,500,000.00 in the Company's Fiscal Year 2003.     10.7  Limitations on Debt.  Not, and not permit any Subsidiary to, create, incur, assume or suffer to exist any Debt, except:     (a) obligations under this Agreement and the other Loan Documents;     (b) Debt secured by Liens permitted by Section 10.8(d), and extensions, renewals and refinancings thereof; provided that the aggregate amount of all such Debt at any time outstanding shall not exceed $3,000,000.00;     (c) Debt of Subsidiaries to the Company;     (d) unsecured Debt of the Company to Subsidiaries;     (e) Subordinated Debt;     (f)  Hedging Obligations incurred for bona fide hedging purposes and not for speculation;     (g) Debt described on Schedule 10.7 and any extension, renewal or refinancing thereof so long as the principal amount thereof is not increased; and     (h) the Debt to be Repaid (so long as such Debt is repaid on the Closing Date with the proceeds of the initial Loans hereunder).     10.8  Liens.  Not, and not permit any Subsidiary to, create or permit to exist any Lien on any of its real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter acquired), except:     (a) Liens for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves;     (b) Liens arising in the ordinary course of business (such as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens incurred in connection with worker's compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations) for sums not overdue or being contested in good faith by appropriate proceedings and not involving any deposits or advances or borrowed money or the deferred purchase price of property or services and, in each case, for which it maintains adequate reserves;     (c) Liens described on Schedule 10.8;     (d) subject to the limitation set forth in Section 10.7(b), (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased), (ii) Liens existing on property at 29 -------------------------------------------------------------------------------- the time of the acquisition thereof by the Company or any Subsidiary (and not created in contemplation of such acquisition) and (iii) Liens that constitute purchase money security interests on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such Lien attaches to such property within 60 days of the acquisition thereof and attaches solely to the property so acquired;     (e) attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding $250,000.00 arising in connection with court proceedings, provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings;     (f)  easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens not interfering in any material respect with the ordinary conduct of the business of the Company or any Subsidiary; and     (g) Liens arising under the Loan Documents.     10.9  Operating Leases.  Not permit the aggregate amount of all rental payments under Operating Leases made (or scheduled to be made) by the Company and its Subsidiaries (on a consolidated basis) to exceed $2,000,000.00 in any Fiscal Year.     10.10  Restricted Payments.  Not, and not permit any Subsidiary to, (a) make any distribution to any of its shareholders, (b) purchase or redeem any of its capital stock or other equity interests or any warrants, options or other rights in respect thereof, (c) pay any management fees or similar fees to any of its shareholders or any Affiliate thereof, (d) make any redemption, prepayment, defeasance or repurchase of any Subordinated Debt or (e) set aside funds for any of the foregoing. Notwithstanding the foregoing, any Subsidiary may pay dividends or make other distributions to the Company or to a Wholly-Owned Subsidiary.     10.11  Mergers, Consolidations, Sales.  Not, and not permit any Subsidiary to, be a party to any merger or consolidation, or purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or, except in the ordinary course of its business, sell, transfer, convey or lease all or any substantial part of its assets, or sell or assign with or without recourse any receivables, except for (a) any such merger, consolidation, sale, transfer, conveyance, lease or assignment of or by any Wholly-Owned Subsidiary into the Company or into, with or to any other Wholly-Owned Subsidiary; (b) any such purchase or other acquisition by the Company or any Wholly-Owned Subsidiary of the assets or stock of any Wholly-Owned Subsidiary; and (c) sales and dispositions of assets (including the stock of Subsidiaries) for at least fair market value (as determined by the Board of Directors of the Company) so long as the net book value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed 10% of the net book value of the consolidated assets of the Company and its Subsidiaries as of the last day of the preceding Fiscal Year.     10.12  Modification of Organizational Documents.  Not permit the Certificate or Articles of Incorporation, By-Laws or other organizational documents of the Company or any Subsidiary to be amended or modified in any way which might reasonably be expected to materially adversely affect the interests of the Banks.     10.13  Use of Proceeds.  Use the proceeds of the Loans, and the Letters of Credit, solely to refinance existing Debt and for working capital and other general corporate purposes; and not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying" any Margin Stock. 30 --------------------------------------------------------------------------------     10.14  Further Assurances.       (a) Take, and cause each Subsidiary to take, such actions as are necessary or as the Agent or the Required Banks may reasonably request from time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, mortgages, deeds of trust, financing statements and other documents, the filing or recording of any of the foregoing, and the delivery of stock certificates and other collateral with respect to which perfection is obtained by possession) to ensure that (i) the obligations of the Company hereunder and under the other Loan Documents (A) are secured by substantially all of the assets of the Company and (B) guaranteed by all of its Subsidiaries (including, promptly upon the acquisition or creation thereof, any Subsidiary acquired or created after the date hereof) by execution of a counterpart of the Guaranty and (ii) the obligations of each Subsidiary under the Guaranty are secured by substantially all of the assets of such Subsidiary.     (b) By no later than 90 days after the Closing Date, enter into cash management agreements that are satisfactory to the Agent, in its sole discretion, and by no later than 30 days after the Closing Date, cause each financial institution (other than the Agent) at which the Company or any Subsidiary maintains any lockbox, deposit account or other similar account as of the Closing Date to deliver to the Agent a writing, in form and substance satisfactory to the Agent, (i) acknowledging and consenting to the security interest of the Agent in such lockbox or account and all cash, checks, drafts and other instruments or writings for the payment of money from time to time therein, (ii) confirming such financial institution's agreement to follow the instructions of the Agent with respect to all such cash, checks, drafts and other instruments or writings for the payment of money following receipt from the Agent of notice of the occurrence of any Event of Default or Unmatured Event of Default and (iii) waiving all rights of setoff and banker's lien on all items held in any such lockbox or account (other than with respect to payment of fees and expenses for account services).     (c) By no later than 30 days after the Closing Date, cause each landlord or lessor of any of the Company's or any of Subsidiaries' business locations described on Schedule 9.17 to execute and deliver to the Agent a landlord waiver in form and substance satisfactory to the Agent, in its sole discretion.     10.15  Transactions with Affiliates.  Not, and not permit any Subsidiary to, enter into, or cause, suffer or permit to exist any transaction, arrangement or contract with any of its other Affiliates (other than the Company and its Subsidiaries) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates; provided that this Section shall not restrict the payment or grant of the following in the ordinary course of business approved by the Company's board of directors or shareholders: (a) directors' fees; (b) indemnity payments to directors, officers or employees; (c) payments pursuant to employment agreements; or (d) grants of options or other equity arrangements with directors, officers or employees but any repurchases thereof or other payments thereon are subject to Section 10.10.     10.16  Employee Benefit Plans.  Not, and not permit any member of the Controlled Group, to maintain, establish, sponsor or contribute to any Pension Plan or any Multiemployer Pension Plan.     10.17  Environmental Matters.       (a) If any Release or Disposal of Hazardous Substances shall occur or shall have occurred on any real property or any other assets of the Company or any Subsidiary, the Company shall, or shall cause the applicable Subsidiary to, cause the prompt containment and removal of such Hazardous Substances and the remediation of such real property or other assets as necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets. Without limiting the generality of the foregoing, the Company shall, and shall cause each 31 -------------------------------------------------------------------------------- Subsidiary to, comply with any valid Federal or state judicial or administrative order requiring the performance at any real property of the Company or any Subsidiary of activities in response to the Release or threatened Release of a Hazardous Substance.     (b) To the extent that the transportation of "hazardous waste" as defined by RCRA is permitted by this Agreement, the Company shall, and shall cause its Subsidiaries to, dispose of such hazardous waste only at licensed disposal facilities operating in compliance with Environmental Laws.     10.18  Unconditional Purchase Obligations.  Not, and not permit any Subsidiary to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services if such contract requires that payment be made by it regardless of whether delivery is ever made of such materials, supplies or other property or services; provided that the foregoing does not prohibit the payment of any reasonable termination fees pursuant to any vendor contract entered into in the ordinary course of business.     10.19  Inconsistent Agreements.  Not, and not permit any Subsidiary to, enter into any agreement containing any provision which would (a) be violated or breached by any borrowing by the Company hereunder or by the performance by the Company or any Subsidiary of any of its obligations hereunder or under any other Loan Document, (b) prohibit the Company or any Subsidiary from granting to the Agent, for the benefit of the Banks, a Lien on any of its assets or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to the Company or any other applicable Subsidiary, or pay any Debt owed to the Company or any other Subsidiary, (ii) make loans or advances to the Company or (iii) transfer any of its assets or properties to the Company.     10.20  Business Activities.  Not, and not permit any Subsidiary to, engage in any material line of business other than the businesses engaged in on the date hereof and businesses reasonably related thereto.     10.21  Investments.  Not, and not permit any Subsidiary to, make or permit to exist any Investment in any other Person, except (without duplication) the following:     (a) contributions by the Company to the capital of any of its Subsidiaries, or by any such Subsidiary to the capital of any of its Subsidiaries;     (b) in the ordinary course of business, Investments by the Company in any Subsidiary or by any Subsidiary in the Company, by way of intercompany loans, advances or guaranties, all to the extent permitted by Section 10.7;     (c) Suretyship Liabilities permitted by Section 10.7;     (d) Cash Equivalent Investments;     (e) bank deposits in the ordinary course of business, provided that the aggregate amount of all such deposits (excluding amounts in payroll accounts or for accounts payable, in each case to the extent that checks have been issued to third parties) which are maintained with any bank other than a Bank shall not at any time exceed $100,000.00;     (f)  Investments in securities of account debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors; and     (h) Investments listed on Schedule 10.21; provided that (x) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if 32 -------------------------------------------------------------------------------- made thereafter would not comply with such requirements; (y) no Investment otherwise permitted by clause (b), or (c), shall be permitted to be made if, immediately before or after giving effect thereto, any Event of Default or Unmatured Event of Default exists; and (z) all Cash Equivalent Investments shall be held in accounts only in accordance with the cash management agreements described in Section 10.14(b) or, until such agreements have been entered into, in accounts subject to a control agreement satisfactory to the Agent, in its sole discretion.     10.22  Restriction of Amendments to Certain Documents.  Intentionally Deleted.     10.23  Fiscal Year.  Not change its Fiscal Year.     10.24  Cancellation of Debt.  Not, and not permit any Subsidiary to, cancel any claim or debt owing to it, except for reasonable consideration or in the ordinary course of business, and except for the cancellation of debts or claims not to exceed $10,000.00 in any Fiscal Year.     10.25  Foreign Operations.  Not, and not permit any Subsidiary to, maintain any tangible Collateral outside the United States of America in excess of $500,000.00 in the aggregate for all such tangible Collateral. SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.     The obligation of each Bank to make its Loans and of the Issuing Bank to issue Letters of Credit is subject to the following conditions precedent:     11.1  Initial Credit Extension.  The obligation of the Banks to make the initial Loans and the obligation of the Issuing Bank to issue its initial Letter of Credit (whichever first occurs) is, in addition to the conditions precedent specified in Section 11.2, subject to the conditions precedent that all Debt to be Repaid has been (or concurrently with the initial borrowing will be) paid in full, and that all agreements and instruments governing the Debt to be Repaid and that all Liens securing such Debt to be Repaid have been (or concurrently with the initial borrowing will be) terminated; and (b) all of the following, each duly executed and dated the Closing Date (or such earlier date as shall be satisfactory to the Agent), in form and substance satisfactory to the Agent (and the date on which all such conditions precedent have been satisfied or waived in writing by the Agent and the Banks is called the "Closing Date"):     11.1.1  Notes.  The Notes.     11.1.2  Resolutions.  Certified copies of resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance by the Company of this Agreement, the Notes and the other Loan Documents to which the Company is a party; and certified copies of resolutions of the Board of Directors of each other Loan Party authorizing the execution, delivery and performance by such Loan Party of each Loan Document to which such entity is a party.     11.1.3  Consents, etc.  Certified copies of all documents evidencing any necessary corporate or partnership action, consents and governmental approvals (if any) required for the execution, delivery and performance by the Company and each other Loan Party of the documents referred to in this Section  11.     11.1.4  Incumbency and Signature Certificates.  A certificate of the Secretary or an Assistant Secretary (or other appropriate representative) of each Loan Party certifying the names of the officer or officers of such entity authorized to sign the Loan Documents to which such entity is a party, together with a sample of the true signature of each such officer (it being understood that the Agent and each Bank may conclusively rely on each such certificate until formally advised by a like certificate of any changes therein). 33 --------------------------------------------------------------------------------     11.1.5  Guaranty.  Intentionally Deleted.     11.1.6  Security Agreement.  A counterpart of the Security Agreement executed by the Company and each Subsidiary.     11.1.7  Pledge Agreements.  Intentionally Deleted.     11.1.8  Opinions of Counsel.  The opinion of Oppenheimer Wolff & Donnelly LLP, counsel to the Company and the other Loan Parties substantially in the form of Exhibit F.     11.1.9  Insurance.  Evidence satisfactory to the Agent of the existence of insurance required to be maintained pursuant to Section 10.3(b), together with evidence that the Agent has been named as a lender's loss payee and an additional insured on all related insurance policies and an assignment of business interruption insurance.     11.1.10  Copies of Documents.  Intentionally Deleted.     11.1.11  Payment of Fees.  Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with all Attorney Costs of the Agent to the extent invoiced prior to the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney Costs incurred or to be incurred by the Agent through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Agent); provided further that the Agent and the Banks agree that the Company's liability to reimburse the Agent and the Banks for their attorneys' fees and legal expenses incurred in connection with the preparation of this Agreement and the other Loan Documents shall be limited to the Agent's special counsel, Fabyanske, Westra & Hart, P.A., and then to the sum of $15,000.00 plus out-of-pocket expenses.     11.1.12  Solvency Certificate.  A Solvency Certificate, substantially in the form of Exhibit G, executed by a Designated Person.     11.1.13  Search Results; Lien Terminations.  Certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements which name the Company and each Subsidiary (under their present names and any previous names) as debtors and which are filed in the jurisdictions in which filings are to be made pursuant to the Collateral Documents, together with (i) copies of such financing statements, (ii) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person in any collateral described in the Collateral Documents previously granted by any Person (other than Liens permitted by Section 10.8) and (iii) such other Uniform Commercial Code Form UCC-3 termination statements as the Agent may reasonably request.     11.1.14  Filings, Registrations and Recordings.  The Agent shall have received each document (including Uniform Commercial Code financing statements) required by the Collateral Documents or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create in favor of the Agent, for the benefit of the Banks, a perfected Lien on the collateral described therein, prior and superior to any other Person, in proper form for filing, registration or recording.     11.1.15  Closing Certificate.  A certificate signed by a Designated Person of the Company dated as of the Closing Date, affirming the matters set for in Section 11.2.1 as of the Closing Date.     11.1.16  Borrowing Base Certificate.  A Borrowing Base Certificate dated as of the Closing Date. 34 --------------------------------------------------------------------------------     11.1.17  Master Letter of Credit Agreement.  The Master Letter of Credit Agreement.     11.1.18  Other.  Such other documents as the Agent or any Bank may reasonably request.     11.2  Conditions.  The obligation (a) of each Bank to make each Loan and (b) of the Issuing Bank to issue each Letter of Credit is subject to the following further conditions precedent that:     11.2.1  Compliance with Warranties, No Default, etc.  Both before and after giving effect to any borrowing and the issuance of any Letter of Credit, the following statements shall be true and correct:     (a) the representations and warranties of the Company and each Subsidiary set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects with the same effect as if then made (except to the extent stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); and     (b) no Event of Default, Unmatured Event of Default or Material Adverse Effect shall have then occurred and be continuing.     11.2.2  Confirmatory Certificate.  If requested by the Agent or any Bank, the Agent shall have received (in sufficient counterparts to provide one to each Bank) a certificate dated the date of such requested Loan or Letter of Credit and signed by a duly authorized representative of the Company as to the matters set out in Section 11.2.1 (it being understood that each request by the Company for the making of a Loan or the issuance of a Letter of Credit shall be deemed to constitute a warranty by the Company that the conditions precedent set forth in Section 11.2.1 will be satisfied at the time of the making of such Loan or the issuance of such Letter of Credit), together with such other documents as the Agent or any Bank may reasonably request in support thereof. SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.     12.1  Events of Default.  Each of the following shall constitute an Event of Default under this Agreement:     12.1.1  Non-Payment of the Loans, etc.  Default in the payment when due of the principal of any Loan, or default, and continuance thereof for five days, in the payment when due of any interest, fee, reimbursement obligation with respect to any Letter of Credit or other amount payable by the Company hereunder or under any other Loan Document.     12.1.2  Non-Payment of Other Debt.  Any default shall occur under the terms applicable to any Debt of the Company or any Subsidiary in an aggregate amount (for all such Debt so affected) exceeding $500,000.00 and such default shall (a) consist of the failure to pay such Debt when due, whether by acceleration or otherwise, (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable (or require the Company or any Subsidiary to purchase or redeem such Debt) prior to its expressed maturity; or (c) continue for more than the period of grace, if any, applicable thereto and shall have the effect of causing, or permitting (any required notice having been given and grace period having expired) the holder of any such Debt or any trustee or other Person acting on behalf of such holder to cause such Debt to become due prior to its stated maturity or to realize upon any collateral given as security therefor.     12.1.3  Other Material Obligations.  Default in the payment when due, or in the performance or observance of, any material obligation of, or condition agreed to by, the Company 35 -------------------------------------------------------------------------------- or any Subsidiary with respect to any material purchase or lease of goods or services where such default, singly or in the aggregate with all other such defaults, might reasonably be expected to have a Material Adverse Effect.     12.1.4  Bankruptcy, Insolvency, etc.  The Company or any Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Company or any Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for the Company or such Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of the Company or any Subsidiary, and if such case or proceeding is not commenced by the Company or such Subsidiary, it is consented to or acquiesced in by the Company or such Subsidiary, or remains for 60 days undismissed; or the Company or any Subsidiary takes any action to authorize, or in furtherance of, any of the foregoing.     12.1.5  Non-Compliance with Loan Documents.  (a) Failure by the Company to comply with or to perform any covenant set forth in Sections 10.1.5(a), or 10.5 through 10.22; or (b) failure by the Company to comply with or to perform any other provision of this Agreement or any other Loan Document (and not constituting an Event of Default under any other provision of this Section 12) and continuance of such failure described in this clause (b) for 30 days.     12.1.6  Warranties.  Any warranty made by the Company or any Subsidiary herein or any other Loan Document is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by the Company or any Subsidiary to the Agent or any Bank in connection herewith is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.     12.1.7  Pension Plans.  Intentionally Deleted.     12.1.8  Judgments.  Final judgments which exceed an aggregate of $1,000,000.00 shall be rendered against the Company or any Subsidiary and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal within 30 days after entry or filing of such judgments.     12.1.9  Invalidity of Guaranty, etc.  Any Guaranty shall cease to be in full force and effect with respect to either of any Subsidiary; or any Subsidiary (or any Person by, through or on behalf of such Subsidiary) shall contest in any manner the validity, binding nature or enforceability of the Guaranty with respect to such Subsidiary.     12.1.10  Invalidity of Collateral Documents, etc.  Any Collateral Document shall cease to be in full force and effect; or the Company or any Subsidiary (or any Person by, through or on behalf of the Company or any Subsidiary) shall contest in any manner the validity, binding nature or enforceability of any Collateral Document.     12.1.11  Invalidity of Subordination Provisions, etc.  Any subordination provision in any document or instrument governing Subordinated Debt, or any subordination provision in any guaranty by any Subsidiary of any Subordinated Debt, shall cease to be in full force and effect, or the Company or any other Person (including the holder of any applicable Subordinated Debt) shall contest in any manner the validity, binding nature or enforceability of any such provision.     12.1.12  Change of Control.  (a) Any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, but excluding any Specified Person (as 36 -------------------------------------------------------------------------------- defined below)) shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under such Act) of more than 20% (or, if greater, the percentage owned by the Specified Persons of the outstanding securities (on a fully diluted basis and taking into account any securities or contract rights exercisable, exchangeable or convertible into equity securities) of the Company having voting rights in the election of directors under normal circumstances; or (b) a majority of the members of the Board of Directors of the Company shall cease to be Continuing Members. For purposes of the foregoing, "Continuing Member" means a member of the Board of Directors of the Company who either (i) was a member of the Company's Board of Directors on the day before the Closing Date and has been such continuously thereafter or (ii) became a member of such Board of Directors after the day before the Closing Date and whose election or nomination for election was approved by a vote of the majority of the Continuing Members then members of the Company's Board of Directors; and "Specified Person" means TA Associates, St. Paul Venture Capital and/or Robert P.Cummins and trustees of trusts created by Robert P. Cummins for the benefit or himself and his heirs.     12.2  Effect of Event of Default.  If any Event of Default described in Section 12.1.4 shall occur, the Commitments (if they have not theretofore terminated) shall immediately terminate and the Loans and all other obligations hereunder shall become immediately due and payable and the Company shall become immediately obligated to Cash Collateralize all Letters of Credit, all without presentment, demand, protest or notice of any kind; and, if any other Event of Default shall occur and be continuing, the Agent (upon written request of the Required Banks) shall declare the Commitments (if they have not theretofore terminated) to be terminated and/or declare all Loans and all other obligations hereunder to be due and payable and/or demand that the Company immediately Cash Collateralize all Letters of Credit, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and/or all Loans and all other obligations hereunder shall become immediately due and payable and/or the Company shall immediately become obligated to Cash Collateralize all Letters of Credit, all without presentment, demand, protest or notice of any kind. The Agent shall promptly advise the Company of any such declaration, but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 12.1.1 or Section 12.1.4 may be waived by the written concurrence of all of the Banks, and the effect as an Event of Default of any other event described in this Section 12 may be waived by the written concurrence of the Required Banks. Any cash collateral delivered hereunder shall be held by the Agent (without liability for interest thereon) and applied to obligations arising in connection with any drawing under a Letter of Credit. After the expiration or termination of all Letters of Credit, such cash collateral shall be applied by the Agent to any remaining obligations hereunder and any excess shall be delivered to the Company or as a court of competent jurisdiction may elect. SECTION 13 THE AGENT.     13.1  Appointment and Authorization.       (a) Each Bank hereby irrevocably (subject to Section 13.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 37 --------------------------------------------------------------------------------     (b) The Issuing Bank shall act on behalf of the Banks with respect to any Letters of Credit issued by it and the documents associated therewith. The Issuing Bank shall have all of the benefits and immunities (i) provided to the Agent in this Section 13 with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term "Agent", as used in this Section 13, included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank.     13.2  Delegation of Duties.  The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.     13.3  Liability of Agent.  None of the Agent nor any of its directors, officers, employees or agents shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates.     13.4  Reliance by Agent.  The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate and, if it so requests, confirmation from the Banks of their obligation to indemnify the Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks.     13.5  Notice of Default.  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Banks, unless the Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a "notice of default". The Agent will notify the Banks of its receipt of any such notice. The Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Banks in accordance with Section 12; provided that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such 38 -------------------------------------------------------------------------------- action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Banks.     13.6  Credit Decision.  Each Bank acknowledges that the Agent has not made any representation or warranty to it, and that no act by the Agent hereafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon the Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Company which may come into the possession of the Agent.     13.7  Indemnification.  Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent and its directors, officers, employees and agents (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities; provided that no Bank shall be liable for any payment to any such Person of any portion of the Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive repayment of the Loans, cancellation of the Notes, expiration or termination of the Letters of Credit, any foreclosure under, or modification, release or discharge of, any or all of the Collateral Documents, termination of this Agreement and the resignation or replacement of the Agent.     13.8  Agent in Individual Capacity.  LaSalle and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though LaSalle were not the Agent or the Issuing Bank hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, LaSalle or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Affiliate) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to their Loans (if any), LaSalle and its Affiliates shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though LaSalle were not the Agent and the Issuing Bank, and the terms "Bank" and "Banks" include LaSalle and its Affiliates, to the extent applicable, in their individual capacities.     13.9  Successor Agent.  The Agent may resign as Agent upon 30 days' notice to the Banks. If the Agent resigns under this Agreement, the Required Banks shall, with (so long as no Event of Default 39 -------------------------------------------------------------------------------- exists) the consent of the Company (which shall not be unreasonably withheld or delayed), appoint from among the Banks a successor agent for the Banks. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent, and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 13 and Sections 14.6 and 14.13 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Banks appoint a successor agent as provided for above.     13.10  Collateral Matters.  The Banks irrevocably authorize the Agent, at its option and in its discretion, (a) to release any Lien granted to or held by the Agent under any Collateral Document (i) upon termination of the Commitments and payment in full of all Loans and all other obligations of the Company hereunder and the expiration or termination of all Letters of Credit; (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; or (iii) subject to Section 14.1, if approved, authorized or ratified in writing by the Required Banks; or (b) to subordinate its interest in any collateral to any holder of a Lien on such collateral which is permitted by clause (d)(i) or (d)(iii) of Section 10.8 (it being understood that the Agent may conclusively rely on a certificate from the Company in determining whether the Debt secured by any such Lien is permitted by Section 10.7(b)). Upon request by the Agent at any time, the Banks will confirm in writing the Agent's authority to release, or subordinate its interest in, particular types or items of collateral pursuant to this Section 13.10. SECTION 14 GENERAL.     14.1  Waiver; Amendments.  No delay on the part of the Agent or any Bank in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by Banks having an aggregate Pro Rata Share of not less than the aggregate Pro Rata Share expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Banks, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall change the Pro Rata Share of any Bank without the consent of such Bank. No amendment, modification, waiver or consent shall (a) increase the Revolving Commitment Amount, (b) extend the date for payment of any principal of or interest on the Loans or any fees payable hereunder, (c) reduce the principal amount of any Loan, the rate of interest thereon or any fees payable hereunder, (d) release the Guaranty or all or any substantial part of the collateral granted under the Collateral Documents, (e) reduce the aggregate Pro Rata Share required to effect an amendment, modification, waiver or consent, (f) affect the definition of "Borrowing Base" or any of its constituent parts in any manner which increases the amount available to the Borrower, or (g) affect Section 12, without, in each case, the consent of all Banks. No provision of Section 13 or other provision of this Agreement affecting the Agent in its capacity as such shall be amended, modified or waived without the consent of the Agent. No provision of this Agreement relating to the rights or duties of the Issuing Bank in its capacity as 40 -------------------------------------------------------------------------------- such shall be amended, modified or waived without the consent of the Issuing Bank. No Bank's Commitment shall be increased without such Bank's prior written consent.     14.2  Confirmations.  The Company and each holder of a Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to the Agent) the aggregate unpaid principal amount of the Loans then outstanding under such Note.     14.3  Notices.  Except as otherwise provided in Sections 2.2.2 and 2.2.3, all notices hereunder shall be in writing (including facsimile transmission) and shall be sent to the applicable party at its address shown on Schedule 14.3 or at such other address as such party may, by written notice received by the other parties, have designated as its address for such purpose. Notices sent by facsimile transmission shall be deemed to have been given when sent; notices sent by mail shall be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed to have been given when received. For purposes of Sections 2.2.2 and 2.2.3, the Agent shall be entitled to rely on telephonic instructions from any person that the Agent in good faith believes is an authorized officer or authorized employee of the Company, and the Company shall hold the Agent and each other Bank harmless from any loss, cost or expense resulting from any such reliance.     14.4  Computations.  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 purpose of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with GAAP, consistently applied; provided that if the Company notifies the Agent that the Company wishes to amend any covenant in Section 10 to eliminate or to take into account the effect of any change in GAAP on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Section 10 for such purpose), then the Company's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks.     14.5  Regulation U.  Each Bank represents that it in good faith is not relying, either directly or indirectly, upon any Margin Stock as collateral security for the extension or maintenance by it of any credit provided for in this Agreement.     14.6  Costs, Expenses and Taxes.  The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agent (including Attorney Costs) in connection with the preparation, execution, syndication, delivery and administration of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including any amendment, supplement or waiver to any Loan Document), and all reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred by the Agent and each Bank after an Event of Default in connection with the enforcement of this Agreement, the other Loan Documents or any such other documents; provided that the Company's liability for the Attorney Costs with respect to the preparation, execution, syndication, and delivery of this Agreement and the other Loan Documents is limited by Section 11.1.11. In addition, the Company agrees to pay, and to save the Agent and the Banks harmless from all liability for, (a) any stamp or other taxes (excluding income taxes and franchise taxes based on net income) which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other Loan Document or any other document provided for herein or delivered or to be delivered hereunder or in connection herewith and (b) any fees of the Company's auditors in connection with any reasonable exercise by the Agent and the Banks of their rights pursuant to Section 10.2. All obligations provided for in this Section 14.6 shall survive repayment of the 41 -------------------------------------------------------------------------------- Loans, cancellation of the Notes, expiration or termination of the Letters of Credit and termination of this Agreement.     14.7  Subsidiary References.  The provisions of this Agreement relating to Subsidiaries shall apply only during such times as the Company has one or more Subsidiaries.     14.8  Captions.  Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement.     14.9  Assignments; Participations.       14.9.1  Assignments.  Any Bank may, with the prior written consents of the Issuing Bank and the Agent and (so long as no Event of Default exists) the Company (which consents shall not be unreasonably delayed or withheld and, in any event, shall not be required for an assignment by a Bank to one of its Affiliates), at any time assign and delegate to one or more commercial banks or other Persons (any Person to whom such an assignment and delegation is to be made being herein called an "Assignee") all or any fraction of such Bank's Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Bank's Loans and Commitment) in a minimum aggregate amount equal to the lesser of (a) the amount of the assigning Bank's Pro Rata Share of the Revolving Commitment Amount and (b) $5,000,000.00; provided that (x) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Section 7.6 or Section 8 to the Assignee than the Company is then obligated to pay to the assigning Bank under such Sections (and if any assignment is made in violation of the foregoing, the Company will not be required to pay the incremental amounts) and (y) the Company and the Agent shall be entitled to continue to deal solely and directly with such Bank in connection with the interests so assigned and delegated to an Assignee until the date when all of the following conditions shall have been met:      (i) five Business Days (or such lesser period of time as the Agent and the assigning Bank shall agree) shall have passed after written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, shall have been given to the Company and the Agent by such assigning Bank and the Assignee,     (ii) the assigning Bank and the Assignee shall have executed and delivered to the Company and the Agent an assignment agreement substantially in the form of Exhibit E (an "Assignment Agreement"), together with any documents required to be delivered thereunder, which Assignment Agreement shall have been accepted by the Agent, and     (iii) except in the case of an assignment by a Bank to one of its Affiliates, the assigning Bank or the Assignee shall have paid the Agent a processing fee of $3,500. From and after the date on which the conditions described above have been met, (x) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Bank hereunder and (y) the assigning Bank, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment Agreement, shall be released from its obligations hereunder. Within five Business Days after effectiveness of any assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the Assignee and the Assignor, as applicable) a new Note in the principal amount of the Assignee's Pro Rata Share of the Revolving Commitment Amount and, if the assigning Bank has retained a Commitment hereunder, a replacement Note in the principal amount of the Pro Rata Share of the Revolving Commitment Amount retained by the assigning Bank (such Note to be in exchange for, but not in payment of, the predecessor Note held by such assigning Bank). Each such 42 -------------------------------------------------------------------------------- Note shall be dated the effective date of such assignment. The assigning Bank shall mark the predecessor Note "exchanged" and deliver it to the Company. Accrued interest on that part of the predecessor Note being assigned shall be paid as provided in the Assignment Agreement. Accrued interest and fees on that part of the predecessor Note not being assigned shall be paid to the assigning Bank. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Any attempted assignment and delegation not made in accordance with this Section 14.9.1 shall be null and void.     Notwithstanding the foregoing provisions of this Section 14.9.1 or any other provision of this Agreement, any Bank may at any time assign all or any portion of its Loans and its Note to a Federal Reserve Bank (but no such assignment shall release any Bank from any of its obligations hereunder).     14.9.2  Participations.  Any Bank may at any time sell to one or more commercial banks or other Persons participating interests in any Loan owing to such Bank, the Note held by such Bank, the Commitment of such Bank, the direct or participation interest of such Bank in any Letter of Credit or any other interest of such Bank hereunder (any Person purchasing any such participating interest being herein called a "Participant"). In the event of a sale by a Bank of a participating interest to a Participant, (a) such Bank shall remain the holder of its Note for all purposes of this Agreement, (b) the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations hereunder and (c) all amounts payable by the Company shall be determined as if such Bank had not sold such participation and shall be paid directly to such Bank. No Participant shall have any direct or indirect voting rights hereunder except with respect to any of the events described in the fourth sentence of Section 14.1. Each Bank agrees to incorporate the requirements of the preceding sentence into each participation agreement which such Bank enters into with any Participant. The Company agrees that if amounts outstanding under this Agreement and the Notes are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement, any Note and with respect to any Letter of Credit to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or such Note; provided that such right of setoff shall be subject to the obligation of each Participant to share with the Banks, and the Banks agree to share with each Participant, as provided in Section 7.5. The Company also agrees that each Participant shall be entitled to the benefits of Section 7.6 and Section 8 as if it were a Bank (provided that no Participant shall receive any greater compensation pursuant to Section 7.6 or Section 8 than would have been paid to the participating Bank if no participation had been sold).     14.10  Governing Law.  This Agreement and each Note shall be a contract made under and governed by the internal laws of the State of Minnesota applicable to contracts made and to be performed entirely within such State. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Company and rights of the Agent and the Banks expressed herein or in any other Loan Document shall be in addition to and not in limitation of those provided by applicable law.     14.11  Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.     14.12  Successors and Assigns.  This Agreement shall be binding upon the Company, the Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Banks and the Agent and the successors and assigns of the Banks and the Agent. 43 --------------------------------------------------------------------------------     14.13  Indemnification by the Company.  In consideration of the execution and delivery of this Agreement by the Agent and the Banks and the agreement to extend the Commitments provided hereunder, the Company hereby agrees to indemnify, exonerate and hold the Agent, each Bank and each of the officers, directors, employees, Affiliates and agents of the Agent and each Bank (each a "Bank Party") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including Attorney Costs (collectively, the "Indemnified Liabilities"), incurred by the Bank Parties or any of them as a result of, or arising out of, or relating to (a) any tender offer, merger, purchase of stock, purchase of assets or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans, (b) the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of any hazardous substance at any property owned or leased by the Company or any Subsidiary, (c) any violation of any Environmental Laws with respect to conditions at any property owned or leased by the Company or any Subsidiary or the operations conducted thereon, (d) the investigation, cleanup or remediation of offsite locations at which the Company or any Subsidiary or their respective predecessors are alleged to have directly or indirectly disposed of hazardous substances or (e) the execution, delivery, performance or enforcement of this Agreement or any other Loan Document by any of the Bank Parties, except for any such Indemnified Liabilities arising on account of the applicable Bank Party's gross negligence or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section 14.13 shall survive repayment of the Loans, cancellation of the Notes, expiration or termination of the Letters of Credit, any foreclosure under, or any modification, release or discharge of, any or all of the Collateral Documents and termination of this Agreement.     14.14  Nonliability of Lenders.  The relationship between the Company on the one hand and the Banks and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent nor any Bank shall have any fiduciary responsibility to the Company. Neither the Agent nor any Bank undertakes any responsibility to the Company to review or inform the Company or any matter in connection with any phase of the Company's business or operations. The Company agrees that neither the Agent nor any Bank shall have liability to the Company (whether sounding in tort, contract or otherwise) for losses suffered by the Company 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 in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent nor any Bank shall have any liability with respect to, and the Company hereby waives, releases and agrees not to sue for, any special, indirect or consequential damages suffered by the Company in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.     14.15  Forum Selection and Consent to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINT AINED EXCLUSIVELY IN THE COURTS OF THE STATE OF MINNESOTA OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF MINNESOTA AND OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MINNESOTA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR 44 -------------------------------------------------------------------------------- BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF MINNESOTA. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.     14.16  Waiver of Jury Trial.  EACH OF THE COMPANY, THE AGENT AND EACH BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 45 --------------------------------------------------------------------------------     Delivered at Minneapolis, Minnesota, as of the day and year first above written.     FARGO ELECTRONICS, INC.           By   /s/ Gary R. Holland --------------------------------------------------------------------------------     Title President and CEO --------------------------------------------------------------------------------           LASALLE BANK NATIONAL ASSOCIATION, as Agent           By   /s/ J.D. Gatzlaff --------------------------------------------------------------------------------     Title Senior Vice President --------------------------------------------------------------------------------           LASALLE BANK NATIONAL ASSOCIATION, as Issuing Bank and as a Bank           By   /s/ J.D. Gatzlaff --------------------------------------------------------------------------------     Title Senior Vice President --------------------------------------------------------------------------------           HARRIS TRUST AND SAVINGS BANK, as a Bank           By   /s/ Andrew T. Claar --------------------------------------------------------------------------------     Title Vice President -------------------------------------------------------------------------------- 46 --------------------------------------------------------------------------------
Exhibit 10.2 (logo) First Midwest First Midwest Bancorp, Inc. 300 Park Boulevard, Suite 405 PO Box 459 Itasca, Illinois 60143-0459 (630)875-7450   September 5, 2000 First_Name Middle_Name Last_Name Address_Line_1 Address_Line_2 Address_Line_3 City, State Zip_Code RE: Letter Agreement Option_Date Grant of Nonqualified Stock Options (the "Agreement") Dear First_Name: I am pleased to advise you that on Option_Date (the "Date of Grant") and pursuant to the First Midwest Bancorp, Inc. 1989 Omnibus Stock and Incentive Plan, as Amended (the "Plan"), the Compensation Committee (the "Committee") of the Board of Directors of First Midwest Bancorp, Inc. (the "Company") approved a grant to you of a "Nonqualified Stock Option" (the "Option"). The Option provides you with the opportunity to purchase, for Option_Price per share, up to Shares_Granted shares of the Company's Common Stock. The Option is subject to the terms and conditions of the Plan, including any Amendments thereto, which are incorporated herein by reference, and to the following provisions: (1) Exerciseability Except as otherwise provided in paragraphs (3), (4), (5) and (8) below, and subject to paragraph (12) below, the Option shall be exercisable only if you continue in the employment of the Company. The Option will become exercisable as follows: (a) 50% of the Option to purchase the shares indicated above is exercisable on or after Vest_Date_Period_1; b) the remaining 50% of the Option to purchase the shares indicated above is exercisable on Vest_Date_Period_2. In the event of your death or Disability, or in the event of a Change-in-Control, as defined in the Plan, the Option will become fully vested and exercisable as set forth in paragraphs (3) and (4), respectively. The Option expires upon the close of business on Expiration_Date_Period_1 (the "Expiration Date"). (2) Procedure for Exercise Subject to the forgoing paragraph (1), you may exercise the Option at any time and from time to time during the term of the Option by:   (a) Delivery of written notification of exercise and payment in full:     (i) in cash or its equivalent; or     (ii) by tendering shares of previously-acquired Company stock that have been held by you for at least six (6) months prior to the date of written notification of exercise and having a fair market value at the exercise date (defined as the average of the high and low prices of the Company's Common Stock quoted on the NASDAQ Stock Market on the date the written notice of exercise is received by the office of the Corporate Controller) equal to all or part of the total Option price; or     (iii) by combination of (i) and (ii);     For all Option shares being purchased, plus the amount of any additional federal and state income tax and FICA/medicare tax required to be withheld by reason of the exercise of the Option, unless you have properly elected, with the Committee's consent in accordance with Section 15 of the Plan, to deliver previously-owned shares that have been held by you for at least six (6) months prior to the date of written notification of exercise or have Option shares withheld to satisfy such taxes; and   (b) If requested within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's counsel, be necessary or desirable to comply with federal and state securities laws.   Also subject to the foregoing paragraph (1), you may exercise the Option by delivery of written notification of exercise and payment in full of the exercise price and applicable taxes in connection with the Nonqualified Stock Option Gain Deferral Plan (the "Gain Deferral Plan") if at the sole discretion of the Committee you qualify to participate in the Gain Deferral Plan.   Further information regarding procedures for exercising your options can be found in the Plan, the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options". If you are a first time grant recipient, these documents accompany this Letter Agreement. (3) Termination of Employment If your employment with the Company or any of its subsidiaries terminates due to your death or Disability, all vesting exercise restrictions will lapse and the Option will become immediately exercisable in full. If you employment with the Company or any of its subsidiaries terminates prior to the Expiration Date, the Option will continue to be exercisable by you (or in the event of your death, by your beneficiary or your estate's executor or administrator) to the same degree that the Option was exercisable on your employment termination date (including any acceleration of vesting which may occur in the event of death or Disability), until the first of the following occur:   (a) Except as provided in the event of a Change-in-Control, the expiration of 30 days after the date your employment is terminated for any reason other than retirement, death, Disability or discharge for cause;   (b) The expiration of three years following retirement, death or Disability;   (c) The termination date if the termination is for cause; or   (d) The Expiration Date. (4) Merger, Consolidation or Change-in-Control In the event of a Change-in-Control as defined in Section 13 of the Plan, as amended by the Board of Directors of the Company on February 18, 1998, all holding period and vesting exercise restrictions will lapse and the Options will become immediately exercisable in full and the 30 day period set forth in paragraph (3) (a) above will be extended to three years. (5) Limited Transferability The Option is personal to you and may not be sold, transferred, pledged, assigned or otherwise alienated, other than as provided herein. Your Option shall be exercisable during your lifetime only by you. Notwithstanding the foregoing, you may transfer your Option to:   (a) Your spouse, children or grandchildren ("Immediate Family Members");   (b) A trust or trusts for the exclusive benefit of such Immediate Family Members, or;   (c) A partnership in which such Immediate Family Members are the only partners,   Provided that:     (i) there may be no consideration for any such transfer;     (ii) subsequent transfers of the transferred Option shall be prohibited, except to designated beneficiaries; and     (iii) such transfer is evidenced by documents acceptable to the Company and filed with the Corporate Secretary.   Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of designating a beneficiary with respect thereto, the transferee shall be entitled to designate the beneficiary. The provisions of this Letter Agreement relating to the period of exerciseability and expiration of the Option shall continue to be applied with respect to you and the Option shall be exercisable by the transferee only to the extent, and for the periods, set forth above. Transfer of Common Stock purchased by your transferee upon exercise of the Option may also be subject to the restrictions and limitations described in Paragraph (6) below. (6) Securities Law Restrictions You understand and acknowledge that applicable securities laws govern and may restrict your right to offer, sell, or otherwise dispose of any Option shares. The Company registered the Option shares under The Securities Act of 1933.   Executive Officers of the Company subject to Section 16(b) of the Securities Exchange Act of 1934 should consult the Company's Corporate Secretary prior to purchasing any shares under this Option or selling such shares thereafter.   Additional information regarding these rules can be found in the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options". (7) Reload Provisions As described more fully in Appendix B, "General Information Regarding Reload Stock Options" of the "Summary Description" of the Plan, the Committee has approved the grant of reload stock options upon certain exercises of the Option. Accordingly, a reload stock option will be granted upon any exercise of the Option by you while you are an employee and upon which you tender previously-owned Common Stock (Common Stock which has been held for at least six (6) months) in payment of the exercise price and/or use such shares in satisfaction of the required tax withholding. A Reload Option Letter Agreement will be issued to you to evidence the grant of a reload stock option. (8) Continuing Participant Agreement For purposes of this Option, your employment will not be deemed to have terminated, and instead will be deemed to be continuing, during any period during which you are a party to a Continuing Participant Agreement with the Company or any of its subsidiaries; provided such Continuing Participant Agreement was approved by the Committee and the Board of Directors of the Company. (9) Tax Consequences Information regarding federal tax consequences of the Option can be found in the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options". You are strongly encouraged to contact your tax advisor regarding such tax consequences as they relate to you. (10) Employment of Successors Nothing herein confers any right or obligation on you to continue in the employment of the Company or any subsidiary or shall affect in any way your right or the right of the Company or any subsidiary, as the case may be, to terminate your employment at any time. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company. (11) Conformity with Plan The Option is intended to conform in all respects with the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed Confirmation of Acceptance of this Letter Agreement, you agree to be bound by all the terms of the Plan. All definitions stated in the Plan shall be fully applicable to this Letter Agreement. (12) Effect of Certain Accounting Rules In the event the Board of Directors determines it is to be in the best interests of the Company to account for a business combination under the pooling-of-interests method and, in the written opinion of the accounting firm then serving as the Company's independent auditors, the grant of this Option or any of the terms of this Option, makes such business combination ineligible for pooling-of-interests accounting that, but for the grant of this Option or such terms and/or the grant of other Options with similar provisions, would otherwise be eligible for such accounting treatment, then this Option shall terms may be rescinded or the terms modified to the extent the Committee determines to be necessary to enable the business combination to so qualify for pooling-of-interests accounting treatment. To confirm your understanding and acceptance of the Option granted to you by this Letter Agreement, please execute and return in the enclosed envelope the following enclosed documents: (a) the "Beneficiary Designation Form" and (b) the Confirmation of Acceptance endorsement of this Letter Agreement. The original copy of this Letter Agreement should be retained for your permanent records. If you have any questions, please do not hesitate to contact the office of the Corporate Controller of First Midwest Bancorp, Inc. at (630) 875-7459.   Very truly yours, First Midwest Bancorp, Inc. Robert P. O'Meara Chairman and Chief Executive Officer First Midwest Bancorp, Inc.     CONFIRMATION OF ACCEPTANCE BY PARTICIPANT I acknowledge having read the Plan (as amended), the Summary Description and this Letter Agreement and I agree to be bound by all provisions as set forth in the Plan and this Letter Agreement. RE: Letter Agreement - Option_Date Grant of Nonqualified Stock Options   _______________________________________________ Participant's Name (Print)       _______________________________________________ Participant's Signitue First_Name Middle_Name Last_Name     _______________________ Date       1989 Omnibus Stock and Incentive Plan BENEFICIARY DESIGNATION FORM This Beneficiary Designation Form applies to Nonqualified Stock Option and Reload Option Agreement(s) as follows (fill in the Option Grant Date from the applicable Letter Agreement): ____________________________   ____________________________   ______________________________ ____________________________   ____________________________   ______________________________ ____________________________   ____________________________   ______________________________   All prior Beneficiary Designation Forms applicable to NonqualifiedStock Options or Reload Options not listed above will remain in effect as previously submitted. You may designate a primary beneficiary and a secondary beneficiary to whom rights under your Nonqualified or Reload Options will pass in the event of your death. You may name more than one person as a primary or secondary beneficiary. For example, you may wish to name your spouse as primary beneficiary and your children as secondary beneficiaries. Your primary beneficiaries will have equal rights with respect to your Director or Reload Options unless you indicate otherwise. The same rule applies for secondary beneficiaries. Designate Your Beneficiary(ies):         Primary Beneficiary(ies) (give name, address and relationship to you): _________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________         Secondary Beneficiary(ies) (give name, address and relationship to you): _______________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________   I certify that my designation of beneficiary(ies) set forth above is my free act and deed and acknowledge that when effective it will revoke any prior designation I may have made with regard to Nonqualified or Reload Option(s) set forth above. ____________________________________ (Signature) First_Name Middle_Name Last_Name ____________________________________ (Date) This Beneficiary Designation Form shall be effective on the day it is received by the Corporate Secretary of the Company. This Form shall be (i) delivered to the Corporate Secretary by personal delivery, facsimile, United States mail or by express courier service, and (ii) deemed to be received upon personal delivery, upon confirmation of receipt of facsimile transmission or upon receipt by the Corporate Secretary if by United States mail or express courier service; provided, however, that if this Form is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company. RECEIVED AND ACKNOWLEDGED: FIRST MIDWEST BANCORP, INC. BY:__________________________________        (On behalf of the Corporate Secretary) Date:______________________
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(o) SEPARATION AND CONSULTING AGREEMENT     This Separation and Consulting Agreement (the "Agreement") is made and entered into on July 31, 2000 by and between Daniel H. Schyma ("Schyma"), a Minnesota resident, and Minntech Corporation ("Company"), a Minnesota corporation. BACKGROUND     A.  Schyma has been employed by the Company for thirteen years, and has served most recently as Vice President Sales and Marketing.     B. By agreement of the parties, Schyma's separation from the Company will be effective July 14, 2000 (the "Effective Date").     C. The parties are concluding their employment relationship amicably, but mutually recognize that any employment relationship may give rise to potential claims or liabilities.     D. The parties expressly deny that they may be liable to each other on any basis or that they have engaged in any improper or unlawful conduct or wrongdoing against each other, and Schyma and the Company desire to resolve all issues potentially in dispute between them.     E. Schyma and the Company have agreed to a full settlement of all issues potentially in dispute between them.     F. One of the purposes of this Agreement is to provide for the exchange of consideration between the parties, to provide for the exchange of releases of claims and potential claims between the parties, and to consolidate within one document the parties' continuing obligations to each other.     NOW, THEREFORE, in consideration of the mutual promises and provisions contained in this Agreement and the Releases referred to below, the parties agree as follows:     1.  Release of Claims by Schyma.  Concurrently with the execution of this Agreement, Schyma will execute a release, in the form attached to this Agreement as Exhibit A ("Schyma Release"), in favor of the Company, its insurers, affiliates, divisions, directors, officers, employees, agents, successors, and assigns. This Agreement shall not be interpreted or construed to limit the Schyma Release in any manner. The existence of any dispute respecting the interpretation of this Agreement or the alleged breach of this Agreement will not nullify or otherwise affect the validity or enforceability of the Schyma Release.     2.  Release of Claims by the Company.  Concurrently with the execution of this Agreement, the Company will also execute a release, in the form attached to this Agreement as Exhibit B ("Minntech Release"), in favor of Schyma and his heirs, successors, representatives, and assigns. This Agreement shall not be interpreted or construed to limit the Minntech Release in any manner. The existence of any dispute respecting the interpretation of this Agreement or the alleged breach of this Agreement will not nullify or otherwise affect the validity or enforceability of the Minntech Release.     4.  Payments.  In consideration of Schyma's past services to the Company as an employee and officer of the Company and his agreement not to enter into competition with the Company as provided in this Agreement, the Company will make the payments set forth in subparagraph 3.a. below to Schyma or for his benefit, but only if (i) Schyma has not rescinded this Agreement or the Schyma Release within the applicable rescission period; and (ii) the Company has received written confirmation from Schyma, in the form attached to this Agreement as Exhibit C, dated not earlier than the day after the expiration of the applicable rescission period, that Schyma has not rescinded and will not rescind this Agreement or the Schyma Release. Payment of any amount set forth below will not modify or terminate the parties' obligations to each other as established by this Agreement. The payments set forth below will be sent by first-class mail to Schyma's last known residence address, unless he advises the Company in writing that he wants the payments sent to a different address. --------------------------------------------------------------------------------     a.  Separation Fee.  The Company shall pay Schyma (or his designated beneficiary or estate, as the case may be) a total amount equal to $178,887, in 26 approximately equal bi-monthly installments less applicable payroll and legal withholding taxes during the period from July 14, 2000 through July 13, 2001; provided, however, that no installment will be paid to Schyma before the second business day following the expiration of the applicable rescission period (the "Payment Date"). Any installments otherwise due prior to the Payment Date will not be forfeited but will be paid to Schyma on the Payment Date. The Company shall also pay to Schyma on July 14, 2000 a lump sum payment $7,568.00 less applicable payroll and legal withholding taxes for earned vacation of 11 days.     b.  Beneficiary Designation.  Any designation of a beneficiary for purposes of subparagraphs 3.a. above must be made by Schyma in writing and must be furnished to the Company's CEO. If no effective beneficiary designation is on file with the Company at the time of Schyma's death, then any remaining severance will be paid to his estate.     4.  Stock Options.  (a) Schyma is a participant in the Company's 1989 and 1998 Stock Option Plans (the "Stock Plans"). Under the terms of the Stock Plans and Schyma's agreements relating to options to purchase shares of the Company's common stock (the "Option Agreements"), as of July 14, 2000 Schyma is fully vested in options to purchase a total of 142,775 shares of the common stock of the Company, which are listed in Schedule 1 attached to this Agreement (the "Stock Options"). Schyma understands that if he does not exercise his incentive stock options to purchase 45,306 shares of common stock of the Company (the "45,306 Shares") on or before October 14, 2000, then the 45,306 Shares will become nonqualified stock options. The Stock Options shall be exercisable in whole or in part during the term of this Agreement until the end of the business day on July 13, 2001, thus extending the period to exercise such options under the Option Agreements in respect thereof by an additional nine-month period.     (b) If Schyma rescinds this Agreement and the Schyma Release prior to the termination of the applicable rescission period, then he must exercise the Stock Options on or before October 14, 2000 or the Stock Options shall lapse.     5.  Insurance Continuation.       a.  Health Insurance.  The Company shall make group health insurance and supplemental life insurance available to Schyma on the same basis and on the same terms that such insurance is made available to senior executives of the Company. The Company will pay the same portion of the premium as the Company pays for its senior executives for such coverage, and any portion of the premium for such coverage payable by Schyma will be paid by him at least monthly on or before the last day of each month during which he is subject to such coverage. The Company will have no obligation to pay any portion of any premiums for either group health insurance coverage or for an individual health insurance policy provided by the Company after July 14, 2001. Schyma acknowledges that his separation from the Company as of July 14, 2000 is a qualifying event under COBRA and that his right to elect under COBRA health insurance coverage provided by the Company will terminate no later than January 14, 2002 as provided by current law. After July 14, 2001, Schyma will have the right to elect under COBRA group health insurance coverage provided by the Company under such terms existing at the time of such election as are made available to similarly-situated former employees of the Company, provided that Schyma pays 102 percent of the cost of the health insurance option selected by Schyma and provided by the Company as provided by law until January 14, 2002, or until he obtains other qualifying group coverage or his COBRA rights terminate for some other reason, if earlier.     b.  Life Insurance.  Schyma will have the right to continue his group life insurance and supplemental life insurance coverage after July 14, 2000 under Minnesota law under such terms as are made available to similarly-situated former employees of the Company, provided that Schyma 2 -------------------------------------------------------------------------------- pays 102 percent of the cost of that insurance as provided by law, for 18 months, or until he obtains other qualifying group coverage or his statutory rights terminate for some other reason, if earlier.     6.  Retirement Plans.  Schyma is a participant in the Minntech Profit Sharing and Retirement Plan and in the Supplemental Executive Retirement Plan (the "Retirement Plans"). Schyma will be entitled to begin drawing his retirement benefits at the times and under the terms and conditions set forth in the Retirement Plans.     7.  No-Competition, Non-Solicitation, and Non-Disclosure Agreements.       a.  Agreement Not to Compete.        (i) Schyma will not, on or before July 14, 2003, without the prior written consent of the Company, either directly or indirectly through third parties, on his own account or in the service of others, engage in the design, development, assembly, manufacture, marketing, or sale of a Competitive Product in any area or territory in which the Company engages or will have engaged in business during the term of Schyma's employment with the Company.     (ii) For purposes of this Agreement "Competitive Product" means any product, process, or service (including any component thereof or research to develop information useful in connection with a product or service) that is being designed, developed, assembled, manufactured, marketed, or sold by anyone other than the Company and which is of the same general type, performs similar functions, competes with, or is used for the same purposes as an existing or reasonably foreseeable Minntech Product.     (iii) For purposes of this Agreement "Minntech Product" means any existing product, process, or service or reasonably foreseeable product, process or service (including any component thereof or research to develop information useful in connection with a product or service) that, was being designed, developed, assembled, manufactured, marketed, or sold by the Company during Schyma's employment with the Company, or with respect to which the Company had acquired Confidential Information which it intends to use in the design, development, manufacture, assembly, or sale of a product or service.     (iv) For purposes of this Agreement "Confidential Information" means information not generally known, including trade secrets, about the Company's methods, processes, and products, including, but not limited to, information relating to such matters as research and development, manufacturing methods, processes, techniques, chemical composition of materials, applications for particular technologies, materials or designs, vendor names, customer lists, management systems, and sales and marketing plans. All information disclosed to Schyma or to which Schyma had access during the time of his employment with the Company, which he has a reasonable basis to believe is Confidential Information or which is treated by the Company as Confidential Information, will be presumed to be Confidential Information. Confidential Information shall exclude information that (i) is in the public domain or otherwise becomes part of the public domain through no fault of Schyma; (ii) Schyma can verify was in his lawful possession prior to having received the Confidential Information from the Company; (iii) is received by Schyma from a third party without a breach of confidentiality owed by the third party to the Company; (iv) Schyma can verify was independently developed by him without having knowledge of the Company's Confidential Information; or (v) the disclosure of which may be necessary by reason of legal or regulatory requirements (provided that Schyma first gives reasonable notice to the Company to permit it to oppose such requirement).     b.  Agreement Not to Solicit Employees.  Schyma will not, on or before July 14, 2003, without the prior written consent of the Company, solicit any person who is then employed by or otherwise 3 -------------------------------------------------------------------------------- engaged to perform services for the Company to terminate his or her relationship with the Company or interfere with the Company's relationship with any such person. Schyma will not, on or before July 14, 2003, without the prior written consent of the Company, provide substantive or qualitative information regarding any person who is then employed by or otherwise engaged to perform services for the Company to any person or entity engaged in the design, development, assembly, manufacture, marketing, or sale of a Competitive Product in any area or territory in which the Company engaged in business during Schyma's employment with the Company.     c.  Agreement Not to Disclose Confidential Information.  (i) Schyma will not, without the prior written consent of the Company, directly or indirectly use or disclose Confidential Information for the benefit of anyone other than the Company. Schyma will hold secret and confidential all Confidential Information of the Company concerning which Schyma has acquired knowledge or information during the time of his employment with the Company. Schyma will not disregard his obligations of confidence by using any trade secret or other confidential business and/or technical information of which he was informed during his employment to guide him in a search of publications or other publicly available information, selecting a series of items of knowledge from unconnected sources, and fitting them together to claim that he did not violate any agreements set forth in this Agreement.     (ii) In addition to the foregoing, in no event shall Confidential Information be used by Schyma or any of Schyma's affiliates (as defined in Section 13) in connection with purchases or sales of, or trading in, any securities of the Company, including but not limited to direct or indirect purchases or sales, offers or agreements to purchase or sell, or rights or options to purchase or sell any such securities. Schyma acknowledges that he is aware of his responsibilities under United States federal and state securities laws with respect to trading in securities while in possession of material non-public information obtained from the issuer of such securities and with respect to providing such information to other persons who purchase or sell securities of such issuer.     d.  Scope of Restrictions.  The parties intend that, if any court of competent jurisdiction holds that any restriction in subparagraphs 7.a. through 7.c. above exceeds the limit of restrictions that are enforceable under applicable law, then the restriction will nevertheless apply to the maximum extent that is enforceable under applicable law.     8.  Company Cooperation.  The Company will ensure that all proper steps are followed to comply with Schyma's written instructions with respect to his stock options, retirement benefits, and health and life insurance benefits, and will provide him with information that he reasonably requires in accordance with the applicable employee benefit plans sponsored by the Company in which he is a participant.     9.  Indemnification.  Notwithstanding Schyma's separation from the Company, with respect to events that occurred during his tenure as an employee or officer of the Company, Schyma will be entitled, as a former employee or officer of the Company, to the same rights that are afforded to senior executive officers of the Company, now or in the future, to indemnification and advancement of expenses provided in the charter documents of the Company and under applicable law or otherwise, and to coverage and a legal defense under any applicable general liability and/or directors' and officers' liability insurance policies maintained by the Company.     10.  Schyma Representation.  Schyma represents that, during the entire period that he was an employee or officer of the Company, he acted in good faith, had no reasonable cause to believe that his conduct was unlawful, and reasonably believed that his conduct was in the best interests of the Company. The parties intend that the terms used in this paragraph will have the same meaning as the same terms used in paragraph 302A.531 of the Minnesota Statutes.     11.  Company Representation.  The Company represents that on the date of this Agreement no transaction or other event has occurred that would constitute a "Change in Control" as that term is 4 -------------------------------------------------------------------------------- defined in the Management Agreement dated September 1, 1996 between Schyma and the Company. Schyma acknowledges that he will be relinquishing his rights under the Management Agreement upon execution of this Agreement and the Schyma Release of Claims.     12.  Mutual Non-Disparagement.  Schyma will not disparage, defame, or besmirch the reputation, character, image, products, or services of the Company, or the reputation or character of its directors, officers, employees, or agents. The Company will not disparage, defame, or besmirch the reputation, character, talents, skills, business reputation, or image of Schyma.     13.  Claims and Actions Involving the Company.  During the period commencing on the Effective Date and ending three years from the Effective Date, Schyma will not recommend or suggest to any potential claimants or plaintiffs or their attorneys or agents that they initiate claims or lawsuits against the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents, nor will Schyma voluntarily aid, assist, or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits now pending or commenced in the future against the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents; provided, however, that this paragraph will not be interpreted or construed to prevent Schyma from giving testimony in response to questions asked pursuant to a legally enforceable subpoena, deposition notice, or other legal process, during any legal proceedings involving the Company, any of its affiliates or divisions, or any of its or their directors, officers, employees, or agents.     14.  Company Property.  The Company hereby sells to Schyma for $1.00 (i) the mobile telephone the Company has previously provided to him; and (ii) the personal computer, lap top computer, and fax machine the Company has previously provided to him, if any. Schyma shall return to the Company all other equipment, records, correspondence, documents, financial data, plans, computer disks, and other tangible property in his possession and all copies thereof, if any, belonging to the Company, wheresoever located. Schyma acknowledges that all files related to the Company's business that may have been downloaded onto his personal computer during his employment with the Company and all copies thereof constitute confidential information of the Company and is the property of the Company for purposes of this paragraph 16 and shall be returned to the Company and otherwise immediately deleted from all computer systems under Schyma's control.     15.  Time to Consider Agreement.  Because this Agreement includes a release of any rights Schyma may have under the Age Discrimination in Employment Act, under federal law the parties acknowledge that Schyma is entitled to a period of at least 21 days from receipt of this Agreement to decide whether to sign this Agreement and the Schyma Release, which 21 day period will commence on the date on which Schyma receives copies of this Agreement and the Schyma Release for review. Schyma represents that if he signs this Agreement and the Schyma Release before the expiration of the 21 day period, it is because he has decided that he does not need any additional time to decide whether to sign this Agreement and the Schyma Release.     16.  Right to Rescind or Revoke.  Schyma understands that he has the right to rescind or revoke this Agreement and the Schyma Release for any reason within 15 calendar days after he signs them (which 15-day period expressly includes any other shorter time periods provided by law). Schyma understands that this Agreement and the Schyma Release will not become effective or enforceable unless and until he has not rescinded this Agreement and the Schyma Release and any applicable rescission period has expired. Schyma understands that if he wishes to rescind, the rescission must be in writing and hand delivered or mailed to the Company. If hand-delivered, the rescission must be (a) addressed to the CEO, Minntech Corporation, 14605 28th Avenue North, Minneapolis, Minnesota 55447; and (b) delivered to the CEO within the 15-day period. If mailed, the rescission must be: (a) postmarked within the 15-day period; (b) addressed to CEO, Minntech Corporation, 14605 28th Avenue North, Minneapolis, Minnesota 55447; and (c) sent by certified mail, return receipt requested. 5 --------------------------------------------------------------------------------     17.  Full Compensation.  Schyma understands that the payments made and other consideration provided by the Company under this Agreement will fully compensate Schyma for and extinguish any and all of the claims Schyma is releasing in the Schyma Release, including, but not limited to, his claims for attorneys' fees and costs and any and all claims for any type of legal or equitable relief.     18.  No Admission of Wrongdoing.  Schyma understands that this Agreement does not constitute an admission that the Company has violated any local ordinance, state or federal statute, or principle of common law, or that the Company has engaged in any improper or unlawful conduct or wrongdoing against Schyma. Schyma will not characterize this Agreement or the payment of any money or other consideration made in accordance with this Agreement as an admission that the Company has engaged in any improper or unlawful conduct or wrongdoing against him.     19.  Authority.  Schyma represents and warrants that he has the authority to enter into this Agreement and the Schyma Release, and that no causes of action, claims, or demands released pursuant to this Agreement and the Schyma Release have been assigned to any person or entity not a party to this Agreement and the Schyma Release.     20.  Representation.  Schyma acknowledges that he has had a full opportunity to consider this Agreement and the Schyma Release, that he has had a full opportunity to ask any questions that he may have concerning this Agreement, the Schyma Release, or the settlement of his potential claims against the Company, and that he has not relied upon any statements or representations made by the Company or its attorneys, written or oral, other than the statements and representations that are explicitly set forth in this Agreement, the Schyma Release, the Minntech Release, the Stock Plans and Schyma's agreements relating thereto, the Retirement Plans, and any other employee benefit plans sponsored by the Company in which Schyma is a participant.     21.  Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the parties and their respective heirs, representatives, successors, and assigns, including, but not limited to, a purchaser of substantially all the business or assets of the Company, but will not be assignable by either party without the prior written consent of the other party.     22.  Invalidity.  In the event that any provision of this Agreement, the Schyma Release, or the Minntech Release is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such a determination will not affect the validity, legality, or enforceability of the remaining provisions of this Agreement, the Schyma Release, or the Minntech Release, and the remaining provisions of this Agreement, the Schyma Release, and the Minntech Release will continue to be valid and enforceable, and any court of competent jurisdiction may modify the objectionable provision so as to make it valid and enforceable.     23.  Entire Agreement.  Before signing this Agreement, the Schyma Release, and the Minntech Release, the parties and their representatives engaged in discussions and negotiations and generated certain documents, in which the parties and their representative considered the matters that are the subject of this Agreement, the Schyma Release, and the Minntech Release. In such discussions, negotiations, and documents, the parties and their representatives may have expressed their opinions and beliefs concerning the intentions, capabilities, and practices of the parties, and may have forecast future events. The parties recognize, however, that all business transactions, including the transactions upon which the parties' respective opinions, beliefs, and forecasts are based, contain an element of risk, and that it is normal business practice to limit the legal obligations of contracting parties only to those promises and representations that are essential to the transaction so as to provide certainty as to their respective future rights and remedies. Accordingly, this Agreement, the Schyma Release, the Minntech Release, the Stock Plans and Schyma's agreements relating thereto (as modified by this Agreement), the Retirement Plans, and any other employee benefit plans sponsored by the Company in which Schyma is a participant are intended to define the full extent of the legally enforceable undertakings of the parties, and no promises or representations, written or oral, that are not set forth explicitly in this 6 -------------------------------------------------------------------------------- Agreement, the Schyma Release, the Minntech Release, the Stock Plans and Schyma's agreements relating thereto (as modified by this Agreement), the Retirement Plans, or any other employee benefit plans sponsored by the Company in which Schyma is a participant are intended by either party to be legally binding, and all other agreements and understandings between the parties are hereby superseded.     24.  Headings.  The descriptive headings of the paragraphs and subparagraphs of this Agreement are inserted for convenience only, and do not constitute a part of this Agreement.     25.  Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.     26.  Governing Law.  This Agreement, the Schyma Release, and the Minntech Release will be interpreted and construed in accordance with, and any dispute or controversy arising from any breach or asserted breach of this Agreement, the Schyma Release, or the Minntech Release will be governed by, the laws of Minnesota.     27.  Outplacement Services.  At Schyma's request, the Company shall provide outplacement services to Schyma. If Schyma does not elect this option within three (3) months of the Effective Date then such option shall expire. The Company shall pay the fee for such outplacement services directly to the outplacement service.     IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.     MINNTECH CORPORATION           -------------------------------------------------------------------------------- Barbara A. Wrigley Executive Vice President           SCHYMA           -------------------------------------------------------------------------------- Daniel H. Schyma 7 -------------------------------------------------------------------------------- QUICKLINKS SEPARATION AND CONSULTING AGREEMENT
QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Avocent Employment Services Co. (formerly known as Polycon Investments, Inc.), a Texas corporation ("Employer"), Avocent Corporation, a Delaware corporation, and Christopher L. Thomas (the "Employee"). RECITALS     WHEREAS, the Employer is a direct or indirect subsidiary of Avocent Corporation engaged in the business of leasing employees to Avocent Corporation and its affiliates, including Apex Inc. ("Apex") and Cybex Computer Products Corporation ("Cybex");     WHEREAS, Avocent Corporation and its affiliates (collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/ KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee, Employer, and Cybex entered into that certain Employment and Noncompetition Agreement dated July 1, 1999 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, Cybex, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as its Senior Vice President of Engineering, and Employer agrees to employ the Employee and lease the Employee to Avocent to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of Senior Vice President of Engineering. The Employee shall report to the President of the Employer, Cybex, and Avocent Corporation and to the Boards of Directors of the Employer, Cybex, and Avocent Corporation, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of Engineering of Avocent Corporation.     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or -------------------------------------------------------------------------------- by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which 2 -------------------------------------------------------------------------------- shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, 3 -------------------------------------------------------------------------------- all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which 4 -------------------------------------------------------------------------------- will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $180,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a)  THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical 5 -------------------------------------------------------------------------------- examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was February 2, 1995.     (b)  VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c)  LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d)  REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at 6 -------------------------------------------------------------------------------- the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof.     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof. 7 --------------------------------------------------------------------------------     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn:  Executive Vice President Copy to General Counsel   If to the Employee:   Christopher Thomas [          ] [          ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Huntsville, Madison County, Alabama, for any lawsuit arising from or relating to this Agreement.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties. 8 --------------------------------------------------------------------------------     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G 9 -------------------------------------------------------------------------------- and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     AVOCENT EMPLOYMENT SERVICES, INC.:           By:   /s/ JULIE YARBROUGH    --------------------------------------------------------------------------------     Its: President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ CHRISTOPHER L. THOMAS    -------------------------------------------------------------------------------- Christopher L. Thomas 10 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.01 CERIDIAN CORPORATION STOCK OPTION AWARD AGREEMENT 2000 Director Performance Incentive Plan     This Agreement is between Ceridian Corporation, a Delaware corporation (the "Company"), and            (the "Participant") as of May  ,       (the "Date of Grant") pursuant to the 2000 Director Performance Incentive Plan of the Company (the "Plan") to evidence the granting of an Option to the Participant pursuant to the Plan. Any capitalized term used and not otherwise defined herein shall have the same meaning as set forth therein. 1.Effective as of the Date of Grant, the Company has granted to the Participant the option to purchase from the Company, and the Company has agreed to sell to the Participant, 4,000 shares of Common Stock at a price of $       per share (the "Option"). 2.Subject to the provisions of paragraph 3, this Option shall become exercisable in full on November   ,      (six months from the Date of Grant), and shall become void and expire at midnight (Minneapolis time) on the tenth anniversary of the Date of Grant and may not be exercised after that time. 3.If the Participant's service as a director of the Company ceases by reason of death or Disability, the Option shall become immediately exercisable in full and remain exercisable for the period specified in paragraph 2 of this Agreement. If the Participant voluntarily resigns from the Board (which does not include the submission of an offer not to stand for re-election as a director in accordance with Company policies), the Participant shall have three months following the date of such cessation of service as a director to exercise this Option (but in no event after the time it becomes void and expires as set forth in paragraph 2), but only to the extent that the Participant was entitled to exercise it as of the date of such cessation. If the Participant's service as a director of the Company ceases for any reason other than those specified earlier in this paragraph, this Option shall remain exercisable until the time it becomes void and expires as set forth in paragraph 2, but only to the extent that the Participant was entitled to exercise it as of the date of such cessation. 4.This Option grant and the Option forming a part hereof, shall be nontransferable (i.e., it may not be sold, pledged, donated or otherwise assigned or transferred) by the Participant, either voluntarily or involuntarily, except by will or in accordance with applicable laws of descent and distribution. This Option shall be exercisable during the Participant's lifetime only by the Participant or by the Participant's guardian or other legal representative. 5.Any notice of Option exercise must specify the number of shares with respect to which the Option is being exercised and be accompanied by either (i) payment in full of the purchase price for the shares exercised or (ii) a properly completed and executed Broker Exercise Notice. The exercise of the Option shall be deemed effective upon receipt by the Company (Attn: Corporate Treasury) of such items at its headquarters at 3311 East Old Shakopee Road, Minneapolis, MN 55425, Facsimile No. 952-853-3932. 6.In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustments (which determination will be conclusive) as to the number and kind of securities or other property (including cash) available for issuance or payment under the Plan and, in order to prevent dilution or enlargement of the Participant's rights, (a) the number and kind of securities or other property (including cash) subject to the Option, and (b) the exercise price of the Option. -------------------------------------------------------------------------------- 7.This Option grant is subject to all of the terms and conditions of the Plan and, where any questions or matters of interpretation arise, the terms and conditions of the Plan shall control. 8.Any notice to be given with respect to this Agreement, including without limitation a notice of Option exercise, shall be addressed to the Company, Attention: Corporate Treasury, at the address listed in paragraph 5, and any notice to be given to the Participant shall be addressed to the Participant at address given beneath the Participant's signature hereto, or at such other address as either party may hereafter designate in writing to the other.     IN WITNESS WHEREOF, Ceridian Corporation and the Participant have executed this Agreement as of the Date of Grant. CERIDIAN CORPORATION   PARTICIPANT   --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Deputy Secretary   [Typed name of Participant]           PARTICIPANT'S MAILING ADDRESS           --------------------------------------------------------------------------------           --------------------------------------------------------------------------------           --------------------------------------------------------------------------------     Social Security Number: -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- QUICKLINKS STOCK OPTION AWARD AGREEMENT 2000 Director Performance Incentive Plan
OFFICERS' SUPPLEMENTAL RETIREMENT PLAN OF CARPENTER TECHNOLOGY CORPORATION Restated December 9, 1993   INTRODUCTION           This Officers' Supplemental Retirement Plan has been authorized by the Board of Directors of Carpenter Technology Corporation to be applicable effective January 1, 1983 to pay supplemental pension benefits to certain Corporate and Division Officers of the Company who qualify for benefits under the General Retirement Plan for Employees of Carpenter Technology Corporation.           All benefits payable under this Plan shall be paid out of the general assets of the Company. Article I - Definitions           1.01      "Benefits" shall mean the supplemental retirement benefits payable pursuant to this Plan.           1.02      "Company" shall mean Carpenter Technology Corporation.           1.03      "Earnings" shall mean "earnings" as determined under the General Retirement Plan but also including any amounts deferred pursuant to the Deferred Compensation Plan for Corporate and Division Officers of Carpenter Technology Corporation.           1.04      "Effective Date" shall mean January 1, 1983.           1.05      "General Retirement Plan" or "GRP" shall mean the Corporation's "General Retirement Plan for Employees of Carpenter Technology Corporation" as in effect on the last date of a Participant's employment with the Corporation as a participant under the General Retirement Plan.           1.06      "Adjusted GRP Benefit" shall mean the gross amount of benefits payable to or on account of the Participant as calculated under the General Retirement Plan (disregarding any reduction in the amount of benefits under the General Retirement Plan attributable to any provision therein incorporating limitations imposed by Section 415 of the Internal Revenue Code of 1986, and the regulations thereunder, as amended).           1.07      "Officer" shall mean any person who is an Executive Officer or other Corporate or Division Officer of the Company.           1.08      "Participant" shall mean any person included in the participation of the Plan as provided in Article 2.           1.09      "Pension Board" shall mean the Pension Board as defined in the General Retirement Plan.           1.10      "Plan" shall mean the Officers' Supplemental Retirement Plan of Carpenter Technology Corporation, as described herein or as hereafter amended. Article 2 - Participation           2.01      Every Officer who is a Participant in the Deferred Compensation Plan for Corporate and Division Officers shall become a Participant in the Plan simultaneously with participation in the Deferred Compensation Plan.           2.02      An Officer's participation in the Plan shall terminate if his employment with the Company terminates unless at that time the Participant is entitled to a pension pursuant to the General Retirement Plan.           2.03      A Participant shall become entitled to a Benefit hereunder only upon retirement, death or other termination of employment with the Company and provided a benefit is payable to or on his account under the General Retirement Plan. Article 3 - Amount and Payment of Benefits           3.01      The Benefits shall be payable by the Company coincident with, and to the same recipient, as shall, in the opinion of the Pension Board, be entitled to receive pension, co-pension, and/or Surviving Spouse benefits under the General Retirement Plan. Any such Benefits shall be payable from the general assets of the Company. The Benefits under this Plan shall be payable under the same terms and conditions as the benefits payable to or on account of a Participant under the General Retirement Plan.           3.02      The amount of any Benefits payable to or on account of a Participant pursuant to this Plan shall, before any modification necessary to conform to the provisions of Section 3.01, be equal to: > >     (a)      the Adjusted GRP Benefit (but calculated using Earnings as > > defined in Section                 1.03 herein to modify the definition of > > "earnings" contained in the General > >                Retirement Plan), minus > > > >     (b)      the Adjusted GRP Benefit.           3.03      If a Participant is re-employed by the Company after having been retired and receiving a pension or after having terminated his employment with the Company for any other reason, the monthly payments under the Plan shall be discontinued and, upon subsequent retirement or termination of employment with the Company, the Participant's Benefits, if any, under the Plan shall be recomputed in accordance with Sections 3.01 and 3.02 and any Benefit derived therefrom shall again become payable to such Participant in accordance with the provisions of the Plan.   Article 4 - Administration and Claims           4.01      The administration of the Plan, the exclusive power to interpret it, and the responsibility for carrying out its provisions are vested in the Pension Board. The expenses of the Pension Board shall be paid directly by the Company.           4.02      The claims procedures established under the General Retirement Plan shall be utilized herein.   Article 5 - General Provisions           5.01      The establishment of the Plan shall not be construed as conferring any legal rights upon any Officer or other person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any Officer and to treat him without regard to the effect which such treatment might have upon him as a Participant in the Plan.           5.02      The Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.           5.03      Subject to any applicable law, no Benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to do shall be void, nor shall any such Benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.           5.04      The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania.           5.05      The masculine pronoun shall mean the feminine wherever appropriate.   Article 6 - Amendment or Termination           6.01      The Board of Directors of the Company reserves the right to modify or to amend, in whole or in part, or to terminate, this Plan at any time. However, no modification, amendment or termination of the Plan shall adversely affect the right of any Participant to receive the Benefits granted under the Plan by such Board of Directors in respect of such Participant as of the date of modification, amendment or termination.   Article 7 - Binding Effect           7.01      This Plan shall be a binding obligation upon and shall inure to the benefit of the Company, its successors and assigns and the Participants and their beneficiaries, executors, administrators and legal representatives.     PL4.11 11/30/93
QuickLinks -- Click here to rapidly navigate through this document AVOCENT CORPORATION INDEMNIFICATION AGREEMENT     This Indemnification Agreement ("Agreement") is made as of this     day of             ,    , by and between Avocent Corporation, a Delaware corporation (the "Company"), and              ("Indemnitee").     WHEREAS the Company and Indemnitee recognize the increasing difficulty in obtaining directors' and officers' liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;     WHEREAS the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and     WHEREAS the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve as officers and directors of the Company and to induce Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancing of expenses to Indemnitee to the maximum protection permitted by law; and     WHEREAS in view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified by the Company as set forth herein.     NOW, THEREFORE, in consideration for Indemnitee's services as an officer or director of the Company, the Company and Indemnitee hereby agree as follows:     1.  Indemnification.       (a)  Indemnification of Expenses.  The Company shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other (hereinafter a "Claim") by reason of (or arising in part out of) any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity (hereinafter an "Indemnifiable Event") against any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any such action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of such Claim and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (collectively, hereinafter "Expenses"), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses. Such payment of Expenses shall be made by the Company as soon as practicable but in any event no later than five days after written demand by Indemnitee therefor is presented to the Company.     (b)  Reviewing Party.  Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) shall be subject to the condition that the Reviewing Party (as described in 1 -------------------------------------------------------------------------------- Section 10(e) hereof) shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an advance payment of Expenses to Indemnitee pursuant to Section 2(a) (an "Expense Advance") shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). An Indemnitee's obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control (as defined in Section 10(c) hereof), the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 1(c) hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.     (c)  Change in Control.  The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control) then, with respect to all matters thereafter arising concerning the rights of Indemnitees to payments of Expenses and Expense Advances under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in effect, Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.     (d)  Mandatory Payment of Expenses.  Notwithstanding any other provision of this Agreement other than Section 9 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, proceeding, inquiry or investigation referred to in Section (1)(a) hereof or in the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith. 2 --------------------------------------------------------------------------------     2.  Expenses; Indemnification Procedure.       (a)  Advancement of Expenses.  The Company shall advance all Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable but in any event no later than five days after written demand by Indemnitee therefor to the Company.     (b)  Notice/Cooperation by Indemnitee.  Indemnitee shall, as a condition precedent to Indemnitees' right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitees' power.     (c)  No Presumptions; Burden of Proof.  For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.     (d)  Notice to Insurers.  If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.     (e)  Selection of Counsel.  In the event the Company shall be obligated hereunder to pay the Expenses of any Claim, the Company shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitees' counsel in any such Claim at Indemnitee expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee counsel shall be at the expense of the Company. The Company shall have the right to 3 -------------------------------------------------------------------------------- conduct such defense as it sees fit in its sole discretion, including the right to settle any claim against Indemnitee without the consent of the Indemnitee.     3.  Additional Indemnification Rights; Nonexclusivity.       (a)  Scope.  The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 8(a) hereof.     (b)  Nonexclusivity.  The indemnification provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue as to Indemnitee for any action Indemnitee took or did not take while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity.     4.  No Duplication of Payments.  The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Certificate of Incorporation, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.     5.  Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee are entitled.     6.  Mutual Acknowledgement.  Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee.     7.  Liability Insurance.  To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary. 4 --------------------------------------------------------------------------------     8.  Exceptions.  Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:     (a)  Excluded Action or Omissions.  (i) To indemnify Indemnitee for Indemnitee's acts, omissions or transactions from which Indemnitee or the Indemnitee may not be indemnified under applicable law; or (ii) to indemnify Indemnitee for Indemnitee's intentional acts or transactions in violation of the Company's policies;     (b)  Claims Initiated by Indemnitee.  To indemnify or advance expenses to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be;     (c)  Lack of Good Faith.  To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous; or     (d)  Claims Under Section 16(b).  To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.     9.  Period of Limitations.  No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.     10.  Construction of Certain Phrases.       (a) For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.     (b) For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in 5 -------------------------------------------------------------------------------- good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement.     (c) For purposes of this Agreement a "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, (A) who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person, or (B) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 20% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve 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 80% 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 stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company's assets.     (d) For purposes of this Agreement, "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 1(c) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).     (e) For purposes of this Agreement, a "Reviewing Party" shall mean any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee are seeking indemnification, or Independent Legal Counsel.     (f)  For purposes of this Agreement, "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors.     11.  Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall constitute an original.     12.  Binding Effect; Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the 6 -------------------------------------------------------------------------------- business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect with respect to Claims relating to Indemnifiable Events regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary of the Company or of any other enterprise at the Company's request.     13.  Attorneys' Fees.  In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee with respect to such action, regardless of whether Indemnitee is ultimately successful in such action, and shall be entitled to the advancement of Expenses with respect to such action, unless, as a part of such action, a court of competent jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee counterclaims and cross-claims made in such action), and shall be entitled to the advancement of Expenses with respect to such action, unless, as a part of such action, a court having jurisdiction over such action determines that each of Indemnitee material defenses to such action was made in bad faith or was frivolous.     14.  Notice.  All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if delivered by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at the Indemnitee address as set forth beneath Indemnitee signatures to this Agreement and if to the Company at the address of its principal corporate offices (attention: Secretary) or at such other address as such party may designate by ten days' advance written notice to the other party hereto.     15.  Consent to Jurisdiction.  The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.     16.  Severability.  The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.     17.  Choice of Law.  This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents, entered into and to be performed entirely within the State of Delaware, without regard to the conflict of laws principles thereof. 7 --------------------------------------------------------------------------------     18.  Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.     19.  Amendment and Termination.  No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.     20.  Integration and Entire Agreement.  This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.     21.  No Construction as Employment Agreement.  Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries. [Remainder of page intentionally left blank; signature page follows immediately hereafter] 8 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.     AVOCENT CORPORATION           By:           --------------------------------------------------------------------------------           Its:           --------------------------------------------------------------------------------           Address:  4991 Corporate Drive Huntsville, Alabama 35805 AGREED TO AND ACCEPTED:       INDEMNITEE:           --------------------------------------------------------------------------------           -------------------------------------------------------------------------------- (signature)           Address:                     --------------------------------------------------------------------------------               --------------------------------------------------------------------------------                   --------------------------------------------------------------------------------         9 -------------------------------------------------------------------------------- QUICKLINKS AVOCENT CORPORATION INDEMNIFICATION AGREEMENT
YEAR 2000 NON-QUALIFIED STOCK OPTION PLAN OF SUNRISE MEDICAL INC.        SUNRISE MEDICAL INC., a corporation organized under the laws of the State of Delaware, hereby adopts this Year 2000 Non-Qualified Stock Option Plan of Sunrise Medical Inc. by the action of its Board of Directors as of February 28, 2000, without stockholder approval. The purposes of this Plan are as follows:      (1)  To further the growth, development and financial success of the Company by providing additional incentives to its Associates, Consultants and Non-Associate Directors by assisting them to become owners of the Company's Common Stock and thus to benefit directly from its growth, development and financial success.      (2)  To enable the Company to obtain and retain the services of the type of professional, technical and managerial Associates and Consultants considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of the Company's Common Stock under non-qualified stock options. ARTICLE I DEFINITIONS      Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.1 - Administrator      "Administrator" shall mean the entity that conducts the administration of the Plan (including the grant of Options) as provided herein. With reference to the administration of the Plan with respect to an Option granted or to be granted to Non-Associate Directors, the term "Administrator" shall refer to the Board. With reference to the administration of the Plan with respect to an Option granted or to be granted to Associates or Consultants, the term "Administrator" shall refer to the Committee, unless and to the extent (a) the Board has assumed the authority for administration of all or any part of the Plan as permitted in Section 6.2 or (b) the Committee has delegated the authority for administration of all or part of the Plan as permitted by Section 6.5. Section 1.2 - Associate      "Associate" shall mean any Employee (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation which is then a Parent Corporation or a Subsidiary, whether such Employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan. Section 1.3 - Board      "Board" shall mean the Board of Directors of the Company, as constituted from time to time. Section 1.4 - Committee      "Committee" shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 6.1. Section 1.5 - Company      "Company" shall mean Sunrise Medical Inc. In addition, "Company" shall mean any corporation assuming, or issuing new stock options in substitution for, Options outstanding under the Plan. Section 1.6 - Consultant      "Consultant" shall mean any consultant or adviser if:      (a)  the consultant or adviser renders bona fide services to the Company;      (b)  the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities; and      (c)  the consultant or adviser is a natural person who has contracted directly with the Company to render such services. Section 1.7 - Director      "Director" shall mean a member of the Board. Section 1.8 - Exchange Act      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. Section 1.9 - Non-Associate Director      "Non-Associate Director" shall mean a Director who is not an Associate. Section 1.10 - Officer      "Officer" shall mean an officer of the Company, as defined in Rule 16a-1(f) under the Exchange Act, as such Rule may be amended in the future. Section 1.11 - Option      "Option" shall mean a non-qualified option to purchase Common Stock of the Company, granted under the Plan. Options granted under the Plan are not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended. Section 1.12 - Optionee      "Optionee" shall mean an Associate, Consultant or a Non-Associate Director to whom an Option is granted under the Plan. Section 1.13 - Parent Corporation      "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.14 - Plan      "Plan" shall mean this Year 2000 Non-Qualified Stock Option Plan of Sunrise Medical Inc., as amended and/or restated from time to time. Section 1.15 - Rule 16b-3      "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. Section 1.16 - Secretary      "Secretary" shall mean the Secretary of the Company. Section 1.17 - Subsidiary      "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.18 - Termination of Consultancy      "Termination of Consultancy" shall mean the time when the engagement of Optionee as a consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including without limitation, by resignation, discharge, death or retirement; but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Consultancy. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. Section 1.19 - Termination of Directorship      "Termination of Directorship" shall mean the time when a Director ceases to be a member of the Board for any reason, including, but not by way of limitation, a termination by resignation, expiration of term, removal (with or without cause), retirement or death. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship. Section 1.20 - Termination of Employment      "Termination of Employment" shall mean the time when the employee-employer relationship between the Associate and the Company, a Parent Corporation or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or retirement, but excluding (i) terminations where there is a simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary, (ii) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former Associate. The Administrator, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Associate's employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. ARTICLE II SHARES SUBJECT TO PLAN Section 2.1 - Shares Subject to Plan      The shares of stock subject to Options shall be shares of the Company's $1.00 par value Common Stock. The aggregate number of such shares which may be issued upon exercise of Options shall initially be Three Million (3,000,000) shares, and, upon termination of the Company's Second Amended and Restated 1993 Stock Option Plan, as amended and/or restated from time to time (the "Restated 1993 Plan") the aggregate number of shares that may be issued upon exercise of Options under this Plan shall be increased, on a share per share basis, by the number of shares remaining available for option grant under the Restated 1993 Plan. The foregoing increase shall be implemented without consideration of the 1.5% of outstanding shares annual increase under the Restated 1993 Plan, thus only giving consideration of the 4,000,000 aggregate share limitation under the Restated 1993 Plan. Section 2.2 - Unexercised Options; Retained or Surrendered Shares      If any Option expires or is canceled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be optioned hereunder, subject to the overall limitation of Section 2.1. Shares of stock which are received or retained by the Company upon the exercise of options pursuant to Section 5.3(b) or Sections 5.3(c) and 5.4(d) may also again be optioned hereunder, subject to the overall limitation of Section 2.1. Section 2.3 - Changes in Company's Shares      In the event that the outstanding shares of Common Stock of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, appropriate adjustments shall be made by the Administrator in the number and kind of shares for the purchase of which Options may be granted, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued on exercise of Options. ARTICLE III GRANTING OF OPTIONS Section 3.1 - Eligibility      Each Associate of the Company, any Parent or any Subsidiary, including, without limitation, each Associate who is employed on a full-time basis in the United States by the Company, any Parent or any Subsidiary and who is an "exempt employee" as defined under the Fair Labor Standards Act of 1938, as amended, shall be eligible to be granted Options under the Plan. In addition, each Consultant and Non-Associate Director of the Company or of any corporation which is then a Parent Corporation or a Subsidiary shall also be eligible to be granted Options under the Plan. Section 3.2 - Limitations on Grants to Officers and Directors      Notwithstanding anything herein to the contrary, not more than 49% of all Options actually granted during the earlier of (i) the first three years following the adoption of this Plan or (ii) the term of this Plan, may be granted to Officers and Directors. All Options granted in excess of this limitation shall be null and void and of no force or effect. Section 3.3 - No Qualification as Incentive Stock Options      No Option shall qualify as an "incentive stock option" under Section 422 of the Internal Revenue Code of 1986, as amended. Section 3.4 - Granting of Options > (a)  The Administrator shall from time to time, in its absolute discretion: (1)  Select from among the Associates, Consultants and Non-associate Directors (including those individuals to whom Options have been previously granted under the Plan) such of them as in its opinion should be granted Options; and (2)  Determine the number of shares to be subject to such Options; and (3)  Determine the terms and conditions of such Options, consistent with the Plan; and (4)  Instruct the Secretary to issue such Options and may impose such conditions on the grant of such Options as it deems appropriate. ARTICLE IV TERMS OF OPTIONS Section 4.1 - Option Agreement      Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Administrator shall determine, consistent with the Plan. Section 4.2 - Option Price      (a)  The price of the shares subject to an Option shall be the fair market value of such shares on the date that such Option is granted; provided, however, that the Administrator, in its sole discretion, has the authority to set the price of the shares subject to an Option at a price per share that is less than or greater than the fair market value of such shares on the date the Option is granted.      (b)  For purposes of the Plan, the fair market value of a share of the Company's Common Stock as of a given date shall be: (i) the closing price of a share of the Company's Common Stock on the principal exchange on which shares of the Company's Common Stock are then trading, if any, on the trading day previous to such date, or, if shares were not traded on the trading day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if such Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the Company's Common Stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative bid and asked prices (in all other cases) for the Company's Common Stock on the trading day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if such Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the Company's Common Stock, on the trading day previous to such date, as determined in good faith by the Administrator; or (iv) if the Company's Common Stock is not publicly traded, the fair market value established by the Administrator acting in good faith. For purposes of the intial grant of options under the Plan on March 1, 2000, the fair market value of a share of the Company's Common Stock on March 1, 2000, shall be the last sales price as reported by NASDAQ on March 1, 2000. Section 4.3 - Commencement of Exercisability      (a)  Options shall become exercisable at such times and in such installments (which may be cumulative) as the Administrator shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised.      (b)  Except as provided in the applicable Stock Option Agreement executed hereunder, no portion of an Option which is unexercisable at Termination of Employment, Termination of Consultancy or Termination of Directorship, as applicable, shall thereafter become exercisable. Section 4.4 - Expiration of Options      (a)  No Option may be exercised to any extent by anyone after the expiration of ten years from the date the Option was granted.      (b)  Subject to the provisions of Section 4.4(a), the Administrator shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable.      (c)  The Administrator may extend the term of any outstanding Option in connection with any Termination of Employment, Termination of Consultancy or Termination of Directorship of the Optionee, or amend any other term or condition of such Option relating to such a termination. Section 4.5 - Consideration      In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to remain in the employ (or, in the case of a Non-Associate Director, as a Director) of the Company, a Parent Corporation or a Subsidiary for a period of at least one year after the Option is granted. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ or as a Director of the Company, any Parent Corporation or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Parent Corporation and Subsidiaries, which are hereby expressly reserved, to discharge (or, in the case of a Non-Associate Director, to remove) any Optionee at any time for any reason whatsoever, with or without cause. Section 4.6 - Adjustments in Outstanding Options      In the event that the outstanding shares of the stock subject to Options are changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company or of any other corporation by reason of merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, the Administrator shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in Option price per share. Any such adjustment made by the Administrator shall be final and binding upon all Optionees, the Company and all other interested persons. Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution      Notwithstanding the provisions of Section 4.6, in its absolute discretion, and on such terms and conditions as it deems appropriate, in the event of the merger or consolidation of the Company with or into another corporation, the acquisition by another corporation, person or group of persons of all or substantially all of the Company's assets or 40% or more of the Company's then outstanding voting stock, or the liquidation or dissolution of the Company or any other transaction deemed by the Board to involve a change in control of the Company (a "Corporate Transaction"), the Administrator may, but is not obligated to, provide by the terms of any Option or by that a resolution adopted prior to the occurrence of such Corporate Transaction that (i) upon such Corporate Transaction, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3 and/or any installment provisions of such Option, (ii) or such Option cannot be exercised and is terminated after the Corporate Transaction, and if the Administrator so provides, it must on such terms and conditions as it deems appropriate, also provide that for some period of time prior to such Corporate Transaction that such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 4.3 and/or any installment provisions of such Option. ARTICLE V EXERCISE OF OPTIONS Section 5.1 - Person Eligible to Exercise      During the lifetime of the Optionee, only the Optionee, or any permitted transferee pursuant to Section 7.1 hereof, may exercise an Option (or any portion thereof) granted to the Optionee. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise      At any time and from time to time prior to the time when any exercisable Option or exercisable portion thereof becomes unexercisable under the Plan or the applicable Stock Option Agreement, such Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Administrator may, by the terms of the Option, require any partial exercise to be with respect to a specified minimum number of shares. Section 5.3 - Manner of Exercise      An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or his office of all of the following prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement: > (a)  Notice in writing signed by the Optionee or other person then entitled to > exercise such Option or portion, stating that such Option or portion is > exercised, such notice complying with all applicable rules established by the > Administrator; and > > (b)  (1) Full payment (in cash or by check) for the shares with respect to > which such Option or portion is thereby exercised; or > > > (2)  With the consent of the Administrator, (A) shares of the Company's > > Common Stock owned for at least six months by the Optionee, duly endorsed > > for transfer to the Company or (B) shares of the Company's Common Stock > > issuable to the Optionee upon exercise of the Option, in either case, with a > > fair market value (as determined under Section 4.2(b)), on the date of > > option exercise equal to the aggregate Option price of the shares with > > respect to which such Option or portion is thereby exercised; or > > > > (3)  With the consent of the Administrator, allow payment, in whole or in > > part, through the delivery of a notice that the Optionee has placed a market > > sell order with a broker with respect to the shares of Common Stock then > > issuable upon exercise of the Option, and that the broker has been directed > > to pay a sufficient portion of the net proceeds of the sale to the Company > > in satisfaction of the Option exercise price, provided that payment of such > > proceeds is then made to the Company upon settlement of such sale; > > > > (4)  With the consent of the Administrator, any combination of the > > consideration provided in the foregoing subsections (1), (2) and (3); and > > (c)  The payment to the Company (or other employer corporation) of all amounts > which it is required to withhold under federal, state or local law in > connection with the exercise of the Option, which in the discretion of the > Administrator, may be in the form of consideration used by the Optionee to pay > for such shares pursuant to Section 5.3(b); and > > (d)  Such representations and documents as the Administrator, in its absolute > discretion, deems necessary or advisable to effect compliance with all > applicable provisions of the Securities Act and any other federal or state > securities laws or regulations. The Administrator may, in its absolute > discretion, also take whatever additional actions it deems appropriate to > effect such compliance including, without limitation, placing legends on share > certificates and issuing stop-transfer orders to transfer agents and > registrars; and > > (e)  In the event that the Option or portion thereof shall be exercised > pursuant to Section 5.1 by any person or persons other than the Optionee, > appropriate proof of the right of such person or persons to exercise the > Option or portion thereof. Section 5.4 - Conditions to Issuance of Stock Certificates      The shares of the Company's Common Stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: > (a)  The admission of such shares to listing on all stock exchanges on which > such series or class of stock is then listed; and > > (b)  The completion of any registration or other qualification of such shares > under any state or federal law or under the rulings or regulations of the > Securities and Exchange Commission or any other governmental regulatory body, > which the Administrator shall, in its absolute discretion, deem necessary or > advisable; and > > (c)  The obtaining of any approval or other clearance from any state or > federal governmental agency which the Administrator shall, in its absolute > discretion, determine to be necessary or advisable; and > > (d)  The payment to the Company (or other employer corporation) of all amounts > which it is required to withhold under federal, state or local law in > connection with the exercise of the Option, which in the discretion of the > Administrator, may be in the form of consideration used by the Optionee to pay > for such shares pursuant to Section 5.3(b); and > > (e)  The lapse of such reasonable period of time following the exercise of the > Option as the Administrator may establish from time to time for reasons of > administrative convenience. Section 5.5 - Rights as Stockholders      The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. Section 5.6 - Transfer Restrictions      The Administrator, in its absolute discretion, may impose such other restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such other restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. ARTICLE VI ADMINISTRATION Section 6.1 - Committee      The Compensation Committee of the Board (or another committee or a subcommittee of the Board assuming the functions of the Administrator under this Plan) shall serve as the Committee and shall consist of two or more Directors appointed by and holding office at the pleasure of the Board, provided, however, that grants to Associates who are considered reporting persons under Section 16 of the Exchange Act are to be administered by a committee or subcommittee consisting of two or more Directors each of whom satisfies the applicable requirements of Rule 16b-3. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. Section 6.2 - Duties and Powers of Administrator      It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan, except with respect to matters which under Rule 16b-3 are required to be determined in the sole discretion of the Committee. Section 6.3 - Majority Rule      The Administrator shall act by a majority of its members in office. The Administrator may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Administrator. Section 6.4 - Compensation; Professional Assistance; Good Faith Actions      Members of the Administrator shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities incurred by members of the Administrator in connection with the administration of the Plan shall be borne by the Company. The Administrator may employ attorneys, Consultants, accountants, appraisers, brokers or other persons. The Administrator, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Administrator shall be fully protected by the Company in respect to any such action, determination or interpretation. Section 6.5 - Delegation of Authority to Grant Awards      The Committee may, but need not, delegate from time to time some or all of its authority to grant (and administer the terms of) Options under the Plan to a committee consisting solely of one or more members of the Committee or consisting solely of one or more Officers of the Company; provided, however, that the Committee may not so delegate its authority to grant Options (or administer the Plan with respect to Options granted) to any individual (i) who is subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (ii) who is an Executive Officer or (iii) who is an Officer. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 6.5 shall serve in such capacity at the pleasure of the Committee. ARTICLE VII OTHER PROVISIONS Section 7.1 - Transferability of Options      (a)  No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by will or by the applicable laws of descent and distribution, or permitted transfers pursuant to the Section 7.1(b) hereof.      (b)  Notwithstanding the foregoing provisions of this Section 7.1, the Administrator, in its sole discretion, may determine to grant an Option, which, by its terms or by resolution of the Administrator after its grant, may be transferred by the Optionee, in writing and with prior written notice to the Administrator, by (i) gift or contribution, to a "family member" of the Optionee (as defined under the instructions to use of Form S-8), or (ii) pursuant to a domestic relations order, provided, that an Option that has been so transferred shall continue to be subject to all of the terms and conditions as applicable to the original Optionee, and the transferee shall execute any and all such documents requested by the Administrator in connection with the transfer, including without limitation to evidence the transfer and to satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws. Section 7.2 - Amendment, Suspension or Termination of the Plan      The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension nor after termination of the Plan, Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans      The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company, any Parent Corporation or any Subsidiary (a) to establish any other forms of incentives or compensation for Associates of the Company, any Parent Corporation or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 7.5 - Titles      Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. Section 7.6 - Conformity to NYSE Requirements      The Plan is intended to conform to the extent necessary with all requirements of the New York Stock Exchange permitting an employee benefit plan to be adopted without stockholder approval, under the "broad-based" plan exemption as in effect on the date this Plan was adopted. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such exception. _______________      I hereby certify that the Plan was originally adopted by the Board of Directors of Sunrise Medical Inc. on February 28, 2000, without obtaining stockholder approval. Executed as of _______________, 2000.   > > > > > > > __________________________________________ > > > > > > > > > > > > > > Steven A. Jaye, Secretary > > > > > > > > > > > > > > _____
Date Name Address RE: Special Severance Agreement Dear               :             Carpenter Technology Corporation (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.             The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. If you agree, this letter will replace any prior special severance agreement.             In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2002 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than the October 31 preceding each such January 1, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, if a change in control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for the later of (i) the original or extended term or (ii) a period of twenty-four (24) months beyond the month in which such change in control occurred. Notwithstanding the foregoing, in no event shall the term of this Agreement extend beyond the date that you attain sixty-five years of age. 2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the stockholders of the Company approve 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 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (D) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets. i. Hidden text do not remove ii. For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company, (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s then outstanding securities, increases his beneficial ownership of such securities by 5% or more of the combined voting power of the Company’s then outstanding securities on the date hereof; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. You agree that, subject to the terms and conditions, of this Agreement, in the event of a potential change in control of the Company, you will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the occurrence of such potential change in control of the Company, (ii) the termination by you of your employment by reason of Disability or Retirement as defined in Subsection 3(i), or (iii) the occurrence of a change in control of the Company. 3. Termination Following Change in Control. If any of the events described in Subsection 2(i) hereof constituting a change in control of the company shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) hereof upon the subsequent termination of your employment during the term of this Agreement unless such termination is (A) because of your death, Disability or Retirement, (B) by the Company for Cause, or (C) by you other than for Good Reason. i. Disability; Retirement. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for twenty-four (24) consecutive months (or twelve (12) consecutive months if you have been employed by the Company for less than five (5) years as of the date your absence from full-time performance of duties under this Subsection begins), and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination with your consent in accordance with the Company’s Pension Plan (as hereafter defined) including early retirement, generally applicable to its salaried employees, provided, however, that termination based on "Retirement" shall not include retirement in conjunction with termination by you for Good Reason. ii. Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters ¾ of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. iii. Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in respect thereof: A. the assignment to you of any duties inconsistent with your present status as ______________________ of the Company (or such other title or titles as you may be holding immediately prior to the change in control of the Company) or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Company; B. a reduction by the Company in your annual base salary as in effect on the date of the change in control of the Company; C. the relocation of the Company’s principal executive offices to a location outside of Berks County, Pennsylvania (or, if different, the metropolitan area in which such offices are located immediately prior to the change in control of the Company) or the Company’s requiring you to be based anywhere other than the Company’s principal executive offices except for required travel on the Company’s business to an extent substantially consistent with your present business travel obligations; D. the failure by the Company, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; E. the failure by the Company to continue in effect any compensation plan in which you participate immediately prior to the change in control of the Company which is material to your total compensation, including but not limited to the Company’s stock option plans, Executive Annual Compensation Plan, Profit Sharing Plan for Employees of Carpenter Technology Corporation and the Flexible Savings Plan of Carpenter Technology Corporation or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control; F. the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under the Company’s General Retirement Plan for Employees of Carpenter Technology Corporation, Earnings Adjustment Plan of Carpenter Technology Corporation, Benefit Equalization Plan of Carpenter Technology Corporation, Supplemental Retirement Plan for Executives of Carpenter Technology Corporation and Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation (the "Pension Plan" or "Pension Plans") or under any of the Company’s other deferred compensation plans, life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy for officers in effect at the time of the change in control of the Company; G. the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or H. any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (iv) below (and, if applicable, the requirements of Subsection (ii) above); for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder, subject to the applicable notice requirements of Subsection (iv) below. iv. Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. A Notice of Termination given by you indicating termination for Good Reason pursuant to Subsection (iii) above must be communicated within six (6) months from the date on which the facts and circumstances believed by you to constitute such Good Reason first became known to you or reasonably ascertainable by you. v. Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated pursuant to Subsection (ii) or (iii) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Subsection (iii) above shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), 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 on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating whether or not specifically referenced in this Agreement when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability. Following a change in control of the Company, as defined by Subsection 2(i), upon termination of your employment or during a period of Disability you shall be entitled to the following benefits: i. During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive the benefits payable to you under the Company’s Salary Continuation Program, together with all other compensation payable to you during such period, until this Agreement is terminated pursuant to Section 3(i) hereof. Thereafter, or in the event your employment shall be terminated by the Company or by you for Retirement, or by reason of your death, your benefits shall be determined under the Company’s retirement, insurance and other compensation plans and programs then in effect in accordance with the terms of such programs. ii. If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, Disability, death or Retirement, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. iii. If your employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) by you for Good Reason, then you shall be entitled to the benefits provided below: A. the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due, except as otherwise provided below; B. in lieu of any further (i) salary payments to you for periods subsequent to the Date of Termination or (ii) payments to you under the Company’s Salary Continuation Program, the Company shall pay as severance pay to you a lump sum severance payment equal to two (2) times the sum of (x) your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof, and (y) a full annual bonus payment (without regard to actual attainment of all relevant performance goals) calculated by using the Executive Annual Compensation Plan Target Percentages found in section "J" of such plan, as amended on June 22, 2000, times your base salary referenced in (x), above ; C. in lieu of shares of common stock of the Company ("Company Shares") issuable upon exercise of outstanding options ("Options") or any related stock appreciation rights ("Rights"), if any, granted to you under the Long-Term Incentive Program (which Options and Rights shall be canceled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (i) the excess of the higher of the closing price of the Company’s Shares as reported on the New York Stock Exchange-Composite Tape on or nearest the Date of Termination (or, if not listed on such exchange, on the nationally recognized exchange or Quotation System on which trading volume in Company Shares is highest) or the highest per share price for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option or Right held by you (whether or not then fully exercisable), times (ii) the number of Company Shares covered by each such Option or Right; and D. an amount in cash equal to the sum of (i) the present value of your accrued benefit (determined by using the ongoing actuarial assumptions in effect immediately prior to your Date of Termination under the Company’s defined benefit plan in which you are a participant) under any Pension Plans or other defined benefit plan sponsored by the Company and (ii) your account balance under any defined contribution plan sponsored by the Company, in either case to the extent that such accrued benefit or account balance, as the case may be, shall not be fully vested at the time of your Date of Termination. E. In addition to the retirement benefits to which you are entitled under the Pension Plan or any successor plans thereto, the Company shall pay to you a lump sum amount, in cash, equal to the actuarial equivalent of the excess of (x) the retirement pension (determined as a straight life annuity commencing at Normal Retirement Age or, if later, two years after the Date of Termination) which you would have accrued under the terms of the Pension Plan (without regard to any amendment to the Pension Plan made subsequent to a change in control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) twenty-four (24) additional months of service credit thereunder at your highest annual rate of compensation during the twelve (12) months immediately preceding the Date of Termination, over (y) the retirement pension (determined as a straight life annuity commencing at Normal Retirement Age which you had then accrued pursuant to the provisions of the Pension Plan). For the purposes of this Section 4(iii)(E), the actuarial value of the retirement benefits shall be calculated as the present value of a single life annuity using the UP 1984 mortality table adjusted one year forward. The interest rate used in the calculation shall be the rate specified for purposes of determining the present value of lump sum distributions under section 417(e)(3) of the Code established for the second month preceding the date of your termination. F. The payments provided for in paragraphs (B),(C), (D) and (E), above, shall be made not later than the fifth day following the Date of Termination, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later then the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). G. The Company also shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such legal fees and legal expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made at the later of the times specified in paragraph (F) above, or within five (5) days after your request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. iv. Certain Additional Payments. A. If all, or any portion, of the payments or other benefits provided under any section of this Agreement, either alone or together with other payments and benefits which you receive or are entitled to receive from the Company or its affiliates, (whether or not under an existing plan, arrangement or other agreement) (collectively the "Payments") would constitute an excess "parachute payment" within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and would result in the imposition on you of an excise tax under section 4999 of the Code, (such excise tax, together with any interest and penalties related thereto, is hereinafter collectively referred to as the "Excise Tax") then, in addition to any other benefits to which you are entitled under this Agreement, you shall be entitled to receive an additional payment (a "Gross-Up Payment") in cash, in an amount such that after payment by you of all taxes (and any interest and penalties imposed with respect thereto) imposed upon the Gross-Up Payment, including, without limitation, (1) any income taxes, (2) any payroll taxes, including FICA and FUTA, and any state or local payroll taxes and (3) any Excise Tax, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. B. Unless you and the Company otherwise agree in writing, any determination required under this Section 4(iv), including without limitation, the amount of the Gross-Up Payment, shall be computed and made in writing by the independent public accountants engaged by the Company as its auditors, (the "Accountants"), whose determination shall be, subject to your reasonable approval of the calculations required under this Section 4(iv), conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this Section 4(iv), the Accountants may rely on reasonable, good faith interpretations concerning the application of section 280G and section 4999 of the Code. You and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4(iv). The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 4(iv). C. As a result of the uncertainty in the application of section 280G and section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that, as a result of Internal Revenue Service examination of your tax returns or otherwise, (i) an amount of Gross-Up Payment will not have been made by the Company that should have been made (an "Underpayment") or that (ii) an amount of Gross-Up Payment that has been made will be determined to have been in excess of the Gross-Up Payment actually required (an "Overpayment"). In the event that you are required to make an additional payment of any Excise Tax beyond that originally calculated by the Accountants, the Accountants shall determine the amount of the Underpayment that has occurred, taking into account all taxes described in (A) above, and any such Underpayment shall be promptly paid by the Company to you or to the Internal Revenue Service for your benefit. In the event that it is finally determined that an Overpayment has occurred, you agree that you shall promptly, and in any event within 30 days of such determination, refund the amount of the Overpayment, plus any interest actually paid to you with respect to the Overpayment, to the Company. D. The Company shall have the right with respect to the determination of either an Underpayment or an Overpayment to require you to appeal the assertion of any Underpayment or to claim, and sue for, a refund of any Excise Tax paid by you upon any Payment or Gross-Up Payment, provided that the Company shall promptly following your request, advance you all expenses, including counsel and accounting fees, that based on advice of your counsel or accountants, you may reasonably expect to incur in connection with any such proceeding. You agree that if the total of such advances exceeds the expenses incurred by you, you will refund the excess to the Company. Alternatively, the Company may undertake any such proceeding, in which case you agree that you shall cooperate with the Company, as the Company may reasonably request, in any such proceeding. v. If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then for a twenty-four (24) month period after such termination, the Company shall arrange to provide you at the Company’s expense with life, disability, accident, and health insurance benefits, as well as tax and financial planning services, substantially similar to those which you are receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this Subsection 4(v) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four (24) month period following your termination, and any such benefits actually received by you shall be reported to the Company. vi. You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise except as specifically provided in this Section 4. vii. In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you, at the respective time or times such payments are due, under the Pension Plans, the Flexible Savings Plan of Carpenter Technology Corporation and any other plan or agreement relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment for Good Reason following a change in control of the company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. i. Hidden text do not remove ii. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage pre-paid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless. such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled, at the Company’s expense, exclusively by arbitration in Berks County, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely,     By: Robert W. Cardy Chairman and Chief Executive Officer   Agreed to this ____ of June, 2000.     _____________________________ Name
EXHIBIT 10.4 EMPLOYMENT AGREEMENT SAKS INCORPORATED AND SUBSIDIARIES EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is entered into as of the 1st day of November 2000, by and between Saks Incorporated (the "Company"), and Brian J. Martin ("Executive").     Company and Executive agree as follows:     1. Employment. Company hereby employs Executive as Executive Vice President and General Counsel of Company or in such other capacity with Company and its subsidiaries as Company's Board of Directors shall designate.     2. Duties. During his employment, Executive shall devote substantially all of his working time, energies, and skills to the benefit of Company's business. Executive agrees to serve Company diligently and to the best of his ability and to use his best efforts to follow the policies and directions of Company's Board of Directors.     3. Compensation. Executive's compensation and benefits under this Agreement shall be as follows:         (a) Base Salary. Company shall pay Executive a base salary ("Base Salary") at a rate of no less than $400,000 per year. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law.         (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus with a target maximum of 60% of Base Salary based upon his performance in accordance with specific annual objectives, set in advance, all as approved by the Board of Directors.         (c) New Option Grant. Executive is granted a non-qualified option ("Option") to purchase 350,000 shares of Company common stock at an option price equal to the closing price of the stock at the close of business on November 1, 2000 (the "Grant Date"), as reported in the Wall Street Journal. The Option is granted pursuant to the Company's 1994 Amended and Restated Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable at the following times: to the extent of 20% on May 1, 2001, 20% on November 1, 2001, 20% on November 1, 2002, 20% on November 1, 2003, and 20% on November 1, 2004. The Option may be exercised up to ten (10) years from the Grant Date; provided, however, that 100% of the option shall be exercisable at the time the closing price of the Company common stock reaches $22 per share on any day, and Executive shall then have 6 months to exercise the option or it shall expire.         (d) Vesting of Restricted Stock Grants. Company has declared earned the 21,166 unvested shares of restricted stock granted under the TARSAP programs in 1996 and 1998. One third of those shares shall vest on each of the first three anniversaries of this Agreement provided that         (e) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the Company's 1994 Plan), any Options granted to Executive prior to such Change of Control shall immediately vest.    4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position.     5. Term. The term of this Agreement shall be for three years, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company without Cause, as defined below, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid in one lump sum.     In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any employee benefit arrangement or plan maintained by Company.     6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for Cause, in which event no salary or bonus shall be paid after termination for Cause. Termination for Cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "Cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's willful and continual material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors.         (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate.     7. Change in Control. If Executive's employment is terminated by Executive for "Good Reason" after a Change in Control, or by Company in any way connected with a Change in Control of Company or a Potential Change in Control of Company, as defined below, Executive shall receive a sum equal to three times his Base Salary then in effect, continuation in the Company's health plans for three years at no cost, and vesting in Company's Supplemental Savings Plan at the retirement rate. The phrase "Good Reason" shall mean: (1) a mandatory relocation, (2) a reduction in duties or status within the combined company as a result of or after the Change in Control with it being deemed good reason if R. Brad Martin in no longer Chairman of the Board of the combined company or the ultimate parent company, or (3) any time during the 13th month after a Change in Control the Executive terminates employment and deems it to be for Good Reason. If any payment, right or benefit provided for in this Agreement or otherwise paid to Executive by Company is treated as an "excess parachute payment" under Section 280(G)(b) of the Internal Revenue Code of 1986, as amended, (the "Code"), Company shall indemnify and hold harmless and make whole, on an after-tax basis, Executive for any adverse tax consequences, including but not limited to providing to Executive on an after-tax basis the amount necessary to pay any tax imposed by Code Section 4999.     As used herein, the term "Change in Control" means the happening of any of the following:         (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or         (b) As the 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, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or         (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period.     As used herein, the term "Potential Change in Control" means the happening of any of the following:         (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or         (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement.     8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year.     9. Non-competition; Unauthorized Disclosure.         (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of one year thereafter, Executive:             (i) shall not engage in any activities, whether as employer, proprietor, partner, stockholder (other than the holder of less than 5% of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (i) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (ii) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period;             (ii) shall not do business with any vendor that is one of the top 100 vendors of the businesses conducted by Company or its affiliates at the date hereof or at any time during the term of this Agreement; and             (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or his employment relationship.         (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of one year thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive).         (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9:             (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company or its affiliates or subsidiaries are actively engaged in the conduct of business while Executive is employed under this Agreement;             (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; provided, however, Company shall be entitled to injunctive relief only to protect itself from unfair competition of the type protected under Tennessee law.             (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and             (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company.     10. General Provisions.         (a) Notices. Any notice to be given hereunder by either party to the other may be effected in writing by personal delivery, mail, electronic mail, overnight courier, or facsimile. Notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt.         If to Executive: Brian J. Martin                                                           12 East 49th Street                          New York, NY 10017         If to Company:   James A. Coggin                                                            3455 Highway 80 West                          Jackson, MS 39209         (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way.         (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee.         (d) Entire Agreement. Except for any prior grants of options, restricted stock, or other forms of incentive compensation evidenced by a written instrument or by an action of the Board or Directors, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged.         (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach.         (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof.         (g) Attorney's Fees. If Executive brings any action to enforce his purported rights under this Agreement after a Change in Control, Company shall reimburse Executive for his reasonable costs, including attorney's fees, incurred. Company shall reimburse Executive as the costs are incurred and without regard to the outcome of the action.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.                               SAKS INCORPORATED                             BY: _____________________                                                                              James A. Coggin                                 President                                   _____________________                                                                              Brian J. Martin                                 Executive
Exhibit 10-40 ENERGY EAST CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS PURPOSE :      This Plan will permit each participating Director ("Participant") to defer receipt of all or a portion of his compensation as a Director of Energy East Corporation ("Energy East") (including compensation as a member of any committee of the Board of Directors) until the Participant's retirement as a Director of Energy East. EFFECTIVE DATE :      The Plan's effective date is September 6, 2000 and the compensation earned after that date may be deferred, provided a timely election is made in the manner described herein. The Plan may be terminated or modified by Energy East at any time for future years, and participation is at the sole discretion of each Director. ELIGIBILITY :      Except as otherwise provided herein, any Director of Energy East may elect to participate by executing a Deferred Compensation Schedule with Energy East, in the form attached hereto (Schedule A). A Director of Energy East who (i) commences service as a Director of Energy East (or first becomes eligible to receive compensation as a Director of Energy East) during a calendar year, (ii) immediately before commencing such service (or becoming eligible for compensation as a Director of Energy East) served as a director of New York State Electric & Gas Corporation ("NYSEG"), and (iii) was participating in a comparable deferred compensation plan of NYSEG shall be deemed to have elected, prior to January 1 of that calendar year, to participate in this Plan on terms comparable to the terms under which he participated in the deferred compensation plan of NYSEG. AMOUNTS DEFERRED :      A Director may elect to defer annually all or a specified part of the compensation otherwise payable to him as a Director of Energy East for the calendar year immediately following the date of election. With respect to the calendar year in which an individual becomes a Director, however, such Director may make an election to participate for that calendar year within 30 days after such individual becomes a Director. Similarly, with respect to the calendar year in which this Plan takes effect, an existing Director may elect within 30 days of the Plan's effective date to defer compensation for services performed by the Director after the Plan's effective date. The annual amount to be deferred in any subsequent calendar year may be eliminated, reduced or increased by the Director at any time prior to the commencement of the calendar year in which such amounts are due to be earned but not thereafter. The deferred amounts, including interest, shall be reflected in Energy East's accounts as a liability in favor of the Director but shall not be funded, nor shall any monies be set aside for this purpose, provided, however, that Energy East, in its discretion, may establish a trust to pay such amounts, which trust shall be subject to the claims of Energy East's creditors in the event of Energy East's bankruptcy or insolvency, and provided further, that Energy East shall remain responsible for the payment of any such amounts which are not so paid by any such trust. In any case, a Director shall have the status of a general unsecured creditor of Energy East with respect to such payments, and a Director's rights to the payments shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Director or the Director's beneficiary. INTEREST :      Semi-annually, at June 30 and December 31, Energy East will credit to each Director's deferred compensation amount an amount equal to simple interest computed daily by applying the prime interest rate from time to time established by The Chase Manhattan Bank, N.A. on short-term borrowing and compounded semi-annually on the aggregate balance of the deferred compensation amount on such date. PAYMENT OF AMOUNTS DEFERRED .      After the date the Director ceases to serve as a Director of Energy East for any reason ("Service Termination Date"), the accumulated amount deferred by a Director, with interest thereon from the tenth day of the calendar month next following the calendar month in which the Service Termination Date occurs, shall be paid to the Director in a lump some or in up to ten yearly installments that are in such percentages as the Director shall have selected. Such election must be made at the time that the Director elects for the first time to participate in the Plan. A Director may change, but only with Energy East's consent, his election of payment terms by executing and delivering to Energy East a new payment terms election. However, no such change shall be effective during the one-year period beginning with the day the Director executes a new payment terms election. If, during such one-year period, the Director becomes entitled to receive a payment or payments under the Plan pursuant to the Director's last effective payment terms election, said last effective payment terms election shall remain in full force and effect and the new election shall be null and void. Only one payment terms election shall be effective for a Director at any time. In the case of an unforeseeable emergency, however, payment may commence before the Director ceases to serve as a Director. For this purpose, an unforeseeable emergency means an event beyond the control of the Director that would result in severe financial hardship to the Director if early payment were not permitted. The amount of such early payment shall be limited to the amount necessary to meet the emergency. BENEFICIARY :      A Director may name a beneficiary or beneficiaries to receive his deferred compensation or balance thereof in the event of his death either prior to his retirement or while receiving payments following his retirement. Such beneficiary may be changed at any time by the Director by filing a notice in writing with the Secretary. Such change shall become effective upon the receipt thereof by the Secretary. OTHER PROVISIONS :      Any termination or modification of this Plan shall not affect rights previously accrued. Participation in the Plan shall in no way be considered an employment agreement or an independent commitment on the part of Energy East to continue the services of Director as Director. Energy East shall be the Plan Sponsor and the Plan Administrator. SCHEDULE A ENERGY EAST CORPORATION Election to Participate in the DEFERRED COMPENSATION PLAN FOR DIRECTORS Name                                                                                                                                  Address                                                                                                                                                                                                                                                                        Amount to be deferred:                                             % Deferral Commencement Date:                                                                 Payment Commencement Date: Corporation (      ) months after the Retirement as a Director of Energy East Mode of Payment:           (   ) single sum               (   )              equal installments (check one)            monthly            quarterly            annual (Note:  Mode of payment may be changed in accordance with the terms of the Deferred Compensation Plan for Directors) In the event of my death, I hereby designate the following beneficiaries for all sums accumulated under this Deferred Compensation Plan for my account: Primary                                     Secondary                                        (Note:  Beneficiary(s) may be changed at any time prior to death.) Mode of Payment to Primary Beneficiary:           (   ) single sum           (   )              equal annual installments (Note:  Mode of payment to primary beneficiary may be changed at any time prior to commencement of payment. Payments to secondary beneficiary will be in a single sum.) Dated:                                                                                                      Director                                                                     Secretary of Energy East Corporation
Exhibit 10.65 [ex10-65x1x1.jpg] AMENDMENT TO THE January 28, 2000          Revised : Aug. 15, 2000 ADOBE EUROPE “DIRECT” AGREEMENT (Original Sent : May 31, 2000) This Amendment to the Adobe Europe “Direct” Agreement (“Agreement”) is  between Adobe Systems Benelux B.V., a company incorporated in The Netherlands  and having a place of business at Europlaza, Hoogoorddreef 54a, 1101 BE Amsterdam ZO, The Netherlands (“Adobe”), and Sykes Europe Limited, a company  incorporated in Scotland under the Companies Act with registered number and  having its registered office at Nether Road, Galashiels, Selkirkshire, TD1 3HE  (hereinafter called “Sykes”). This replaces an original set sent via E-Mail on  May 31, 2000, which cannot be traced; and adds Item 3, Expansion of Countries for  Adobe Direct. Adobe and Vendor agree as follows: 1. Attachment 1. Adendum to Statement of Work encompassing Outbound Services, Version 1.1, Dated March 2000.      2. Attachment 2: Pricing – Adobe Outbound Services, Version 1.0   3. Attachment: Expansion of Countries to Adobe Direct program; including Pricing.   4. Other Provisions. All other provisions of the Agreement remain in full force and   effect.          ADOBE SYSTEMS BENELUX B.V. SYKES EUROPE LIMITED     /S/ /S/ -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Authorized Signature Authorized Signature     H. Evertse Harry A. Jackson Jr. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Printed Name Printed Name     Controller VP & MD -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Title Title     8/16/00 9/1/00 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Date Date -------------------------------------------------------------------------------- AMENDMENT TO ADOBE DIRECT CONTRACT – EXPANSION OF COUNTRIES   1. Additional countries Spain, Portugal, Italy, Denmark, Norway, Finland as agreed with local country managers.   2. Languages supported*  * Spanish * Italian * English         *Sykes note: English is not widely used in Portugal. We recommend that Portugese is included in the language cover.   3. Products to be offered All Adobe products including full version, upgrades and plug-ins as currently sold in direct countries.   Currencies Local currencies will be supported through the end of 2000. Starting 2001 the Euro will replace local currencies with the exception of Denmark and Norway.   Payment Requirement Sykes will accept credit card payment for all new direct countries.   4. Support Type Direct Sales will be supported by phone, fax and direct mail.   5. Call Volume Analysis   Existing Countries: Call volume per month French         [ * ]  Swiss         [ * ]   New Countries: Call volume per month   Italy          [ * ]  Spain         [ * ]  Portugal         [ * ]   * Confidential Treatment Requested -------------------------------------------------------------------------------- 6. Pricing     New Country Language Cover Price Denmark English See attachment : [ * ] Norway English See attachment : [ * ] Finland English See attachment : [ * ] Portugal English See attachment : [ * ] Italy Italian [ * ] Spain Spanish [ * ]   7. Staffing     English cover: N/A: Priced per transaction (Sykes estimate adding 2 English agents to ensure SLAs achieved)   Spanish & Italian: 3 agents will be recruited for the program.     8. Set up     Telephony Charge Line set up, per line per country [ * ]   9. Finance Charges   As per [ * ]   * Confidential Treatment Requested   -------------------------------------------------------------------------------- Adobe Outbound Services version 1.0 ORDER MANAGEMENT  FEE TYPE  CHARGE   Outbound Agent Activity      £ Outbound call minutes as measured by the switch [  *  ] [  *  ]             In-bound Sales - Enquiries:(referencing outbound campaign     code)           Inbound Telephone Enquiry [  *  ] [  *  ] Inbound Mail Enquiry [  *  ] [  *  ] Inbound Fax Enquiry [  *  ] [  *  ] Inbound E-mail Enquiry [  *  ] [  *  ]             In-bound Sales - Orders:(referencing outbound campaign code)           Telephone Order [  *  ] [  *  ] Fax Order [  *  ] [  *  ] Mail Order [  *  ] [  *  ] E-mail Order [  *  ] [  *  ] Web Orders [  *  ] [  *  ] Split orders [  *  ] [  *  ] RMA's [  *  ] [  *  ]             Training           Agent training time [  *  ] [  *  ] Train the Trainer time [  *  ] [  *  ]             Database Management:           normal management [  *  ] [  *  ] development [  *  ] [  *  ] database changes [  *  ] [  *  ] System Support:     Support & Additional development [  *  ] [  *  ]             Telebilling - Recharges:     Inbound Calls [  *  ]   Outbound Calls Recharge [  *  ]   Faxes Recharge [  *  ]   Phone/Fax line + machine Rental Recharge [  *  ]          * Confidential Treatment Requested Page 4 -------------------------------------------------------------------------------- ORDER FULFILLMENT  Fee Type  Charge   Sales Order Fulfillment:     Pick & Pack (per order) [  *  ] [  *  ]   [  *  ] [  *  ] RMA charges (excluding freight, duty, re-work and destruction where applicable) [  *  ] [  *  ]   Marketing insert per unit [  *  ] [  *  ]   Outbound Mail [  *  ] [  *  ] Rework [  *  ] [  *  ]   Inventory Management: Warehousing [  *  ] [  *  ]   Destruction of Stock (security skip) [  *  ] [  *  ]   System Support: Support & Additional development [  *  ] [  *  ]   Recharges: Freight [  *  ] [  *  ] Couriers from Calder House [  *  ] [  *  ] IBRS - Business Reply [  *  ] [  *  ]   FINANCE SERVICE  FEE TYPE  CHARGE Finance Management Fee: [  *  ] [  *  ] specific to any outbound campaign requirements out   Payment Processing [  *  ] [  *  ]  * Confidential Treatment Requested Page 5 -------------------------------------------------------------------------------- Adobe Order Management  Addendum to Statement of Work Encompassing Outbound Services Version1.1     March 2000 NOTE: All procedure charts in this Statement of Work are uncontrolled and are subject to change. 1  -------------------------------------------------------------------------------- Table of Contents -------------------------------------------------------------------------------- TABLE OF CONTENTS 2   EXECUTIVE SUMMARY 3         1.    ACCOUNT MANAGEMENT                 1.1 Account Management Structure & Responsibilities . 3               1.2 Core Operational Team 4         2.    OUTBOUND PROJECT CRITERIA 5               2.1 Call Targets. 5               2.2 Call Scripting 6               2.3 Agent Training 6         3.    OUTBOUND SALES ORDER PROCESSING 6               3.1 Customer Profiling 6               3.2 Revenue Generation 7         4.    REPORTING 7         5.    PRICING 7 2 -------------------------------------------------------------------------------- Executive Summary -------------------------------------------------------------------------------- This document describes the processes and environment under which Sykes will provide outbound telemarketing services to Adobe for Anti-Piracy campaigns and will also allow for the extension of existing order management services to include regular outbound sales programs. The Statement of Work (SOW) should be seen as a live document and updated as and when necessary. 1.      Account Management Overall responsibility for the performance and management of the Outbound services lies with the Client Group Manager (CGM). The CGM reports to the Call Centre Director who in turn reports to the Regional Director of Call Centre Services (CCS). 1.1    Account Management Structure & Responsibilities The Sykes organisational structure consists of a core management team dedicated to Adobe programmes with responsibility for delivering all aspects of a clients business, whether it is implementation of a project or discussing a new service. The Account or Project owner sit in the centre of the circle and call on the skills, knowledge and expertise of specialist functions within the organisation. These specialist functions would be from Telecommunications, MIS, Finance, Legal or Distribution. 1.1.1  Client Group Manager The CGM is responsible for the Client Group 1 overall performance and profitability. Key Objectives * Manage the relationship with Adobe and ensure satisfaction of outbound services delivered by Sykes. * Manage the relationship with other teams, functions and BU’s within the Sykes organisation. * Motivate and manage a core group of individuals to meet the KPI’s and business objectives of the outbound campaigns. * Work with Business Manager to prepare pricing and new initiative for Outbound programmes. 3 -------------------------------------------------------------------------------- 1.1.2  Program Manager Key Objectives * Co-ordinate all Outbound communication and feedback. * Provide project management within the team regarding implementation for extended or new business. * Provide the interface between Adobe Order Management and all aspects of Sykes’ business. * Prepare pricing for extension to existing services * Process management ownership. 1.2    Core Operational Team The outbound programmes will initially be run from within the existing pool of Direct sales agents until such time as the of outbound calls/number of programme initiatives increases to an extent to allow for a dedicated resource to be applied. 1.2.1  Senior Supervisor Key Objectives * Ensure Team Lead and agents are aware of KPI’s. * Monitor call performance and instigate corrective action to improve performance. * Propose process improvements. * Ensure ongoing training requirements are met. * Carry out recruitment selection of agents with Team Lead assistance. * Ensure processes are understood and adhered to. 1.2.2  Team Lead Key Objectives * Work with Senior Supervisor, program Manager and Agents to ensure individual performance to provide the highest service quality * Communicate policies and processes to agents. * Manage team call monitoring process. * Assist in team recruitment selection. 4  -------------------------------------------------------------------------------- 1.2.3  Agent Key Objectives * To provide a professional and efficient outbound service function on behalf of Adobe. * Handling of transactions for the outbound campaigns to the required KPI’s. * Ensuring customers are aware of appropriate services and programs on offer. 2.      Outbound Project Criteria The following sub-heading give details of the call centre criteria required for outbound campaigns – any campaigns requiring specific process changes will result in an amendment to this SOW. All customer contact is logged in Siebel and a full customer history maintained. 2.1    Call Targets Adobe will provide Sykes with all call target listings. Sykes understands that these will be generated either from a local Adobe office or from the central database managed by Sykes within Calder House, Edinburgh. Call target files should be submitted to Sykes in agreed format for each project to allow use of any predictive dialing tools which may become necessary. The call target files should have as a minimum the following information: * name * title * address * phone number * Adobe CSN (where applicable) It is understood that as the outbound services develop that further criteria can be added. 5  -------------------------------------------------------------------------------- 2.2    Call Scripting Adobe will provide Sykes with approved, and where necessary localised, call scripts for the outbound campaigns. Sykes understands that specific scripts will be developed for individual campaigns and that call testing may be required to determine the call lengths and suitability. 2.3    Agent Training Structured training will be a requirement for all outbound campaigns. The training shall encompass: * Call script training * Campaign training This training should be delivered by the appropriate Adobe resource sponsoring the campaign. Sykes will provide all call centre, systems, process and telemarketing training necessary for outbound projects. All training programmes will be scheduled with the Sykes Senior Supervisor. 3.      Outbound Sales Order Processing Sykes understands that for outbound campaigns there will be 2 main goals: 1) [    *    ] 2) [    *    ] 3.    Customer Profiling All profiling information gathered during an outbound call will be entered into the Seibel database as managed by Sykes. This will encompass: 1.     updating an existing customer record with new data received 2.     generating new customer records for customers not already present in the database         *     Confidential Treatment Requested   6  -------------------------------------------------------------------------------- 3.2    Revenue Generation A key element of all [   *   ] will be revenue generation through [   *   ]. * All sales will be processed as per the existing Sales Order Process detailed within the Order Management SOW. Existing KPI agreements will be adhered to unless otherwise agreed with Adobe. * All product fulfillments resulting from the sale function will be fulfilled from [   *   ] through the normal Direct Sales Order Fulfillment process as detailed in the Order Management SOW. Existing Fulfillment KPI agreements will be adhered to unless otherwise agreed with Adobe. All sales resulting from [   *   ] will be tagged, tracked and reported via [   *   ] assigned to each project. 4.      Reporting Sykes will be able to provide Adobe with the following reporting metrics: * [   *   ] including [   *   ] * [   *   ] * [   *   ] * [   *   ] * [   *   ] 5.      Pricing Pricing for out-bound services is detailed in the Pricing schedules attached to this statement of work. Sykes agree that the pricing for outbound will be reviewed after [   *   ]. * Confidential Treatment Requested 7  --------------------------------------------------------------------------------
EXECUTION COPY VOTING AND SUPPORT AGREEMENT       This Voting and Support Agreement dated as of December 13, 2000 between the stockholders identified on Exhibit A hereto (individually, a “Stockholder” and collectively, the “Stockholders”) and Network 1 Financial Corporation, a Virginia corporation (“Network 1”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).       In consideration of the execution by Network 1 of the Agreement and Plan of Merger dated as of December 12, 2000 (the “Merger Agreement”) by and among CyberCash, Inc., a Delaware Corporation (“CyberCash”), Blue Fish Acquisition Corp., and Network 1 and other good and valuable consideration, receipt of which is hereby acknowledged, the Stockholders and Network 1 hereby agree as follows:       1.      Representations, Warranties and Agreements of Stockholders. Each Stockholder hereby represents and warrants to, and agrees with, Network 1 as follows:                (a)      Title.  As of the date hereof, such Stockholder is the beneficial and registered owner of or has the power to vote the number of shares (collectively, the “Shares”) of common stock, $0.001 par value per share (“Common Stock”) set forth beside such Stockholder’s name on Exhibit A hereto. As of the date hereof, except as set forth on Exhibit A hereto, such Stockholder does not (i) beneficially own any shares of any class or series of capital stock of CyberCash (other than the Shares) or any securities convertible into or exercisable for shares of any class or series of CyberCash’s capital stock or (ii) have any options or other rights to acquire any shares of any class or series of capital stock of CyberCash or any securities convertible into or exercisable for shares of any class of CyberCash’s capital stock. Such Stockholder owns his or its Shares free and clear of any lien, mortgage, pledge, charge, security interest or any other encumbrance of any kind. Such Stockholder covenants and agrees to take any action necessary to insure that such Stockholder can carry out the terms of this Agreement.                (b)      Right to Vote and to Transfer Shares.  Such Stockholder has full legal power, authority and right to vote all of the Shares held by such Stockholder in favor of approval and adoption of the Merger Agreement without the consent or approval of, or any other action on the part of, any other person or entity, and except where the failure to obtain such consent or approval could not prevent or delay the performance by such Stockholder of his or its obligations under this Agreement in any material respect. Without limiting the generality of the foregoing, except for this Agreement and as set forth in Schedule 1B hereto, such Stockholder has not entered into any voting agreement or any other agreement with any person or entity with respect to any of the Shares, granted any person or entity any proxy (revocable or irrevocable) or power of attorney with respect to any of the Shares, deposited any of the Shares in a voting trust or entered into any arrangement or agreement with any person or entity limiting or affecting such Stockholder’s ability to enter into this Agreement or legal power, authority or right to vote the Shares in favor of the approval and adoption of the Merger Agreement or any of the transactions contemplated by the Merger Agreement, and such Stockholder will not take any such action after the date of this Agreement and prior to the CyberCash Special Meeting to vote on approval and - 1 - -------------------------------------------------------------------------------- EXECUTION COPY adoption of the Merger Agreement, including any adjournment or postponement thereof. This Agreement has been duly executed and delivered by such Stockholder and, assuming its due execution and delivery by Network 1, constitutes a valid and binding agreement of such Stockholder.       2.      Representations and Warranties of Network 1. Network 1 hereby represents and warrants to the Stockholders that this Agreement (i) has been duly authorized by all necessary corporate action, (iii) has been duly executed and delivered by Network 1 and (iii) is a valid and binding agreement of Network 1.       3.      Restriction on Transfer. Each Stockholder agrees that (other than pursuant to the Merger Agreement) such Stockholder will not, and will not agree to, sell, assign, dispose of, encumber, mortgage, hypothecate or otherwise transfer or encumber (collectively, “Transfer”) any of the Shares to any person or entity.       4.      Agreement to Vote of Stockholders. Each Stockholder, in his or its individual capacity as a stockholder of CyberCash only, hereby irrevocably and unconditionally agrees to vote or to cause to be voted all of the Shares beneficially held by such Stockholder, directly or indirectly, at the CyberCash Special Meeting and at any other annual or special meeting of stockholders of CyberCash where such matters arise (a) in favor of the approval and adoption of the Charter Amendment and the issuance of the Merger Shares, and (b) against (i) approval of any proposal made in opposition to or in competition with the Merger or any of the other transactions contemplated by the Merger Agreement, (ii) any merger, consolidation, sale of assets, business combination, share exchange, reorganization or recapitalization of CyberCash or any of its subsidiaries, with or involving any party other than Network 1 or one of its subsidiaries, (iii) any liquidation, dissolution or winding up of CyberCash, (iv) any extraordinary dividend by CyberCash, (v) any change in the capital structure of CyberCash (other than pursuant to the Merger Agreement) and (vi) any other action that may reasonably be expected to impede, interfere with, delay, postpone or attempt to discourage the Merger or the other transactions contemplated by the Merger Agreement or this Agreement or result in a breach of any of the covenants, representations, warranties or other obligations or agreements of CyberCash under the Merger Agreement which would materially and adversely affect CyberCash or its ability to consummate the transactions contemplated by the Merger Agreement. Each Stockholder further agrees not to take or commit or agree to take any action inconsistent with the foregoing.       5.      Action in Stockholder Capacity Only. Each Stockholder signs solely in such Stockholder’s capacity as a record and beneficial owner of the Shares held by him or it, and nothing herein shall prohibit, prevent or preclude such Stockholder from fulfilling his fiduciary duties as a director of CyberCash.       6.      No Shopping. Each Stockholder, in his or its individual capacity as a stockholder of CyberCash only, agrees not to, directly or indirectly, (i) solicit, initiate or encourage (or authorize any person to solicit, initiate or encourage) any inquiry, proposal or offer from any person relating to an acquisition proposal or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate - 2 - -------------------------------------------------------------------------------- EXECUTION COPY in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing that constitutes, or would reasonably be expected to lead to, an acquisition proposal; provided, that, notwithstanding the foregoing, a Stockholder shall not be prohibited from taking any such actions as are required, based upon advice of counsel, to comply with his fiduciary duties as an officer and/or director of CyberCash to the extent such actions are permitted under the Merger Agreement.       7.      Executed in Counterparts. This Agreement may be executed in counterparts each of which shall be an original with the same effect as if the signatures hereto and thereto were upon the same instrument.       8.      Specific Performance. The parties hereto agree that if for any reason a Stockholder fails to perform any of his or its agreements or obligations under this Agreement irreparable harm or injury to Network 1 would be caused for which money damages would not be an adequate remedy. Accordingly, each Stockholder agrees that, in seeking to enforce this Agreement against such Stockholder, Network 1 shall be entitled to specific performance and injunctive and other equitable relief in addition and without prejudice to any other rights or remedies, whether at law or in equity, that Network 1 may have against such Stockholder for any failure to perform any of his or its agreements or obligations under this Agreement.       9.      Amendments; Termination.                (a)      This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto.                (b)      The provisions of this Agreement shall terminate upon the earlier to occur of the Effective Time or the termination of the Merger Agreement pursuant to Section 6.1 thereof.                (c)      For purposes of this Agreement, the term “Merger Agreement” includes the Merger Agreement, as the same may be modified or amended from time to time.       10.    Additional Shares. If, after the date hereof a Stockholder acquires beneficial ownership of any shares of the capital stock of CyberCash (any such shares, “Additional Shares”), including, without limitation, upon exercise of any option, warrant or right to acquire shares of capital stock or through any stock dividend or stock split, the provisions of this Agreement (other than those set forth in Section 1(a)) applicable to the Shares shall be applicable to such Additional Shares as if such Additional Shares had been Shares as of the date hereof. The provisions of the immediately preceding sentence shall be effective with respect to Additional Shares without action by any person or entity immediately upon the acquisition by such Stockholder of beneficial ownership of such Additional Shares.       11.    Action by Written Consent. If, in lieu of the CyberCash Special Meeting, stockholder action in respect of the Merger Agreement or any of the transactions contemplated by the Merger Agreement is taken by written consent, the provisions of this Agreement imposing - 3 - -------------------------------------------------------------------------------- EXECUTION COPY obligations in respect of or in connection with the CyberCash Special Meeting shall apply mutatis mutandis to such action by written consent.       12.    Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal successors and permitted assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of Network 1 (in the case of a Stockholder or any of its permitted assigns) or the Stockholders (in the case of Network 1 or any of its permitted assigns).       13.    Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by facsimile, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto.       14.     Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule or law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.       15.    Entire Agreement. This Agreement constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof.       16.    Governing Law; Jurisdiction and Venue. This Agreement shall be governed by and construed in accordance with the internal laws (and not the law of conflicts) of the State of Delaware. The parties hereto hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Delaware and the United States of America located in the State of Delaware (the “Delaware Courts”) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agree not to commence any litigation relating thereto except in such courts), consent to the service of process in such Delaware Courts, waive any objection to the laying of venue of any such litigation in the Delaware Courts and agree not to plead or claim in any Delaware Court that such litigation brought therein has been brought in any inconvenient forum       17.    Exculpation. No Stockholder shall have any liability or obligation whatsoever under or by reason of this Agreement (or a separate similar agreement) because of a breach by any other stockholder of CyberCash of its obligations hereunder or thereunder. - 4 - -------------------------------------------------------------------------------- EXECUTION COPY * * * {Signatures on following page} - 5 - -------------------------------------------------------------------------------- EXECUTION COPY       IN WITNESS WHEREOF, the parties hereto have caused this Voting and Support Agreement to be duly executed as of the date first above written.   NETWORK 1 FINANCIAL CORPORATION   By: /s/ William G. Wade Name: William G. Wade Title: President and Chief Executive Officer   WILLIAM N. MELTON   By: /s/ William N. Melton William N. Melton   THE MELTON FOUNDATION   By: /s/ William N. Melton William N. Melton Title: Trustee   THE WILLIAM N. MELTON 1994 CHARITABLE REMAINDER ANNUITY TRUST   By: /s/ Torunn Meighan Name: Torunn Meighan Title: Trustee   THE WILLIAM N. MELTON 1995 CHARITABLE REMAINDER ANNUITY TRUST   By: /s/ Torunn Meighan Name: Torunn Meighan Title: Trustee - 6 - -------------------------------------------------------------------------------- EXECUTION COPY     EXHIBIT A       Name and Address Number of Shares of CyberCash Common Stock -------------------------------------------------------------------------------- --------------------------------------------------------------------------------       William N. Melton For himself and as Trustee of The Melton Foundation Torunn Meighan As Trustee for The William N. Melton 1994 and 1995 Charitable Remainder Annuity Trusts C/o Melton Investments 2086 Hunters Crest Way Vienna, VA 22181 4,815,498 Common Stock
THE MACERICH COMPANY ELIGIBLE DIRECTORS' DEFERRED COMPENSATION/PHANTOM STOCK PLAN (as Amended and Restated as of June 30, 2000) THE MACERICH COMPANY ELIGIBLE DIRECTORS' DEFERRED COMPENSATION/PHANTOM STOCK PLAN (as Amended and Restated as of June 30, 2000) TABLE OF CONTENTS Page ARTICLE I...............................................................................................1 ARTICLE II..............................................................................................1 2.1 Accounts.......................................................................................1 2.2 Average Fair Market Value......................................................................1 2.3 Award Date.....................................................................................1 2.4 Board of Directors.............................................................................1 2.5 Cash Account...................................................................................1 2.6 Change in Control Event........................................................................2 2.7 Code...........................................................................................2 2.8 Common Stock...................................................................................2 2.9 Committee......................................................................................2 2.10 Company........................................................................................2 2.11 Compensation...................................................................................2 2.12 Disability.....................................................................................2 2.13 Discount Rate..................................................................................2 2.14 Disinterested Director.........................................................................2 2.15 Distribution Subaccount........................................................................2 2.16 Dividend Equivalent............................................................................2 2.17 Dividend Equivalent Cash Account...............................................................2 2.18 Dividend Equivalent Stock Account..............................................................3 2.19 Effective Date.................................................................................3 2.20 Eligible Director..............................................................................3 2.21 Exchange Act...................................................................................3 i 2.22 Fair Market Value..............................................................................3 2.23 Interest Rate..................................................................................3 2.24 Plan...........................................................................................3 2.25 Plan Year......................................................................................3 2.26 Special Meeting Fees...........................................................................3 2.27 Stock Unit or Unit.............................................................................3 2.28 Stock Unit Account.............................................................................3 2.29 Unforeseeable Emergency........................................................................4 ARTICLE III.............................................................................................4 ARTICLE IV..............................................................................................4 4.1 Initial Elections..............................................................................4 4.2 Subsequent Annual Elections....................................................................4 ARTICLE V...............................................................................................5 5.1 Cash Account...................................................................................5 5.2 Stock Unit Account.............................................................................5 5.3 Dividend Equivalents; Dividend Equivalent Cash Account; Dividend Equivalent Stock Account......6 5.4 Vesting........................................................................................7 5.5 Distribution of Benefits.......................................................................8 5.6 Adjustments in Case of Changes in Common Stock................................................10 5.7 Company's Right to Withhold...................................................................10 5.8 Stockholder Approval..........................................................................11 ARTICLE VI.............................................................................................11 6.1 The Administrator.............................................................................11 6.2 Committee Action..............................................................................11 6.3 Rights and Duties.............................................................................11 6.4 Indemnity and Liability.......................................................................12 ARTICLE VII............................................................................................12 ARTICLE VIII...........................................................................................13 8.1 Limitation on Eligible Directors' Rights......................................................13 8.2 Beneficiaries.................................................................................13 8.3 Benefits Not Assignable; Obligations Binding Upon Successors..................................14 8.4 Governing Law; Severability...................................................................14 ii 8.5 Compliance With Laws..........................................................................14 8.6 Headings Not Part of Plan.....................................................................14 iii THE MACERICH COMPANY ELIGIBLE DIRECTORS' DEFERRED COMPENSATION/PHANTOM STOCK PLAN (as Amended and Restated as of June 30, 2000) ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES This Plan shall be known as "The Macerich Company Eligible Directors' Deferred Compensation/Phantom Stock Plan." The purpose of this Plan is to attract, motivate and retain experienced and knowledgeable directors of The Macerich Company by permitting them to defer compensation and affording them the opportunity to link that compensation to an equity interest in the Company. The total number of shares of Common Stock that may be delivered pursuant to awards under this Plan is 250,000, subject to adjustments contemplated by Section 5.6. ARTICLE II DEFINITIONS Whenever the following terms are used in this Plan they shall have the meaning specified below unless the context clearly indicates to the contrary: 2.1 Accounts shall mean an Eligible Director's Cash Account, Stock Unit Account, Dividend Equivalent Cash Account and Dividend Equivalent Stock Account. 2.2 Average Fair Market Value shall mean the average of the Fair Market Values of a share of Common Stock of the Company during the last 10 trading days preceding the Award Date. 2.3 Award Date with reference to elections under Section 4.2 shall mean the January 1 that next follows the date of an Eligible Director's election made pursuant to Section 4.2. Award Date with reference to elections under Section 4.1(a) shall mean August 3, 1994 and with reference to elections under Section 4.1(b) shall mean February 1, 1995. 2.4 Board of Directors shall mean the Board of Directors of the Company. 2.5 Cash Account shall mean the bookkeeping account maintained by the Company on behalf of each Eligible Director who elects to defer his or her Compensation and Special Meeting Fees in cash in accordance with Section 5.1. 1 2.6 Change in Control Event shall have the meaning specified for such term under The Macerich Company Amended and Restated 1994 Incentive Plan, as amended from time to time. 2.7 Code shall mean the Internal Revenue Code of 1986, as amended. 2.8 Common Stock shall mean the Common Stock of the Company. 2.9 Committee shall mean a Committee of the Board of Directors acting in accordance with Article VI and applicable Maryland law, or the Board of Directors. 2.10 Company shall mean The Macerich Company, a Maryland corporation, and its successors and assigns. 2.11 Compensation shall mean the annual retainer and regular meeting fees payable by the Company to an Eligible Director for a calendar year. 2.12 Disability shall mean a "permanent and total disability" within the meaning of Section 22(e)(3) of the Code. 2.13 Discount Rate shall mean an interest rate equal to 5% per annum. 2.14 Disinterested Director shall mean a member of the Board who is not generally disqualified from making decisions concerning this Plan or all actions hereunder under any applicable legal requirements, but in no event shall a member of the Board participate in any decision affecting only his or her benefits under this Plan. 2.15 Distribution Subaccount shall mean a subaccount of an Eligible Director's Account established to separately account for deferred Compensation (and Dividend Equivalents or other earnings or losses thereon) which are subject to different distribution elections. 2.16 Dividend Equivalent shall mean the amount of cash dividends or other cash distributions paid by the Company after January 31, 1995 on that number of shares of Common Stock equivalent to the number of Stock Units then credited to an Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account, which amount shall be allocated as additional Stock Units to the Eligible Director's Dividend Equivalent Stock Account or as additional deferrals to the Eligible Director's Dividend Equivalent Cash Account, as provided in Section 5.3. 2.17 Dividend Equivalent Cash Account shall mean the bookkeeping account maintained by the Company on behalf of an Eligible Director which is credited with Dividend Equivalents in the form of cash deferrals in accordance with Section 5.3. 2 2.18 Dividend Equivalent Stock Account shall mean the bookkeeping account maintained by the Company on behalf of an Eligible Director which is credited with Dividend Equivalents in the form of Stock Units in accordance with Section 5.3, and includes, to the extent applicable, any Distribution Subaccount. 2.19 Effective Date shall mean July 29, 1994. 2.20 Eligible Director shall mean a member of the Board of Directors of the Company who is compensated in such capacity and (as to any outstanding Account balances under this Plan) any such person who has Account balances under the Plan. 2.21 Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time. 2.22 Fair Market Value shall mean on any date the closing price of the stock on the Composite Tape, as published in the Western Edition of The Wall Street Journal, of the principal securities exchange or market on which the stock is so listed, admitted to trade, or quoted on such date, or, if there is no trading of the stock on such date, then the closing price of the stock as quoted on such Composite Tape on the next preceding date on which there was trading in such shares; provided, however, if the stock is not so listed, admitted or quoted, the Committee may designate such other exchange, market or source of data as it deems appropriate for determining such value for purposes of this Plan. 2.23 Interest Rate shall mean the rate that is 120% of the federal long-term rate for compounding on a quarterly basis, determined and published by the Secretary of the United States Department of Treasury under Section 1274(d) of the Code, for the month in which interest is credited. 2.24 Plan shall mean The Macerich Company Eligible Directors' Deferred Compensation/Phantom Stock Plan, as amended from time to time. 2.25 Plan Year shall mean the applicable calendar year. 2.26 Special Meeting Fees shall mean the meeting fees which are paid by the Company after January 31, 1995 to an Eligible Director for meetings during a deferral period in addition to the regular meetings contemplated at the time of a deferral election for that deferral period. 2.27 Stock Unit or Unit shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of Common Stock of the Company solely for purposes of this Plan. 3 2.28 Stock Unit Account shall mean the bookkeeping account maintained by the Company on behalf of each Eligible Director which is credited with Stock Units in accordance with Section 5.2, and includes, to the extent applicable, any Distribution Subaccount. 2.29 Unforeseeable Emergency shall mean a severe financial hardship to the Eligible Director resulting from a sudden and unexpected illness or accident of the Eligible Director or a dependent of the Eligible Director, loss to the Eligible Director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Eligible Director. The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case. Examples of what are not considered to be Unforeseeable Emergencies include the need to send an Eligible Director's child to college or the desire to purchase a home, absent destruction or severe damage to the Eligible Director's existing home. ARTICLE III PARTICIPATION Each Eligible Director shall become a participant in the Plan by electing to defer his or her Compensation or Special Meeting Fees in accordance with Article IV. ARTICLE IV DEFERRAL ELECTIONS 4.1 Initial Elections. (a) Initial Election for Compensation Earned from July 31, 1994 through December 31, 1994. On or before July 31, 1994, each Eligible Director may make an irrevocable election to defer 100% of the portion of his or her Compensation payable for services to be rendered by the Eligible Director from July 31, 1994 through December 31, 1994 in (1) cash, in accordance with Section 5.1, or (2) Stock Units in accordance with Section 5.2. Such election shall be in writing on forms provided by the Company and approved by the Committee. (b) Initial Election for Compensation and Special Meeting Fees Earned during 1995, 1996 and 1997. On or before July 31, 1994, each Eligible Director may make an irrevocable election to defer 100% of the portion of his or her Compensation and Special Meeting Fees payable for services to be rendered by the Eligible Director during the next one, two, or three calendar years in (1) cash, in accordance with Section 5.1, or (2) Stock Units, in accordance with Section 5.2. Such election shall be in writing on forms provided by the Company and approved by the Committee. 4.2 Subsequent Annual Elections. On or before the date set forth in the applicable election agreement, each Eligible Director may make an irrevocable election to defer all or a portion (in 10% increments) of his or her Compensation and/or Special Meeting Fees payable for services to be rendered by the Eligible Director during the next one, two, or three calendar years in (a) cash, in accordance with Section 5.1, or (b) Stock Units, in accordance with Section 5.2. Such election shall be in writing on forms provided by the Company and approved by the Committee. 4 ARTICLE V DEFERRAL ACCOUNTS 5.1 Cash Account. If an Eligible Director elects in accordance with Article IV to defer his or her Compensation and Special Meeting Fees in cash, the Committee shall establish and maintain a Cash Account for the Eligible Director under the Plan, which account shall be a memorandum account on the books of the Company. An Eligible Director's Cash Account shall be credited as follows: (a) As of the last day of each calendar quarter, the Committee shall credit the Eligible Director's Cash Account with an amount equal to the elected percentage of the Compensation deferred by the Eligible Director during such quarter; (b) As of the date payment of any Special Meeting Fees would otherwise be made, the Eligible Director's Cash Account shall be credited with an amount equal to the elected percentage of the Eligible Director's Special Meeting Fees; and (c) As of the last day of each calendar quarter, the Eligible Director's Cash Account shall be credited with earnings equal to an amount determined by multiplying the balance credited to such account as of the last day of the preceding quarter by one-fourth of the Interest Rate. 5.2 Stock Unit Account. (a) Regular Compensation. If an Eligible Director elects pursuant to Article IV to defer his or her Compensation in Stock Units, the Committee shall credit on the Award Date to the Stock Unit Account of the Eligible Director a number of Units determined by dividing the present value of the Compensation deferred by the Eligible Director by the Average Fair Market Value of a share of Common Stock. The present value shall be computed assuming the Compensation deferred would have been paid on the first day of the calendar year to which it relates at the prevailing rate of Compensation at the time of the election made in accordance with Article IV, discounted to present value using the Discount Rate. Notwithstanding the preceding, for purposes of a Stock Unit election made pursuant to Section 4.1(a), the number of Units to be credited on the Award Date shall be determined by dividing the Compensation deferred by the Average Fair Market Value of a share of Common Stock. (b) Special Meeting Fees. If an Eligible Director has elected in accordance with Article IV to defer his or her Special Meeting Fees in Stock Units, the Committee shall, as of the date payment of any Special Meeting Fees would otherwise be made, credit the Eligible Director's Stock Unit Account with an amount of Units determined by dividing the amount of the Eligible Director's Special Meeting Fees deferred by the Fair Market Value of a share of Common Stock as of such date. 5 (c) Limitations on Rights Associated with Units. An Eligible Director's Stock Unit Account shall be a memorandum account on the books of the Company. The Units credited to an Eligible Director's Stock Unit Account shall be used solely as a device for the determination of the number of shares of Common Stock to be eventually distributed to such Eligible Director in accordance with this Plan. The Units shall not be treated as property or as a trust fund of any kind. All shares of Common Stock or other amounts attributed to the Units shall be and remain the sole property of the Company, and each Eligible Director's right in the Units is limited to the right to receive shares of Common Stock in the future as herein provided. No Eligible Director shall be entitled to any voting or other shareholder rights with respect to Units granted under this Plan. The number of Units credited under this Section shall be subject to adjustment in accordance with Section 5.6. (d) Credited Units Not Vested. The Units credited to an Eligible Director's Stock Unit Account shall only become vested in accordance with Section 5.4(a). 5.3 Dividend Equivalents; Dividend Equivalent Cash Account; Dividend Equivalent Stock Account. (a) Allocation of Dividend Equivalents. Each Eligible Director shall, at the time of making an election in accordance with Article IV, elect to have all Dividend Equivalents attributable to Units credited to his or her Stock Unit Account credited to either (1) the Eligible Director's Dividend Equivalent Cash Account in accordance with subsection (b) below or (2) the Eligible Director's Dividend Equivalent Stock Account in accordance with subsection (c) below. Such election shall be irrevocable and shall remain in effect with respect to all Stock Units credited to the Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account in accordance with the Eligible Director's election made pursuant to Article IV. (b) Dividend Equivalent Cash Account. If an Eligible Director elects to have Dividend Equivalents credited to his or her Dividend Equivalent Cash Account, the Committee shall, as of each dividend payment date, credit the Eligible Director's Dividend Equivalent Cash Account with an amount equal to the amount of Dividend Equivalents. In addition, as of the last day of each calendar quarter, the Eligible Director's Dividend Equivalent Cash Account shall be credited with earnings in an amount equal to that determined by multiplying the balance credited to such account as of the last day of the preceding quarter by an amount equal to one-fourth of the Interest Rate. (c) Dividend Equivalent Stock Account. If an Eligible Director elects to have Dividend Equivalents credited to his or her Dividend Equivalent Stock Account, the Committee shall, as of each dividend payment date, credit the Eligible Director's Dividend Equivalent Stock Account with an amount of Units determined by dividing the amount of Dividend Equivalents by the Fair Market Value of a share 6 of Common Stock as of such date. The Units credited to an Eligible Director's Dividend Equivalent Stock Account shall be subject to adjustment under Section 5.6. (d) Credited Dividends Account Not Vested. Amounts credited to the Dividend Equivalent Cash Account or the Dividend Equivalent Stock Account shall only become vested in accordance with Sections 5.4(a) or (c), as the case may be. 5.4 Vesting. (a) Stock Unit Account; Dividend Equivalent Stock Account. The rights of each Eligible Director in respect of his or her Stock Unit Account and Dividend Equivalent Stock Account shall vest as the Eligible Director's services (to which the deferred Compensation and deferred Special Meeting Fees relate) are rendered. Accordingly, effective as of the date the Eligible Director ceases to be a member of the Board, the number of Units credited to the Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account shall be reduced to the number of Units that would have been in such accounts on the date the Eligible Director ceased to serve on the Board had the Compensation and Special Meeting Fees the Eligible Director elected to defer included only Compensation and Special Meeting Fees payable for the period of actual service as a director, less any vested Units previously distributed as shares of Common Stock pursuant to the Eligible Director's election to receive installment payments and/or a distribution under Section 5.5(d) or (e). For purposes of calculating the number of Units that would have been credited to the Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account, the Eligible Director's annual retainer shall be prorated for the year of cessation on a monthly basis. Notwithstanding the preceding sentence, if an Eligible Director ceases to be a member of the Board by reason of death or Disability, or upon or following a Change in Control Event, the Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account shall immediately become fully vested. (b) Cash Account. The rights of each Eligible Director in respect of his or her Cash Account shall at all times be fully vested. (c) Dividend Equivalent Cash Account. The rights of each Eligible Director in respect of his or her Dividend Equivalent Cash Account shall vest as the Eligible Director's services (to which the deferred Compensation and deferred Special Meeting Fees relate) are rendered. Accordingly, effective as of the date the Eligible Director ceases to be a member of the Board, the Company shall reduce any amount credited to the Eligible Director's Dividend Equivalent Cash Account by an amount equal to any Dividend Equivalents (together with any related earnings) attributable to any Units which are forfeited in accordance with Section 5.4(a) and/or previously distributed as shares of Common Stock in accordance with the Eligible Director's election to receive installment payments and/or a distribution under Section 5.5(d) or (e). Notwithstanding the preceding, if an Eligible Director ceases to be a member of the Board by reason of death or Disability, or upon or following a Change in Control Event, the Eligible Director's Dividend Equivalent Cash Account shall immediately become fully vested. 7 5.5 Distribution of Benefits. (a) Time and Manner of Distribution. Each Eligible Director shall be entitled to receive a distribution of the vested portion of his or her Accounts upon his or her termination from service on the Board or at such time as may be elected by the Eligible Director at the time of an election under Article IV and set forth in writing on forms provided by the Company. The benefits payable under this Plan shall be distributed to the Eligible Director (or, in the event of his or her death, the Eligible Director's Beneficiary) in a lump sum or, if elected by the Eligible Director in writing on forms provided by the Company at least 12 months in advance of the date benefits become distributable under subsection (a), in annual installments for up to 10-years. An Eligible Director shall be permitted to make a different election with respect to each annual deferral period as to the time and manner in which his or her benefits shall be distributed. For each Eligible Director who makes one or more distribution elections pursuant to this Section 5.5(a), each of his or her Accounts shall be divided into two or more Distribution Subaccounts as necessary to separately account for deferrals which are payable at different times and/or in different manners. For purposes of calculating installments, the Eligible Director's vested Accounts (and Distribution Subaccounts if applicable) will be valued as of December 31 of each year, and divided by the number of remaining installments to determine the amount of the installment to be paid in the following year. Subsequent installments will be adjusted accordingly for the next calendar year, according to procedures established by the Committee. Such installment payments shall commence as of the date benefits become distributable under this Section 5.5(a). (b) Change in Time or Manner of Distribution. Notwithstanding subsection (a): (1) An Eligible Director may elect to further defer the commencement of any distribution to be made with respect to benefits payable under this Plan by filing a new written election with the Committee on a form approved by the Committee; provided, however, that (A) no such new election shall be effective until 12 months after such election is filed with the Committee, (B) no such new election shall be effective with respect to any Account(s) after the distribution of benefits with respect to such Account(s) shall have commenced, and (C) no more than three new elections with respect to each annual deferral period shall be valid as to any Eligible Director. An election made pursuant to this Section 5.5(b)(1) shall not affect the manner of distribution (i.e., lump sum versus installments), the terms of which shall be subject to Section 5.5(a) above or Section 5.5(b)(2) below. (2) An Eligible Director may change the manner of any distribution election from a lump sum to annual installments (or vice versa) made with respect to amounts credited under his or her Accounts by filing a written election with the Committee on a form provided by the 8 Committee; provided, however, that no such election shall be effective until 12 months after such election is filed with the Committee, and no such election shall be effective if it is made with respect to any Account(s) after the distribution of benefits with respect to such Account(s) have commenced. An election made pursuant to this Section 5.5(b)(2) shall not affect the date of the commencement of benefits. (3) On or before September 30, 2000, an Eligible Director may make a one-time, irrevocable election (subject to other express provisions of this Plan), on forms provided for this purpose, to receive a distribution of his or her accumulated balances under this Plan as of September 30, 2000 on: (A) a date elected by the Eligible Director, but in no event before 2003, or (B) the earlier of a date elected by the Eligible Director, but in no event before 2003, or the date of his or her termination of service from the Board. The benefits payable under such an election shall be distributed to the Eligible Director (or in the event of his or her death, the Eligible Director's Beneficiary) in a lump sum or, if elected by the Eligible Director in writing on forms provided by the Company at least 12 months in advance of the date benefits become distributable under Section 5.5(a) above, in annual installments for up to 10 years, as so elected. (c) Effect of Change in Control Event. Notwithstanding subsections (a) and (b), if a Change in Control Event and a termination of service occurs, the vested portions of an Eligible Director's Accounts shall be distributed immediately in a lump sum. (d) Early Distributions. Each Eligible Director (which for purposes of this Section 5.5(d) includes former Eligible Directors) shall be permitted to elect to withdraw not less than 50% of the vested portion of his or her Accounts, reduced by the withdrawal penalty described below, prior to the applicable payment date(s) or payment commencement date(s) ("Early Distributions"), subject to the following restrictions: (1) The election to take an Early Distribution shall be made in writing on a form provided by and filed with the Committee; (2) The amount of the Early Distribution shall equal 90% of the amount the Eligible Director has elected to withdraw; and (3) The remaining 10% of the amount the Eligible Director has elected to withdraw shall be permanently forfeited, and the Eligible Director or his or her Beneficiary shall have no rights with respect to such forfeited amounts. Notwithstanding the foregoing, the Eligible Director's Accounts will continue to vest in accordance with Section 5.4 and the Dividend Equivalent Stock Account and/or Dividend Equivalent Cash Account of such Eligible Director shall continue to be credited with Dividend Equivalents in accordance with Section 5.3. 9 (e) Distribution for Unforeseeable Emergencies. An Eligible Director (which for purposes of this Section 5.5(e) includes former Eligible Directors) may request a distribution for an Unforeseeable Emergency without penalty of an amount not greater than the value of the Eligible Director's vested benefit under this Plan. Such distribution for an Unforeseeable Emergency shall be subject to approval by the Committee in its sole discretion and may be made only to the extent necessary to satisfy the hardship and only from vested amounts credited to his or her Accounts. The Committee may treat a distribution as necessary for an Unforeseeable Emergency if it relies on the Eligible Director's written representation, without actual knowledge to the contrary, that the hardship cannot reasonably be relieved (1) through timely reimbursement or compensation by insurance or otherwise or (2) by liquidation of the Eligible Director's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. Amounts distributed pursuant to this Section 5.5(e) shall be distributed first from an Eligible Director's Cash and Dividend Equivalent Cash Accounts, and, to the extent the balance of the Participant's Cash and Dividend Equivalent Cash Accounts is not sufficient to satisfy the severe financial hardship, next as a distribution of shares of the Company's Common Stock with a Fair Market Value equal to such deficiency from the vested portion of such Eligible Director's Stock Unit and Dividend Equivalent Stock Accounts. (f) Form of Distribution. Stock Units credited to an Eligible Director's Stock Unit Account and Dividend Equivalent Stock Account shall be distributed in an equivalent whole number of shares of the Company's Common Stock. Fractions shall be disregarded. Amounts credited to an Eligible Director's Cash Account and vested in the Eligible Director's Dividend Equivalent Cash Account shall be distributed in cash. (g) Small Benefit Exception. Notwithstanding any other provision of this Plan to the contrary , if at the time of any distribution the vested balance remaining in an Eligible Director's Cash Account or Dividend Equivalent Cash Account is less than $2,000 or, if the number of vested Units credited to the Eligible Director's Stock Unit Account or Dividend Equivalent Stock Account is less than 100, then such remaining vested balances shall be distributed in a lump sum. 5.6 Adjustments in Case of Changes in Common Stock. If any stock dividend, stock split, recapitalization, merger, consolidation, combination or exchange of shares, sale of all or substantially all of the assets of the Company, split-up, split-off, spin-off, liquidation or similar change in capitalization or any distribution to holders of the Company's Common Stock (other than cash dividends and cash distributions) shall occur, proportionate and equitable adjustments shall be made in the number and type of shares of Common Stock or other property reserved and of Units (both credited and vested) under this Plan. 5.7 Company's Right to Withhold. The Company shall satisfy any state or federal income tax withholding obligation arising upon distribution of an Eligible Director's accounts by reducing the number of shares of Common Stock otherwise 10 deliverable to the Eligible Director by the appropriate number of shares, valued at the average of the Fair Market Values of a share of Common Stock during the last 10 trading days preceding the date of distribution, required to satisfy such tax withholding obligation. If the Company, for any reason, cannot satisfy the withholding obligation in accordance with the preceding sentence, the Eligible Director shall pay or provide for payment in cash of the amount of any taxes which the Company may be required to withhold with respect to the benefits hereunder. 5.8 Stockholder Approval. This Plan, and all the elections, actions and accruals with respect to Stock Units and Dividend Equivalents made prior to stockholder approval, was originally approved by the stockholders of the Company at their 1995 annual meeting. Amendments to the Plan have been approved by the Board of Directors pursuant to Article VII. ARTICLE VI ADMINISTRATION 6.1 The Administrator. The Committee hereunder shall consist of two (2) or more Disinterested Directors appointed from time to time by the Board of Directors to serve as the administrator of this Plan at its pleasure. Any member of the Committee may resign by delivering a written resignation to the Board of Directors. Members of the Committee shall not receive any additional compensation for administration of this Plan. 6.2 Committee Action. The Committee may, for the purpose of administering this Plan, choose a Secretary who may be, but is not required to be, a member of the Committee, who shall keep minutes of the Committee's proceedings and all records and documents pertaining to the Committee's administration of this Plan. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant in this Plan. The Secretary may execute any certificate or other written direction on behalf of the Committee. Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or by unanimous written consent of its members. 6.3 Rights and Duties. Subject to the limitations of this Plan, the Committee shall be charged with the general administration of this Plan and the responsibility for carrying out its provisions, and shall have powers necessary to accomplish those purposes, including, but not by way of limitation, the following: (a) To construe, interpret and administer this Plan; (b) To resolve any questions concerning the amount of benefits payable to an Eligible Director (except that no member of the Committee shall participate in a decision relating solely to his or her own benefits); (c) To make all other determinations required by this Plan; 11 (d) To maintain all the necessary records for the administration of this Plan; and (e) To make and publish forms, rules and procedures for elections under and for the administration of this Plan. The determination of the Committee made in good faith as to any disputed question or controversy and the Committee's determination of benefits payable to Eligible Directors shall be conclusive. In performing its duties, the Committee shall be entitled to rely on information, opinions, reports or statements prepared or presented by: (1) officers or employees of the Company whom the Committee believes to be reliable and competent as to such matters; and (2) counsel (who may be employees of the Company), independent accountants and other persons as to matters which the Committee believes to be within such persons' professional or expert competence. The Committee shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of such persons. The Committee may delegate ministerial, bookkeeping and other non-discretionary functions to individuals who are officers or employees of the Company. 6.4 Indemnity and Liability. All expenses of the Committee shall be paid by the Company and the Company shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. No member of the Committee shall be liable for any act or omission of any other member of the Committee nor for any act or omission on his or her own part, excepting only his or her own willful misconduct or gross negligence. To the extent permitted by law, the Company shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, excepting only expenses and liabilities arising out of his or her own willful misconduct or gross negligence, as determined by the Board of Directors. ARTICLE VII PLAN CHANGES AND TERMINATION The Board of Directors shall have the right to amend this Plan in whole or in part from time to time or may at any time suspend or terminate this Plan; provided, however, that no amendment or termination shall cancel or otherwise adversely affect in any way, without his or her written consent, any Eligible Director's rights with respect to Stock Units and Dividend Equivalents credited to his or her Stock Unit Account, Dividend Equivalent Cash Account or Dividend Equivalent Stock Account which are then vested (assuming solely for such purposes a voluntary termination of services as of the date of such amendment or termination) or to any amounts previously credited to his or her Cash Account. Any amendments authorized hereby shall be stated in an instrument in writing, and all Eligible Directors shall be bound thereby upon receipt of notice thereof. 12 It is the current expectation of the Company that this Plan shall be continued for a period of 20 years following the date of Board approval of this Plan, but continuance of this Plan is not assumed as a contractual obligation of the Company. In the event that the Board of Directors decides to discontinue or terminate this Plan, it shall notify the Committee and participants in this Plan of its action in an instrument in writing, and this Plan shall be terminated at the time therein set forth, and all participants shall be bound thereby. In such event, the then vested benefits of an Eligible Director shall be distributed in accordance with the manner of distribution elected by him or her under Section 5.5. ARTICLE VIII MISCELLANEOUS 8.1 Limitation on Eligible Directors' Rights. Participation in this Plan shall not give any Eligible Director the right to continue to serve as a member of the Board or any rights or interests other than as herein provided. No Eligible Director shall have any right to any payment or benefit hereunder except to the extent provided in this Plan. This Plan shall create only a contractual obligation on the part of the Company as to such amounts and shall not be construed as creating a trust. This Plan, in and of itself, has no assets. Eligible Directors shall have only the rights of general unsecured creditors of the Company with respect to amounts credited or vested and benefits payable, if any, on their Accounts. 8.2 Beneficiaries. (a) Beneficiary Designation. Upon forms provided by the Company each Eligible Director may designate in writing the Beneficiary or Beneficiaries (as defined in Section 8.3(b)) whom such Eligible Director desires to receive any amounts payable under this Plan after his or her death. An Eligible Director from may from time to time change his or her designated Beneficiary or Beneficiaries without the consent of such Beneficiary or Beneficiaries by filing a new designation in writing with the Committee. However, if a married Eligible Director wishes to designate a person other than his or her spouse as Beneficiary, such designation shall be consented to in writing by the spouse. The Eligible Director may change any election designating a Beneficiary or Beneficiaries without any requirement of further spousal consent if the spouse's consent so provides. Notwithstanding the foregoing, spousal consent shall not be necessary if it is established that the required consent cannot be obtained because the spouse cannot be located or because of other circumstances prescribed by the Committee. The Company and the Committee may rely on the Eligible Director's designation of a Beneficiary or Beneficiaries last filed in accordance with the terms of this Plan. (b) Definition of Beneficiary. An Eligible Director's "Beneficiary" or "Beneficiaries" shall be the person, persons, trust or trusts so designated by the Eligible Director or, in the absence of such designation, entitled by will or the laws of descent and distribution to receive the Eligible Director's benefits under this Plan in the 13 event of the Eligible Director's death, and shall mean the Eligible Director's executor or administrator if no other Beneficiary is identified and able to act under the circumstances. 8.3 Benefits Not Assignable; Obligations Binding Upon Successors. Benefits of an Eligible Director under this Plan shall not be assignable or transferable and any purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under this Plan, or any interest therein, other than by operation of law or pursuant to Section 8.2, shall not be permitted or recognized. Obligations of the Company under this Plan shall be binding upon successors of the Company. 8.4 Governing Law; Severability. The validity of this Plan or any of its provisions shall be construed, administered and governed in all respects under and by the laws of the state of incorporation of the Company. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 8.5 Compliance With Laws. This Plan and the offer, issuance and delivery of shares of Common Stock and/or the payment of money through the deferral of compensation under this Plan are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law) and to such approvals by any listing, agency or any regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. 8.6 Headings Not Part of Plan. Headings and subheadings in this Plan are inserted for reference only and are not to be considered in the construction of the provisions hereof. 14 THE MACERICH COMPANY ELIGIBLE DIRECTORS' DEFERRED COMPENSATION/PHANTOM STOCK PLAN 2000 ANNUAL ELECTION AGREEMENT __________________________________________________________________________________________ A. DEFERRAL ELECTIONS. (Complete items 1, 2 and 3 below) 1. Compensation. I hereby irrevocably elect to defer _____% (must choose an increment of 10% with a minimum deferral of 10% and a maximum deferral of 100%) of the annual retainer and regular meeting fees that will become payable to me for my services to be rendered during the ___ (insert one of the following: 1, 2 or 3) calendar year period(s) commencing on January 1 following the date of this election in the following manner. (Initial the option you choose in the space provided): (a) _________ In Cash. Such amount shall be credited as a bookkeeping account maintained (Initial) for me upon the terms provided in the Plan. (b) _________ In Stock Units. Such amount shall be credited in the form of stock units to a (Initial) bookkeeping account maintained for me upon the terms provided in the Plan. 2. Special Meeting Fees. I hereby irrevocably elect to defer _____% (must choose an increment of 10% with a minimum deferral of 10% and a maximum deferral of 100%) of the special meeting fees that will become payable to me for my services to be rendered during the ___ (insert one of the following: 1, 2 or 3) calendar year period(s) commencing on January 1 following the date of this election in the following manner. (Initial the option you choose in the space provided): (a) _________ In Cash. Such amount shall be credited as a bookkeeping account maintained (Initial) for me upon the terms provided in the Plan. (b) _________ In Stock Units. Such amount shall be credited in the form of stock units to a (Initial) bookkeeping account maintained for me upon the terms provided in the Plan. 3. Dividend Equivalents. I hereby irrevocably elect to defer 100% of any Dividend Equivalents attributable to stock units credited on my behalf under the Plan pursuant to this Election Agreement which accrue thereon in the following manner. (Initial the option you choose in the space provided): (a) _________ In Cash. The deferred amounts shall be credited to a bookkeeping account (Initial) maintained on my behalf upon the terms provided in the Plan. (b) _________ In Stock Units. The deferred amounts shall be credited in the form of stock units (Initial) to a bookkeeping account maintained on my behalf upon the terms provided in the Plan. 1 B. DISTRIBUTION ELECTIONS. 1. Commencement of Distribution. I hereby irrevocably agree to have the vested amounts credited in my bookkeeping accounts under the Plan pursuant to my elections in Section A above distributed on the date indicated by me below, or as soon as practicable thereafter, except as may be otherwise provided in the Plan. I understand and agree that if no box is checked and initialed, the deferred amounts will be paid commencing on the January 1 following my separation from service. (Initial the option you choose in the space provided): (a) _________ The January 1 following the date of termination of board service. (Initial) (b) _________ January 1, _________ (specify year) (must be no earlier than 2004*). (Initial) (c) _________ The earlier of (a) or (b) above. (Initial) 2. Manner of Distribution. I hereby further agree that the number of payments to me of vested amounts deferred through this agreement (together with any earnings thereon) for the periods indicated in Part A shall be paid to me commencing on the date indicated above in accordance with my choice below. If no box is checked and initialed, I understand and agree the deferred amounts will be paid in a lump sum. (Initial the option you choose): (a) _________ A single lump sum; or (Initial) (b) _________ Substantially equal annual installments (subject to adjustment under Section (Initial) 5.5(a)) over ________ years (specify number of years; must not exceed 10). Remaining balances of less than $2,000 or 100 shares shall be paid in a lump sum. C. SIGNATURE. I understand and agree that (1) this Annual Election Agreement is subject to the terms of the Plan, (2) the deferral and distribution elections specified in Part A and B of this Annual Election Agreement are irrevocable except as provided in Section 5.5 of the Plan, and (3) this Annual Election Agreement must be filed by September 30, 2000 with: Richard A. Bayer, General Counsel, 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401. I acknowledge and agree to the following terms of this Annual Election Agreement. _______________________________________ ____________________________ (Director's Signature) (Date) __________________________________________________________________ (Print Name) ______________________ *Note that this election refers to amounts earned during the entire period elected in Sections A.1 and A.2. 2 THE MACERICH COMPANY ELIGIBLE DIRECTORS' DEFERRED COMPENSATION/PHANTOM STOCK PLAN CHANGE ELECTION AGREEMENT __________________________________________________________________________________________ A. DEFERRAL ELECTIONS CHANGE. (Complete the items below if you want to change any prior elections) I hereby elect to change my elections with respect to the "Commencement of Distributions" and/or "Manner of Distributions" for the following period(s). (Check the appropriate box if you want to change an election for any period). (1) July 31, 1994 through December 31, 1994 ___ (2) January 1, 1995 through December 31, 1995 ___ (3) January 1, 1996 through December 31, 1996 ___ (4) January 1, 1997 through December 31, 1997 ___ (5) January 1, 1998 through December 31, 1998 ___ (6) January 1, 1999 through December 31, 1999 ___ (7) January 1, 2000 through December 31, 2000 ___ PLEASE INDICATE BELOW WHAT CHANGES YOU WANT TO HAVE MADE WITH RESPECT TO YOUR PRIOR ELECTIONS FOR THE ABOVE PERIODS. IF YOUR CHANGES ARE NOT THE SAME FOR EACH PERIOD CHECKED, PLEASE USE A SEPARATE FORM FOR EACH DIFFERENT CHANGE. B. DISTRIBUTION ELECTIONS. 1. Commencement of Distributions. I hereby agree to have the vested amounts in my bookkeeping accounts under the Plan pursuant to my elections for the periods indicated above distributed on the date indicated by me below, or as soon as practicable thereafter, except as may be otherwise provided in the Plan. Since I have previously elected to receive all deferred distributions upon termination of my board service I understand I may only change this election to one of the following options. I understand and agree this new election will be irrevocable except as permitted by Section 5.5 of the Plan. (Initial the option you choose in the space provided only if you want to change your prior election(s)): (a) _________ January 1, ________ (specify year) (must be no earlier than 2003). (Initial) (b) _________ The earlier of the January 1 following the date of termination of (Initial) my board service or January 1, ________ (specify year) (must be no earlier than 2003). 1 2. Manner of Distributions. I hereby further agree that the number of payments to me of vested amounts deferred through this agreement (together with any earnings thereon) for the periods indicated in Part A shall be paid to me commencing on the date indicated in Part B(1) in accordance with my choice below. Since I have previously elected to receive all deferred distributions in a single lump sum I understand I may only change this election to the following option. I understand and agree this new election will be irrevocable except as permitted by Section 5.5 of the Plan. (Initial and provide the information in the spaces provided only if you want to change your prior election(s)): (a) _________ Substantially equal annual installments (subject to adjustment under Section (Initial) 5.5(a)) over _____ years (specify number of years; must not exceed 10). Remaining balances of less than $2,000 or 100 shares shall be paid in a lump sum. C. SIGNATURE. I understand and agree that (1) this Change Election Agreement is subject to the terms of the Plan, (2) the deferral and distribution elections specified in Part A and Part B of this Change Election Agreement are irrevocable except as provided in Section 5.5 of the Plan, and (3) this Change Election Agreement must be filed by September 30, 2000 with: Richard A. Bayer, General Counsel, 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401. I acknowledge and agree to the following terms of this Change Election Agreement. _______________________________________ ____________________________ (Director's Signature) (Date) __________________________________________________________________ (Print Name) 2
 Exhibit 10.19 LEASE BY AND BETWEEN VEF III FUNDING, LLC as Landlord and INTERLEAF, INC. as Tenant      for premises located at 400 Fifth Avenue, Waltham, MA   -------------------------------------------------------------------------------- Table of Contents     Page         SECTION 1 Reference Data 1 Section 1.1. Reference Information 1 Section 1.2. Exhibits 3     SECTION 2 Premises and Term 4 Section 2.1. Premises 4 Section 2.2. Term 5 Section 2.3. Option to Extend Term 5 Section 2.4 Right of First Offer On Available Space 5 Section 2.5 Right of First Refusal On Second Floor Space 6     SECTION 3 Construction 6 Section 3.1. Premises As Is; Landlord's Work 6 Section 3.2. Preparation of Premises for Occupancy 7 Section 3.3. Construction Representatives. 7 Section 3.4. Tenant Improvement Allowance 8     SECTION 4 Annual Rent 8 Section 4.1. The Annual Rent 8 Section 4.2. Market Rent 9     SECTION 5 Operating Cost Escalation 10 Section 5.1. Operating Cost Escalation 10 Section 5.2. Estimated Operating Cost Escalation Payments 12 Section 5.3. Real Estate Tax Escalation Payments 12     SECTION 6 Insurance 13 Section 6.1. Tenant's Insurance 13 Section 6.2. Landlord's Insurance 14 Section 6.3. Tenant Reimbursement of Certain Insurance Costs. 14 Section 6.4. Requirements Applicable to Insurance Policies. 14 Section 6.5. Waiver of Subrogation 15     SECTION 7 Landlord's Covenants 15 Section 7.1. Quiet Enjoyment 15 Section 7.2. Maintenance and Repair 15 Section 7.3. Exterior Common Areas and Facilities 16 Section 7.4. Heating and Air Conditioning 16 Section 7.5. Electricity 16     --------------------------------------------------------------------------------     Page           Section 7.6. Cleaning       17   Section 7.7. Interruptions 17   Section 7.8. Tenant's Access to Building       18   SECTION 8 Tenant's Covenants 18   Section 8.1. Use       18   Section 8.2. Repair and Maintenance 18   Section 8.3. Compliance with Law and Insurance Requirements       19   Section 8.4. Tenant's Work 19   Section 8.5. Indemnity.       20   Section 8.6. Landlord's Access 20   Section 8.7. Alterations to Building       21   Section 8.8. Personal Property at Tenant's Risk 22   Section 8.9. Payment of Landlord's Cost of Enforcement.       22   Section 8.10. Yield Up 22   Section 8.11. Estoppel Certificate       22   Section 8.12. Landlord's Expenses Re Consents 23   Section 8.13. Rules and Regulations       23   Section 8.14. Holding Over. 23   Section 8.15. Assignment and Subletting       23   Section 8.16. Overloading and Nuisance 25 SECTION 9 Casualty or Taking       25   Section 9.1. Termination 25   Section 9.2. Restoration       26   Section 9.3. Award 26 SECTION 10 Default       27   Section 10.1. Events of Default 27   Section 10.2. Remedies       28   Section 10.3. Remedies Cumulative 28   Section 10.4. Landlord's Right to Cure Defaults       28   Section 10.5. Effect of Waivers of Default 29   Section 10.6. No Accord and Satisfaction       29   Section 10.7. Interest on Overdue Sums; Late Charge 29 SECTION 11 Mortgages       30   Section 11.1. Rights of Mortgage Holders 30   Section 11.2. Subordination and Attornment       30   Section 11.3. Subordination of Mortgage 31   Section 11.4. Provisions       31   SECTION 12 Miscellaneous Provisions 31   Section 12.1. Notices from One Party to the Other       31   Section 12.2. Quiet Enjoyment 32   Section 12.3. Lease Not to be Recorded; Notice of Lease       32       --------------------------------------------------------------------------------       Section 12.4. Bind and Inure; Limitation of Landlord's Liability. 32       Section 12.5. Acts of God 32       Section 12.6. Landlord's Default. 32       Section 12.7. Brokerage 33       Section 12.8. Miscellaneous 33       Section 12.9. Security Deposit 33       Section 12.10. Waiver of Trial By Jury 35       Section 12.11. No Surrender or Release 35       Section 12.12. No Representations 35       Section 12.13. No Money Damages 35       Section 12.14. Financial Statements 36       Section 12.15. Tenant's Signage 36       Section 12.16. Operation of Cafeteria 36       Section 12.17. Renovation of Lobby and Cafeteria 36       Section 12.18. Rooftop Installations 36       Section 12.19. Generator Pad 37       Section 12.20. Confidentiality Agreement 37 -------------------------------------------------------------------------------- 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:          Date of this Lease: March __, 2000          Premises: The following portions (shown on Exhibit A) of the building (the "Building") on the lot (the "Lot") shown on Exhibit B, situated at 400 Fifth Avenue, Waltham, MA: (a) a portion of the First Floor of the Building (the "First Floor Premises"), (b) a portion of the Second Floor of the Building (the "Second Floor Premises"), (c) the entire rentable square footage of the Third Floor of the Building (the "Third Floor Premises") and (d) the entire rentable square footage of the Fourth Floor of the Building (the "Fourth Floor Premises"), all as shown on the plans attached hereto as Exhibit A. The First Floor Premises is comprised of two components: (i) the area shown on Exhibit A-1 as the "First Floor First Stage Premises" and (ii) the area shown on Exhibit A-1 as the "First Floor Second Stage Premises".         Landlord:     VEF III Funding, LLC, a Delaware limited liability company          Address of Landlord:     c/o Lend Lease Real Estate Investments, Inc.                                                  101 Arch Street, Boston, MA 02110          Tenant: Interleaf, Inc., a Massachusetts corporation         Address of Tenant:     Before Term Commencement Date: 62 Fourth Avenue, Waltham, MA                                               On and after Term Commencement Date: at the Premises          Landlord's Construction Representative: Lynn Scarbo, Meredith & Grew Incorporated          Tenant's Construction Representative: Kevin Fitzgibbon, Interleaf, Inc.         Term Commencement Date:      (I) July 1, 2000 (the "Initial Term Commencement Date"), with respect to the Third Floor Premises, the Fourth Floor Premises, the - Second Floor Premises and the "First Floor First Stage Premises", and (II) the earlier of (i) the date that Tenant occupies the same for purposes of commencing its business 1 -------------------------------------------------------------------------------- operations or (ii) October 1, 2000 (such earlier date shall be referred to herein as the "First Floor Second Stage Premises Term Commencement Date) with respect to the "First Floor Second Stage Premises."   Term:    See Section 2.2   Extension Term:  One five (5) year period beginning on the first day after the expiration of the original term.   Premises Square Footage: First Floor Premises:      Approximately 14,188 rentable square feet (of which the First Floor First Stage Premises consists of 8,603 rentable square feet and the First Floor Second Stage Premises consists of 5,585 rentable square feet) Second Floor Premises: Approximately 12,229 rentable square feet Third Floor Premises:  Approximately 20,079 rentable square feet Fourth Floor Premises: Approximately 20,079 rentable square feet   Building Square Footage: 114,531 rentable square feet   Annual Rent: (a) For the period (the "First Initial Rental Period") beginning on the Initial Term Commencement Date and ending on the day before the First Floor Second Stage Premises Term Commencement Date: $1,646,730 per annum ($137,227.50 per month) (b) For the period (the "Second Initial Rental Period") beginning on the first day after the end of the First Initial Rental Period and ending on the day before the third anniversary of the Initial Term Commencement Date: $1,797,525 per annum ($149,793.75 per month) (c) For the period beginning on the first day after the expiration of the Second Initial Rental Period and continuing for a period of three years and three months: 2 --------------------------------------------------------------------------------       $ 1,930,675 per annum  ($160,889.58 per month)  Notwithstanding the above: (i) Tenant shall not be obligated to make the payments of Annual Rent due for the ninety (90) day period commencing on the Initial Term Commencement Date with respect to the Second Floor  Premises, the Third Floor Premises, the Fourth Floor Premises and the First Floor First Stage Premises; and (ii) the monthly payments of Annual Rent for the first three (3) months of the Second Initial Rental Period for the Premises shall be abated by $12,566.25 per month.   Annual Base Operating Costs: An amount equal to Landlord's Operating Costs (as defined in Section 5.1 of the Lease) for calendar year 2001.   Tax Base Amount: An amount equal to Landlord's Tax Expenses Allocable to the Premises (as defined in Section 5.3 of the Lease) for the tax fiscal year ending June 30, 2002.   Tenant's Estimated Electrical Charge:  $66,575 per annum Permitted Uses: For general office purposes. Public Liability Insurance Limit:  Combined single limit of $5,000,000, or greater amount as reasonably required by Landlord from time to time. Tenant's Proportionate Fraction:     58.13% Security Deposit:    $1,100,506.50  Broker:  Meredith & Grew Incorporated and Cushman & Wakefield of Massachusetts, Inc.      Section 1.2.     Exhibits.     The following Exhibits are attached to and incorporated in this Lease:                      Exhibit A: Plans of Premises                     Exhibit B: Description of Lot                      Exhibit C: Parking Area                      Exhibit D: Cleaning Specifications                      Exhibit E: Rules and Regulations                      Exhibit F: DOME Right of First Offer Space  3 -------------------------------------------------------------------------------- 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 to any and all existing encumbrances and other matters of record and subject to the terms and provisions of this Lease, excepting and reserving to Landlord the exterior walls of the Building and further reserving to Landlord the right to place above the dropped ceiling and/or below the floor in the Premises and behind the perimeter walls of the Premises utility lines, pipes, equipment and the like, to serve premises other than the Premises, and to replace and maintain and repair such utility lines, pipes, equipment and the like in, over and upon the Premises as may have been or may be installed by Landlord in the Building. To the extent that the City of Waltham shall require the same, Landlord also reserves the right, on behalf of the other tenants and occupants of the Building, to utilize and to grant to such tenants and occupants and the parties referred to in the next sentence the right to utilize a portion or portions (collectively the "Emergency Access Portion") of the First Floor Second Stage Premises as shall be necessary in Landlord's reasonable discretion as a means of secondary access and egress to and from the Building for fire emergency purposes in the case of a potential fire and the resulting activation of the fire alarm for the Building. To the extent that such means of secondary access and egress via the Emergency Access Portion shall be required by the City of Waltham, Landlord and its tenants and other occupants of the Building and the employees, agents, contractors and invitees of such tenants and occupants shall be entitled to utilize the Emergency Access Portion for emergency fire access and egress purposes only. If such Emergency Access Portion shall be so utilized, Landlord shall install and maintain, at Landlord's expense, electronic or magnetic locking devices on the doors for the Emergency Access Portion that causes such doors to automatically delock when the fire alarm for the Building is activated due to a potential fire and shall have the right to install any necessary devices so as to connect the same with Landlord's emergency fire alarm system.              The Premises are leased together with the right of Tenant to use the parking areas located on the Lot, in such locations thereon as are designated from time to time by Landlord, for parking (free of a usage charge) by its customers, employees, suppliers and visitors, in common with others from time to time entitled thereto (said parking areas and locations being identified on the plan attached hereto as Exhibit "C"). Tenant's rights to use the parking areas, however, shall be limited to 3.3 spaces per 1,000 square feet of rentable square footage of the Premises. Tenant's usage of such number of parking spaces shall be on an unassigned and unreserved basis. Landlord shall have the right to monitor Tenant's usage of such parking spaces and Landlord shall have the right to establish reasonable rules and regulations with respect to the usage of such parking spaces. Landlord reserves the right from time to time, and at Landlord's sole discretion and after written notice, to alter, reduce or redesign the parking area and to temporarily close portions of the parking area, or to relocate the ingress and egress to and from the parking area and the Building; provided, however, that Landlord's actions shall not result in a permanent diminution of the number of parking spaces Tenant is entitled to use hereunder. Notwithstanding any supervision or control over any parking area on the Lot which Landlord may undertake pursuant to this Lease or otherwise, Tenant acknowledges 4 -------------------------------------------------------------------------------- and agrees that Landlord shall not be responsible or obligated hereunder to furnish any security or security services to any parking areas.          Tenant and its employees shall also have the right to use, in common with others entitled thereto, the hallways, stairways, and elevator(s), if any, necessary for access and egress to the Premises and other common areas of the Building.          Section 2.2.     Term.     TO HAVE AND TO HOLD for a term (hereinafter such term plus any extensions hereof shall be referred to herein as the "term" or "Term") beginning on July 1, 2000 (the "Term Commencement Date") and continuing for a period of six (6) years and three (3) months (the "original term").          Section 2.3.     Option to Extend Term.     Tenant shall have the option to extend the term of this Lease beyond the original term for the Extension Term, provided (i) no default in the obligations of Tenant under this Lease shall exist at the time such option is exercised or as of the first day of the Extension Term; (ii) the original Tenant itself (or "BroadVision" [as such entity is defined herein]) shall be in occupancy of at least 75% of the Premises as of the first day of the Extension Term; and (iii) Tenant shall give notice to Landlord of its exercise of such option not less than one (1) year prior to expiration of the original term. All of the terms and provisions of this Lease shall be applicable during the Extension Term except that (a) Tenant shall have no option to extend the term of the Lease beyond the Extension Term and (b) Annual Rent for the Extension Term shall be the Market Rent, as defined in Section 4.2, as of the first day of the Extension Term but in no event less than the per annum Annual Rent in effect in the last full year of the original term.      Section 2.4         Right of First Offer On Available Space. Commencing as of the date after the Term Commencement Date on which the Building is 100% leased to tenants and continuing until the date which is three (3) years prior to the last day of the original term, subject to the rights of existing tenants to lease such space, and provided that (i) the original Tenant itself (or Broadvision) is in occupancy of at least 70% of the Premises at the time of Tenant's notice under this Section 2.4; and (ii) no default in the obligations of Tenant hereunder shall exist at the time of Tenant's notice under this Section 2.4, in the event that any space in the Building shall become available for leasing to any tenant (other than the then existing tenant of such space), prior to marketing such space, Landlord shall give Tenant notice of the availability of such space and the rent and other terms and conditions on which Landlord is willing to lease such space. Without limiting the generality of the foregoing sentence, Tenant recognizes and agrees that DOME imaging systems, inc. ("DOME"), an existing tenant of the Building, shall have, until such time as the "DOME Right of First Offer Space" shall have been hereafter leased under a new lease to a third party, a superior right of first offer on that approximately 5,154 rentabl e square feet of space located on the fifth floor of the Building shown on Exhibit F hereto as the "DOME Right of First Offer Space". If DOME exercises its right of first offer to lease the DOME Right of First Offer Space, however, Tenant's right of first offer to lease the DOME Right of First Offer Space 5 -------------------------------------------------------------------------------- shall not arise prior to the date that the term of Landlord's lease with DOME for such DOME Right of First Offer Space (including any extensions of such term) expires or is sooner terminated.          If (a) Tenant shall not give Landlord notice of Tenant's desire to lease the space identified in Landlord's notice under the prior paragraph within ten (10) days after Landlord's notice or (b) Landlord and Tenant shall not execute and deliver an amendment to this Lease adding such space to the Premises in a mutually acceptable form within twenty (20) days after Tenant gives such notice, Landlord shall be free to lease such space to any other party at any time and from time-to-time thereafter on such terms as Landlord shall determine.          Section 2.5     Right of First Refusal On Remaining Second Floor Space. Provided that (i) no sublease or subleases shall be in effect at the time of Tenant's notice under this Section 2.5; and (ii) no default in the obligations of Tenant hereunder shall exist at the time of Tenant's notice under this Section 2.5, in the event that Landlord enters into a letter of intent with another party prior to July 1, 2000 for the remaining (i.e., exclusive of the Second Floor Premises leased to Tenant under this Lease) space on the second floor of the Building, prior to consummating a lease pursuant to such letter of intent (the "Second Floor Letter of Intent"), Landlord shall give Tenant notice of the Second Floor Letter of Intent whereupon Tenant shall have the right to lease all (but not just a portion) of the space described in the Second Floor Letter of Intent on the same terms applicable to the Premises, subject to the next sentence. If (a) Tenant shall not give Landlord notice of Tenant's desire to lease the space described in the Second Floor Letter of Intent on the same terms applicable to the Premises hereunder within three (3) business days after Landlord's notice or (b) Landlord and Tenant shall not execute and deliver an amendment to this Lease adding such space to the Premises in a mutually acceptable form within fifteen (15) days after Tenant gives such notice, Landlord shall be free to lease such space to the party identified in the Second Floor Letter of Intent. SECTION 3 Construction          Section 3.1     Premises As Is; Landlord's Work. Except for Landlord's obligation to perform the work described on Schedule 1 hereto ("Landlord's Work"), the Premises shall be leased to Tenant in "as is" condition without any further obligation on the part of Landlord to perform any construction therein or to prepare the same for Tenant's occupancy or otherwise. Landlord's Work shall be completed in a good and workmanlike manner employing materials of good quality and so as to conform with all applicable building, fire, health and other codes, regulations, ordinances and laws, and with all applicable insurance regulations. Upon the completion of Landlord's Work, Tenant shall have the right to perform, at Tenant's sole cost and expense, an air quality test(s) of the Premises, and upon the completion of such test(s), Tenant shall provide a copy of the results of such test(s) to Landlord. Any alterations, improvements, additions or construction to the Premises proposed by Tenant shall be subject to Section 8.4 of this Lease. Without limiting the generality of the prior sentence, 6 -------------------------------------------------------------------------------- Tenant shall not perform any of such proposed work prior to the date on which Landlord's Work shall have been substantially completed.          Section 3.2.     Preparation of Premises for Occupancy. Landlord agrees to use reasonable efforts to substantially complete construction of Landlord's Work for the Third Floor Premises, the Fourth Floor Premises and the First Floor First Stage Premises on or before May 15, 2000 and, with respect to the First Floor Second Stage Premises, within forty-five (45) days after the existing tenant (i.e., as of the date of this Lease) vacates the same in its entirety (which vacation date is currently scheduled for June 30, 2000). Without limiting the provisions of the prior sentence, the times for completion of construction of Landlord's Work shall be extended by the duration of any delay referred to in Section 12.5 and by the duration of any delays caused by any of the existing tenants in failing to vacate the same on the dates scheduled for such vacation. If for any reason Landlord does not deliver possession of the Third Floor Premises, the Fourth Floor Premises and the First Floor First Stage P remises to Tenant by the Initial Term Commencement Date (unless such failure is caused by Tenant), all rent and other payments due hereunder shall be proportionately abated until delivery of such space in order to reflect the space not so delivered. If for any reason Landlord does not deliver possession of the First Floor Second Stage Premises by the First Floor Second Stage Premises Term Commencement Date (unless such failure is caused by Tenant) the rent and other payments for the First Floor Second Stage Premises shall be abated until delivery of such space to Tenant. Notwithstanding the provisions of this paragraph, if Landlord shall fail for any reason to deliver possession of any portion of the Premises by December 31, 2000, Tenant shall have the right to terminate this Lease by notice given to Landlord on or before January 10, 2001 but only as to the portion not so delivered by December 31, 2000, and not as to any other portions delivered prior to December 31, 2000; provided, however, that if Landlord shall fail to deliver for any reason possession of at least 25% of the Premises by December 31, 2000, Tenant shall have the right to terminate the entire Lease by notice given to Landlord on or before January 10, 2001.          Landlord's Work for a particular floor of the Premises shall be deemed substantially complete on the date on which construction of the same shall have been substantially completed in accordance with Schedule 1 (with the exception of items that can be completed without material interference to Tenant's construction work), as reasonably certified by Landlord's contractor.          Landlord warrants that it has good and legal title to the premises, the Building and Lot and has full authority to enter into this Lease and demise the premises to Tenant.          Section 3.3.     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.          Section 3.4.     Tenant Improvement Allowance. Landlord shall provide Tenant with a tenant improvement allowance in an amount not exceeding $798,900 in the aggregate (the 7 -------------------------------------------------------------------------------- "Allowance") to reimburse Tenant for the costs incurred by Tenant in performing initial leasehold improvements to the Premises and for the other items described below in this Section 3.4, including but not limited to architectural and engineering consulting costs, moving costs, telecommunications equipment and installations and the purchase of office furniture, but subject, however, to the limitations described in the next paragraph.          The Allowance shall be paid to Tenant (in increments of not less $50,000), upon the submission to Landlord of a written requisition with copies of invoices supporting the costs sought to be reimbursed and, if applicable, (a) lien waivers from Tenant's contractors and (b) a certificate from Tenant's architect certifying to the completion of the percentage of work sought to be reimbursed. Landlord shall pay each such approved requisition within twenty (20) days of its receipt. Notwithstanding the foregoing, Landlord shall only be obligated to pay such requisition submitted by Tenant up to the aggregate amount of the Allowance and only to the extent that the amount described in such requisition shall be included in the budget for Tenant's work that has been approved in writing by Landlord prior to May 15, 2000. At least 50% of the Allowance shall be expended for permanent leasehold improvements to the Premises, telecommunications wirin g, equipment and installations, and architectural and engineering costs, and no more than 50% of the Allowance shall be expended for moving costs, the purchase of office furniture and other consultants' costs.          In no event, however, shall Landlord be obligated (i) to make any payments to Tenant on account of the Allowance prior to the Term Commencement Date or (ii) to make any payments to Tenant on account of the Allowance for requisitions received from Tenant after January 1, 2001, except if Tenant's failure to submit a requisition prior to January 1, 2001 shall be due to Landlord's inability to deliver any portion of the Premises by November 1, 2000. SECTION 4 Annual Rent          Section 4.1.     The Annual 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 Rent set forth in Section 1, in equal installments equal to 1/l2th of the Annual Rent 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.          Section 4.2.     Market Rent. "Market Rent" shall be computed as of the applicable date at the then current rentals being charged to new or renewal tenants for comparable first class office 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 and lease term building quality and tenant improvement allowance.          Landlord shall initially designate the Market Rent and shall furnish data in support of such designation within forty-five (45) days from receipt of Tenant's notice of its exercise 8 -------------------------------------------------------------------------------- of its option to extend under Section 2.3, except that Landlord shall not be obligated to provide such designation any sooner than the first day of the eleventh (11th) month prior to the commencement of the Extension Term. If Tenant disagrees with Landlord's designation of the Market Rent, then Tenant shall have the right, by written notice given within twenty-one (21) days after Tenant has been notified of Landlord's designation, to submit such Market Rent to arbitration as follows: Market Rent shall be determined by arbitrators, one to be chosen by Tenant, one to be chosen by Landlord and a third to be selected, if necessary, as below provided. Each arbitrator hereunder shall be an MAI-appraiser having at least ten (10) years' experience in appraising rental values for space in properties similar to the Building within a ten (10) mile radius of the Building. If within twenty-one (21) days after Tenant's notice, the parties agree upon a single arbitrato r, Market Rent shall be determined by such arbitrator. The unanimous written decision of the two first chosen without selection and participation of a third arbitrator, or otherwise the written decision of a majority of the three arbitrators chosen and selected as provided herein, shall be conclusive and binding upon Landlord and Tenant. Landlord and Tenant shall each notify the other of its chosen arbitrator within twenty-one (21) days following the call for arbitration and, unless such two arbitrators shall have reached a unanimous decision within thirty (30) days after their designation, then they shall so notify the then President of the Boston Bar Association and request him or her to select an impartial third qualified arbitrator (having the qualifications described above) to determine Market Rent as herein defined. Such third arbitrator and the first two chosen shall hear the parties and their evidence and render their decision within thirty (30) days following the conclusion of such hearing and no tify Landlord and Tenant thereof. Landlord and Tenant shall bear the expense of the third arbitrator (if any) equally. If the dispute between the parties as to Market Rent has not been resolved before the commencement of Tenant's obligation to pay rent under the Lease in Market Rent, then Tenant shall pay rent under the Lease in respect of the premises based upon 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 5 Operating Cost Escalation          Section 5.1.     Operating Cost Escalation. Tenant shall pay to Landlord, as Additional Rent, Operating Cost Escalation (as defined below) on or before the 20th day following receipt by Tenant of Landlord's 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 Statement") in reasonable detail and according to generally accepted accounting practices, certified by Landlord, and showing for the preceding calendar year or fraction thereof, as the case may be, all of Landlord's operating costs for the Building and Lot ("Landlord's Operating Costs"), including, without limitation, premiums for insurance; 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 operating, maintaining or cleaning of the Building (including the Premises) and Lot; costs of electricity in ex cess of Tenant's Estimated Electrical Charge 9 -------------------------------------------------------------------------------- and other Estimated Electrical Charges paid by other tenants of the Building including, without limitation, costs of electricity furnished to the Premises and other tenants' premises but excluding electricity separately metered to Tenant or tenants; all other utility charges not billed directly to tenants by Landlord or the utility company; all payments to contractors under service contracts for operating, managing, cleaning, maintaining and repairing the Building (including the Premises) and Lot (which payments may be to affiliates of Landlord, provided the same are at comparable market rates); costs of Building and cleaning supplies and equipment; if the Building shares common areas or facilities with another building or buildings, the Building's allocable share (as reasonably determined by Landlord in accordance with generally accepted accounting principles) of the cost of cleaning, operating, managing (including the cost of the management office for such buildings and facilities), maintaining and repairing such common areas and facilities; and all other reasonable and necessary expenses paid in connection with the cleaning, operating, managing, maintaining, and repairing of the Building and Lot, or either, and properly chargeable against income; 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 intending to reduce Landlord's Operating Costs, the annual amortization (determined by Landlord in accordance with generally accepted accounting principles) of the cost thereof, with interest thereon at the prime rate published in The Wall Street Journal from time to time, shall be included in Landlord's Operating Costs.        Notwithstanding anything to the contrary contained above, Landlord's Operating Costs shall not include costs and expenses related to the following: (1) Interest and amortization on mortgages for the Building and Lot;   (2) The cost of special services rendered to tenants (including Tenant) for which a special separate charge is made;   (3) Cost of restoration or replacements occasioned by fire or other casualty or caused by the exercise of eminent domain takings to the extent that Landlord receives insurance or eminent domain proceeds for the same;   (4) The depreciation or amortization of the Building, or any part thereof;   (5) Legal or professional fees relating to leasing or financing of the Building;   (6) Promotional, advertising or marketing expenses; and   (7) Capital expenditures, except to the extent referenced above in this Section 5.1.        In determining Landlord's Operating Costs, if (i) 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 expenses that would normally be expected to be incurred had such occupancy been 95% 10 --------------------------------------------------------------------------------   and had such full utilization been made during the entire period, or (ii) Landlord is not furnishing any particular work or service (the cost of which, if performed by the 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, Landlord's Operating Costs shall be deemed for the purpose of this Section 5.1 to be increased by an amount equal to the additional expense that 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 Escalation" shall be equal to Tenant's Proportionate Fraction of the excess, if any, of: (a) Landlord's Operating Costs as indicated by Landlord's Statement; over   (b) The Annual Base Operating Costs.         Notwithstanding the above calculation, in no event shall Operating Cost Escalation be less than zero.         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 Statement and shall be made on or before the later of (a) 20 days after Landlord delivers such estimate to Tenant, or (b) the last day of the Term, with an appropriate payment or refund to be made upon submission of Landlord's Statement.         Within ninety (90) days after receipt of each Landlord's Statement, Tenant or its agent (but in no event shall such agent be a party or entity whose compensation is based in part or in whole on the amount of discrepancies found) shall have the right to examine Landlord's records relating to Landlord's Operating Costs described in such applicable Landlord's Statement. Landlord shall make all its records relating to the calculation of Landlord's Operating Costs available to Tenant or its agents at reasonable times and upon reasonable advance notice at the Address of Landlord or at the address of Landlord's property manager. Any errors shall be promptly corrected, and any resulting overpayment by Tenant will be credited by Landlord against Tenant's next payment(s) under Section 5.1, and any resulting underpayment by Tenant will be promptly paid by Tenant. If Tenant shall perform such examination for a particular period to which a particular Landlord's Statement relates and it shall be found that Landlord's Operating Costs were overstated in such Landlord's Statement by more than 7%, then Landlord shall also be responsible to pay for Tenant's reasonable costs of performing such examination. In the event that Tenant fails to complete such examination of Landlord's records within such ninety (90) day period described above and notify Landlord in writing of any discrepancies discovered within ten (10) days after completing such examination, Tenant shall be estopped from raising any claims with respect to the items set forth in the 11 -------------------------------------------------------------------------------- applicable Landlord's Statement for the calendar year to which the applicable Landlord's Statement relates.        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, credit or refund to be made within thirty (30) days after Landlord's 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, the adjusted estimated monthly escalation payment and, on the first of the first month following receipt of Landlord's notice thereof, any deficiency in prior payments made by Tenant prior to such adjustment by Landlord in such calendar year.        Section 5.3.   If with respect to any Tax Year (hereinafter defined) falling within the Term or fraction of a Tax Year falling within the term at the beginning or end thereof, Landlord's Tax Expenses Allocable to the Premises (hereinafter defined) for a full Tax Year exceed the Tax Base Amount, or for any such fraction of a Tax Year exceed the corresponding fraction of the Tax Base Amount, then, on or before the thirtieth (30th) day following the receipt by Tenant of the certified statement referred to below in this Section 5.3, Tenant shall pay to Landlord, as Additional Rent, the amount of such excess less the monthly estimated payments paid for such corresponding period pursuant to the last paragraph of this Section 5.3.        Terms used herein are defined as follows: >        (i)   "Tax Year" means the twelve-month period beginning July l each > year during the term, or if the appropriate governmental tax fiscal period > shall begin on any other date than July l, such other date. > >        (ii)   "Landlord's Tax Expenses for the Building and Lot" with respect > to any Tax Year means the aggregate real estate taxes on the Building or Lot > with respect to that Tax Year, reduced by any abatement receipts with respect > to that Tax Year. > >        (iii)    "Landlord's Tax Expenses Allocable to the Premises" means > Tenant's Proportionate Fraction of Landlord's Tax Expenses for the Building > and Lot.         The term "real estate taxes" as used herein shall mean all taxes, assessments (special, betterment or otherwise, plus any interest thereon), levies, fees, water and sewer rents and charges, and all other government levies and charges, general and special, 12 -------------------------------------------------------------------------------- ordinary and extraordinary, foreseen and unforeseen, which are allocable to the term hereof and imposed or levied upon or assessed against the Lot or Building 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 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 Building or Lot 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 Building and Lot were the only property of Landlord.         Landlord shall, upon receipt of the applicable tax bills, render to Tenant a statement certified by Landlord setting forth the amount of Tenant's Additional Rent for real estate taxes in the event Landlord's real estate taxes Allocable to the Premises exceed the Tax Base Amount. To the extent that Tax Expenses shall be payable to the taxing authority in installments with respect to periods less than a Tax Year, the foregoing statement shall be rendered and payments made on account of such installments and computations shall be based upon appropriate prorations of Landlord's Tax Expenses for the Building and Lot and the Tax Base Amount.          Notwithstanding the foregoing and with respect to any Tax Year or fraction of a Tax Year falling within the Term, Tenant shall pay to Landlord, as Additional Rent, on each payment date for Annual Rent, an amount in respect of real estate taxes determined by subtracting 1/12th of the Tax Base Amount for such Tax Year or fraction of a Tax Year from 1/12th of Landlord's estimate, based on the most current tax bills, of Landlord's Tax Expenses Allocable to the Premises for such Tax Year or fraction of a Tax Year, with an appropriate adjustment within thirty (30) days after delivery of Landlord's statement referred to in this Section 5.3. Landlord may adjust such estimated monthly escalation payment for real estate taxes 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, the adjusted estimated monthly escalation payment and, on the first of the first month following receipt of Landlord's notice thereof, any deficiency in prior payments made by Tenant prior to such adjustment by Landlord in such calendar year. SECTION 6 Insurance.         Section 6.1.    Tenant's Insurance.  Tenant shall, as Additional Rent, maintain throughout the Term the following insurance: 13 --------------------------------------------------------------------------------         (a)    Commercial general liability insurance for any injury to person or property occurring on the Premises, naming as insureds Tenant, Landlord and such persons, including, without limitation, Landlord's property manager, as Landlord shall reasonably designate from time to time, 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.          Section 6.2.    Landlord's Insurance.  Landlord shall maintain throughout the Term the following insurance and shall include the costs thereof in Landlord's Operating Costs:         (a)    Commercial general liability insurance for any injury to person or property occurring in the common areas of the Lot or Building, in such amounts and with such deductibles as Landlord may consider appropriate in its commercially reasonable judgment;         (b)    All risk fire and casualty insurance on a replacement value, agreed amount basis, together with rental loss coverage and, if Landlord so elects, flood coverage to the extent the same is available, insuring the Building and its rental value, with such deductibles, if any, as Landlord shall consider appropriate in its commercially reasonable judgment; and         (c)    At Landlord's option, 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 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 institution holding a mortgage on the Building.         Section 6.3.    Tenant Reimbursement of Certain Insurance Costs.  Tenant shall reimburse Landlord for all of Landlord's costs incurred in providing such insurance to the extent attributable to any special endorsement or increase in premium resulting from the business or operations of Tenant or any special or extraordinary hazards resulting therefrom. Landlord agrees to use reasonable efforts to notify Tenant in advance of any anticipated additional insurance premiums resulting from Tenant's specific use of the Premises or the Lot. If any increase in the cost of Landlord's insurance is specifically attributable to any other tenant's business at the Building, such increased insurance costs shall be paid by such tenant and shall not be included in Landlord's Operating Costs.         Section 6.4.    Requirements Applicable to Insurance Policies.  All policies for insurance required under the provisions of Section 6.1 shall be obtained from responsible companies qualified to do business in the Commonwealth of Massachusetts and in good 14 -------------------------------------------------------------------------------- standing therein, which companies and the amount of insurance allocated thereto shall be subject to Landlord's approval and Landlord's lender'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 hereof and of each renewal policy at least thirty (30) 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 thirty (30) days' prior written notice thereto.          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 Landlord's Covenants         Section 7.1.    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 7.2.    Maintenance and Repair.  Subject to the provisions of Section 9, Landlord shall maintain the roof, walls, subfloors, structural supports, foundation and exterior of the Building and all standard common plumbing, electrical, mechanical, heating, ventilating and air conditioning systems installed by Landlord (but excluding (i) all special systems installed by Tenant or by Landlord at Tenant's request, (ii) the fire suppression, life safety and HVAC systems servicing the computer room located in the Third Floor Premises and (iii) the kitchen equipment, sink and showers located in the First Floor Premises and (iv) repairs or replacement occasioned by any act or negligence of Tenant, its agents, customers or employees, all of which Tenant shall be solely responsible for) in good order, repair and condition and shall maintain and clean the interior common areas in the Building in accordance with the specifications attached hereto as Exhibit D. Landlord shall have thirty (30) days after notice from Tenant to perform any necessary maintenance or repairs provided, however, that if such maintenance or repairs cannot be 15 -------------------------------------------------------------------------------- completed within thirty (30) days, Landlord shall use reasonable efforts to commence the maintenance or repair within such thirty (30) day period.         Section 7.3.    Exterior Common Areas and Facilities.  Landlord shall maintain all lawns and planted areas within the Lot and clean and maintain and provide snow plowing for all parking areas, walks and driveways on the Lot, subject to the provisions of Section 9.         Section 7.4.    Heating and Air Conditioning.  From 8:00 a.m. to 6:00 p.m. Monday through Friday and from 8:00 a.m. to l:00 p.m. on Saturdays (in all cases, holidays excluded), Landlord shall furnish heating and cooling as normal seasonal variations may require to provide reasonably comfortable space under normal business operations and an occupancy of not more than one person per 200 square feet of usable floor area in order to provide temperatures reasonably similar to other similar buildings in the general Waltham, Massachusetts vicinity. Should Tenant require air conditioning or heating outside the hours and days herein specified, Landlord shall furnish such service, and Tenant shall pay to Landlord such charges therefor as Landlord may from time to time specify. Landlord's charge for air conditioning or heating beyond such hours is currently $40.00 per additional hour (or portion thereof). Tenant agrees to cooperate with Landlord and to abide by all Building regulations which Landlord may, from time to time, reasonably prescribe for the proper functioning and protection of any heating, ventilating and air conditioning systems and in order to maximize the effect thereof. Notwithstanding anything to the contrary set forth in this Section 7.4 or otherwise in this Lease, Landlord may institute such reasonable policies, programs and measures as may be necessary, required or expedient for the conservation or preservation of energy or energy services, or as may be necessary or required to comply with applicable codes, rules, regulations and standards.         Section 7.5.    Electricity.  Landlord, in its sole discretion, will either (a) furnish electricity to the Premises sufficient to operate normal lighting and business machines approved by Landlord (exclusive, however, of Tenant's electrical needs for computers and similar equipment having special power or environmental requirements and in no event shall Landlord be obligated to furnish electricity to supply a requirement in excess of 3.0 watts per square foot of usable area of the Premises), charging for such service, in addition to Tenant's obligations to pay Operating Cost Escalation under Section 5.1, the Tenant's Estimated Electrical Charge (which may be increased at any time during the Term if the actual electricity cost for the Premises, as reasonably determined by Landlord, is greater than the Tenant's Estimated Electrical Charge), to be paid by Tenant as Additional Rent in equal monthly installments on the same day in each month that rental payments are due and payable hereunder, or (b) elect, at any time during the term, to cause electricity furnished to the Premises to be separately metered, in which event all charges for electricity consumed on the Premises will be billed directly to, and paid by, Tenant, and Tenant thereafter will not be required to pay Tenant's Estimated Electrical Charge. The cost of any such electric meter and the cost of installation, repair and replacement thereof shall be borne by Landlord but shall be recoverable through inclusion in Landlord's Operating Costs. 16 --------------------------------------------------------------------------------         Whether or not Landlord is furnishing electricity to Tenant, if Tenant shall require electricity in excess of the quantity to be furnished under the preceding paragraph, Tenant shall upon demand reimburse Landlord for the cost of such excess electricity. If (a) in Landlord's judgment, Landlord's facilities are inadequate for such excess requirements, or (b) such excess use shall result in an additional burden on the Building's or office park's utility systems or additional cost on account thereof, as the case may be, Tenant shall upon demand reimburse Landlord for all additional costs related thereto.         Landlord shall furnish and install the bulbs required within the Premises as of the Term Commencement Date, and thereafter Landlord, at Tenant's sole cost and expense, shall replace and install all ballasts, lamps and bulbs (including, but not limited to, incandescent and flourescent) 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 is changed or is no longer available or suitable for Tenant's requirements.         Section 7.6.    Cleaning.  Landlord shall cause the Premises, at Landlord's expense (but recoverable through inclusion in Landlord's Operating Costs), to be cleaned substantially as set forth in the Cleaning Specifications attached as Exhibit D - Cleaning Specifications.         Section 7.7.    Interruptions.  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 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 Building or Lot. 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, Landlord shall not be liable to Tenant therefor, nor shall Tenant be entitled to any abatement or reduction of rent by reason thereof, 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 if same is due to the gross negligence or willful misconduct of Landlord, or its agents, employees, contractors or invitees and Tenant's use of the premises is materially adversely affected by the interruption in an essential utility service for more than a 30 day consecutive period, Tenant shall be entitled, as its sole and exclusive remedy, to an equitable abatement of rent for each day after such 30 day period that such interruption continues.         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 unnecessary inconvenience to Tenant by reason thereof. 17 --------------------------------------------------------------------------------         Landlord also reserves the right to institute such reasonable policies, programs and measures as may be necessary, required or expedient for the conservation or preservation of energy or energy services or as may be necessary or required to comply with applicable codes, rules, regulations or standards. In so doing, Landlord shall make reasonable efforts to avoid unnecessary inconvenience to Tenant by reason thereof.          Section 7.8    Tenant's Access to Building.  During normal Building hours, access to the Premises shall be freely available, subject to interruption due to causes beyond Landlord's reasonable controls and reasonable control and subject to reasonable security restrictions. During other periods, Tenant shall have access to the Premises through use of an entry door card access system, but such access shall always be subject to reasonable rules and regulations from time to time established for the Building by Landlord (and shall be subject to interruption due to causes beyond Landlord's reasonable control). Tenant acknowledges that Tenant is responsible for providing security to the Premises following Tenant's entry onto the Premises for any reason and for its own personnel whenever located therein. Subject to the foregoing, Landlord shall, at all times, retain the right to control and prevent such access by all persons whose presence, in the sole discretion of Landlord, shall be prejudicial to the safety, protection, character, reputation and interests of the Building and its tenants or occupants. Landlord shall in no case be liable for damages resulting from any error with regard to the admission or exclusion of any person to or from the Building. SECTION 8 Tenant's Covenants         Section 8.1.    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.          Section 8.2.    Repair and Maintenance.  Except as otherwise provided in Sections 7 and 9, Tenant shall keep the Premises (but not the systems serving the Premises except Tenant shall be responsible to repair and maintain in good order and condition and replace as necessary (i) all special systems installed by Tenant or by Landlord at Tenant's request, (ii) the fire suppression, life safety and HVAC systems servicing the computer room located in the Third Floor Premises and (iii) the kitchen equipment, sink and showers located in the First Floor Premises) in good order, condition and repair and in at least as good order, condition and repair as they are in on the Commencement Date or may be put in during the term, reasonable use and wear and damage due to fire or other insured casualty or eminent domain only excepted; and to make as and when needed as a result of misuse by, or neglect or improper conduct of, Tenant or Tenant's servants, employees, agents, invitees or licensees or otherwise, all repairs in and about the Premises necessary to preserve them in such repair, order and condition, which repairs shall be in quality and class equal to the original work . 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, 18 -------------------------------------------------------------------------------- foreseen or unforeseen. Tenant shall keep in a safe, secure and sanitary condition all trash and rubbish temporarily stored at the Premises.         Section 8.3.    Compliance with Law and Insurance Requirements. Tenant shall make all repairs, alterations, additions or replacements to the Premises required by any law or ordinance or any order or regulation of any public authority arising from Tenant's use of the Premises or alterations, improvements or additions to the Premises performed by Tenant and shall keep the Premises equipped with all safety appliances so required. 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 Premises, or generate, store or dispose of hazardous substances in or on the Premises or dispose of hazardous substances from the Premises 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 which would require the filing of a notice under Chapter 232 of the Acts of 1982 and shall 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 may, if it so elects, make any of the repairs, alterations, additions or replacements referred to in this Section which affect the Building structure or the Building systems, and Tenant shall reimburse Landlord for the 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 Tenant's expense, to make such inspections as Landlord shall reasonably elect from time to time to determine if Tenant is complying with this Section.         Tenant shall comply promptly with the 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 8.4.    Tenant's Work.  Tenant shall not make any installations, alterations, additions or improvements in or to the Premises, including, without limitation, any apertures in the walls, partitions, ceilings or floors, without on each occasion obtaining the 19 -------------------------------------------------------------------------------- prior written consent of Landlord; provided, however, that (i) Landlord shall not unreasonably withhold or delay its consent to any installations, alterations, additions or improvements which do not affect the Building systems or the structure of the Building or its components; and (ii) Landlord's consent shall not be required for any work that does not affect the Building systems or the structure of the Building or its components so long as such work shall not cost in excess of $10,000 to complete. Any such work so consented to by Landlord 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. If requested by Landlord, Tenant shall furnish to Landlord prior to the commencement of any such work a bond or other security acceptable to Landlord assuring that any work by Tenant will be completed in accordance with the approved plans and specifications. Tenant shall keep the Premises at all times free of liens for labor and materials. Tenant shall employ for such work only contractors approved by Landlord and shall require all contractors employed by Tenant to carry worker's compensation insurance in accordance with statutory requirements and commercial general liability insurance covering such contractors, and naming Landlord, Landlord's property manager and Tenant as additional insureds, on or about the Premises in amounts at least equal to 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. Landlord may inspect the work of Tenant at reasonable times and give notice of observed defects.         Section 8.5.    Indemnity.  Tenant shall defend, with counsel approved by Landlord, all actions against Landlord, any partner, trustee, stockholder, officer, director, employee, agent or beneficiary of Landlord, holders of mortgages secured by the Building and any other party having an interest in the Premises ("Indemnified Parties") with respect to, and shall pay, protect, indemnify and save harmless, to the extent permitted by law, all 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, occurring in or about the Premises or connected with the use, condition or occupancy of any thereof unless caused by the negligence of Landlord or its servants or agents; (b) violation of this Lease by Tenant; or (c) any act, fault, omission, or other misconduct of Tenant or its agents, contractors, licensees, sublessees or invitees.         Section 8.6.    Landlord's Access.  (a) Tenant shall permit Landlord, Landlord's agents and contractors, and appropriate public utility service providers to erect, use and maintain, repair and replace concealed ducts, pipes, lines and conduits in and through the Premises provided such use does not cause the usable area of the Premises to be reduced beyond a de minimis amount. Landlord shall promptly repair any damage to the Premises 20 -------------------------------------------------------------------------------- or Tenant's personal property caused by any work performed pursuant to this Section 8.6(a).         (b)    Landlord, any ground lessor or mortgagee and any other party designated by Landlord and their respective agents shall have the right to enter the Premises at all reasonable times, upon reasonable notice (which notice may be oral) except in the case of emergency (when no notice shall be required), (I) to examine the Premises during the Term, (II) to show the Premises during the Term to prospective purchasers, mortgagees or ground lessors of the Building and their respective agents and representatives or others, and during the last 12 months of the Term (unless Tenant exercises its option to extend pursuant to Section 2.3, in which event the last twelve months of the Extension Term) to prospective tenants, and (III) during the Term to make such repairs, alterations or additions to the Premises or the Building (i) as Landlord may deem necessary or appropriate, (ii) which Landlord may elect to perform following Tenant's failure to perform, or (iii) to comply with any legal requirements, and Landlord shall be allowed to take all materials into the Premises that may be required for the performance of such work without the same constituting an actual or constructive eviction of Tenant in whole or in part and without any abatement of rent.         (c)    All parts (except surfaces facing the interior of the Premises) of all walls, windows and doors bounding the Premises (including exterior Building walls, exterior core corridor walls, and doors and entrances other than doors and entrances solely connecting areas within the Premises), all balconies, terraces and roofs adjacent to the Premises, all space in or adjacent to the Premises used for shafts, stacks, stairways, mail chutes, conduits and other mechanical facilities, Building systems and Building facilities are not part of the Premises, and Landlord shall have the use thereof and access thereto through the Premises for the purposes of Building operation, maintenance, alteration, improvement and repair.         (d)    If, during the last twelve (12) months of the Term, Tenant removes all or substantially all of Tenant's property from the Premises and vacates the same, Landlord may, upon prior notice to Tenant (which notice may be oral), renovate and/or redecorate the Premises, without abatement of any rent or incurring any liability to Tenant. Such acts shall not be deemed an actual or constructive eviction and shall have no effect upon this Lease.         Section 8.7.    Alterations to Building.  Landlord shall have the right at any time or from time to time, in its sole discretion, to (a), upon at least ninety (90) days prior notice to Tenant, change the name, number or designation by which the Building is commonly known, and (b) alter the Building to change the arrangement or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets, or other public parts of the Building without any such acts constituting an actual or constructive eviction and without incurring any liability to Tenant, so long as such changes do not deprive Tenant of commercially reasonable access to the Premises. 21 --------------------------------------------------------------------------------         Section 8.8.    Personal Property at Tenant's Risk.  All furnishings, fixtures, equipment, effects and property of every kind of Tenant and of all persons claiming by, through or under Tenant which may be on the Premises, shall be at the sole risk and hazard of Tenant 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, except that Landlord shall not be indemnified or held harmless or exonerated from any liability to Tenant for any injury, loss, damage or liability caused by Landlord's negligence or willful misconduct except to the extent, in the case of Landlord's negligence, the loss is covered by Tenant's insurance. Tenant shall be solely responsible to insure Tenant's personal property.         Section 8.9.    Payment of Landlord's Cost of Enforcement.  Tenant shall pay, on demand, Landlord's 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 10.4.         Section 8.10.    Yield Up.  At the expiration of the term or earlier termination of this Lease, Tenant shall surrender all keys to the Premises, remove all of its trade fixtures and personal property in the Premises, remove 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 which Landlord shall not request Tenant to remove) broom-clean and in the same good order and repair in which Tenant is obliged to keep and maintain the Premises under this Lease. 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 entire 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 8.10.          Section 8.11.    Estoppel Certificate.  Upon not less than ten (10) business days' prior written request by Landlord or Tenant, the non-requesting party shall execute, acknowledge and deliver to the requesting party a statement in writing certifying that this Lease is unmodified and in full force and effect and that, except as stated therein, the non-requesting party has no knowledge of any defenses, offsets or counterclaims against the non-requesting party's obligations under the Lease, including any payments due thereunder, (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 Rent and Additional Rent and other charges have been paid and a statement that the requesting party is not in default hereunder (or if in default, the nature of such default, in reasonable detail). Any such statement delivered pursuant to this Section 8.11 may be relied upon by any prospective purchaser or mortgagee of the Building or any permitted sublessee or assignee of this Lease. 22 --------------------------------------------------------------------------------         Section 8.12.    Landlord's Expenses Re Consents.  Tenant shall reimburse Landlord promptly on demand for all reasonable legal and other expenses incurred by Landlord in connection with all requests by Tenant for consent or approval hereunder.        Section 8.13.   Rules and Regulations.  Tenant shallcomply with the Rules and Regulations attached hereto as Exhibit E and such other reasonable Rules and Regulations as may be adopted from time to time by Landlord to provide for the beneficial operation of the Lot and Building; provided, however, that Landlord shall not discriminate against Tenant in the enforcement of such Rules and Regulations.        Section 8.14.   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 termination of the term without Landlord's express consent, Tenant shall pay Landlord rent at double the monthly rate specified in Section 1 (most recently in effect just prior to such termination) for the time Tenant thus remains in possession and, in addition thereto, shall 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 remove Tenant through summary proceedings for holding over beyond the expiration of the term of this Lease.         Section 8.15.   Assignment and Subletting . Tenant shall not 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 (a) Tenant shall have the right to sublease the Premises or assign this Lease to any entity that controls, is controlled by or is under common control with Tenant without Landlord's prior consent so long as Tenant provides Landlord with prior written notice thereof and so long as such entity, in the case of an assignment, assumes all of the Tenant's obligations hereunder by a written instrument approved by Landlord and so long as such entity shall have a net worth immediately after such assignment at least equal to that of Tenant as of the date of this Lease; and (b) Tenant shall have the right, subject to the below provisions of this Section 8.15, to sublet all or portions of the Premises to third parties upon obtaining Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed. In connection with any request by Tenant for such consent to an assignment or subletting, Tenant shall submit to Landlord in writing (i) the name of the proposed assignee or subtenant, (ii) such information as to its reputation, financial responsibility and standing as Landlord may reasonably require, including, without limitation, business references and references from prior landlords, and (iii) all of the terms and provisions upon which the proposed assignment or subletting is to be made. As additional rent, Tenant shall reimburse Landlord promptly for reasonable legal and other expenses incurred by Landlord in connection with any request by Tenant for consent 23 -------------------------------------------------------------------------------- to any assignment or subletting.  Any sale or transfer after the date hereof, whether to one or more persons or entities and whether at one or more different times, and whether voluntarily, involuntarily, by operation of law or otherwise (including, without limitation, upon a merger, consolidation, reorganization or other such transaction), of (a) all or substantially all of Tenant's assets or (b) of a total of fifty percent (50%) or more of the shares of capital stock of any corporation which is then the legal tenant under this lease or the legal subtenant under any permitted sublease hereunder shall be deemed an assignment within the meaning of this Section 8.15, except that so long as (i) BroadVision shall have a net worth at the time of the proposed sale or transfer of at least $150,000,000 (as evidenced by financial statements and other written information reasonably requested by Landlord) and (ii) Tenant shall not be in default under this Lease beyond the expiration of applicable notice and cure periods at the time of such sale or transfer (including, without limitation upon a merger or other such transaction), Landlord shall consent to the sale or transfer to BroadVision of all or substantially all of Interleaf, Inc.'s assets or a transfer to BroadVision of 50% or more of Interleaf, Inc.'s capital stock.         Notwithstanding whether or not Landlord consents to any subletting or assignment:  (i) in no event shall Tenant sublet to more than three subtenants at any one time; and (ii) in no event shall Tenant enter into negotiations to assign this Lease or sublet, or offer to assign or sublet, or sublet or assign to any of the other tenants of the Building or to any party with whom Landlord is then negotiating with respect to other space in the Building.         Notwithstanding anything to the contrary contained in this Section 8.15, provided that (i) Tenant shall not be in default under this Lease beyond the expiration of applicable notice and cure periods at the time of the "BroadVision Assignment;" (ii) BroadVision, Inc., a Delaware corporation ("BroadVision") shall have a net worth at the time of the proposed assignment by Interleaf, Inc. of this Lease of at least $150,000,000.00 (as evidenced by financial statements and other written information reasonably requested by Landlord); (iii) BroadVision enters into a written assignment and assumption agreement in a form satisfactory to Landlord with Interleaf, Inc. and Landlord whereby BroadVision accepts the assignment of this Lease by Interleaf, Inc. and agrees to assume all of the obligations of Interleaf, Inc. under this Lease from the initial date of this Lease and continuing through the expiration of the term of the Lease, including any Extension Term); and (iv) BroadVision provides the Landlord with legal existing certificates and corporate resolutions evidencing the entity status of BroadVision as of the date of the assignment and the authority of BroadVision to enter into the assignment and assumption of this Lease, Landlord shall consent to an assignment of this Lease by Interleaf, Inc. to BroadVision (the "BroadVision Assignment").         Any attempted assignment, transfer, mortgage, pledge, grant of security interest, sublease or other encumbrance, except with the prior consent thereto by Landlord, shall be void. No assignment, transfer, mortgage, grant of security interest, sublease or other encumbrance, whether or not consented to (and whether or not any consent shall have been required hereunder), 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 consent in a particular 24 -------------------------------------------------------------------------------- instance shall be deemed to be a waiver of the obligation to obtain Landlord's consent 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 rent called for hereunder (or in the case of the sublease of part, in excess of such rent allocable to the part) after appropriate adjustments to assure that all other payments called for hereunder are taken into account and after subtracting from such excess amount the following expenses incurred by Tenant as a result of the assignment or subletting of such space, all amortized ratably over the term of the sublease or assignment: (i) any leasehold improvements made to the Premises on account thereof; (ii) any commercially reasonable brokerage commissions paid therefor; and (iii) any commercially reasonable attorneys' fees paid by Tenant therefor, Tenant shall pay to Landlord, as Additional Rent, 50% of such excess of such payment of rent or other consideration received by Tenant, promptly after its receipt.         Section 8.16.    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 Casualty or Taking         Section 9.1.    Termination.  In the event that 35% or more of the Building shall be destroyed or damaged by fire or casualty (a "Casualty") then this lease may be terminated by Landlord by notice given to Tenant within sixty (60) days after the Casualty.         In the event that the Premises or a substantial portion thereof (or all reasonable means of access to the Premises) shall be destroyed or damaged by a Casualty and if Landlord's architect, engineer or contractor shall determine that it will require in excess of 210 days from the date of Landlord's receipt of insurance proceeds to restore the Premises (or the reasonable means of access thereto), this Lease may be terminated by either Landlord or Tenant by notice to the other given within sixty (60) days after the Casualty. In the event of a termination of this Lease under this Section 9.1, Annual Rent and Additional Rent shall be abated, according to the nature and extent of the damages to the Premises, from the date of the Casualty until such termination, provided, however, that in no event shall Tenant be entitled to any abatement of rent on account of a Casualty if such casualty was caused by the negligence or willful misconduct of Tenant or Tenant's agents, employees or contractors.         In the event that greater than twenty (20) percent of the Building or greater than ten (10) percent of the Lot shall be taken by any public authority or for any public use or destroyed by the action of any public authority (a "Taking") then this Lease may be terminated by Landlord effective on the effective date of the Taking. 25 --------------------------------------------------------------------------------         In the case of a Taking of a substantial portion of the Premises or of all reasonable means of access thereto, Landlord or Tenant shall have the right to terminate this Lease effective as of the date of such Taking. In the case of a Taking under this Section 9.1 that entitles either party to elect to terminate this Lease, such election, which may be made notwithstanding the fact that Landlord's or Tenant's entire interest may have been divested, shall be made by the giving of notice by Landlord or Tenant to the other within thirty (30) days after Landlord or Tenant, as the case may be, shall receive notice of the Taking.         In the case of a Taking of a substantial portion of the Premises or of all reasonable means of access thereto, Landlord or Tenant shall have the right to terminate this Lease effective as of the date of such Taking. In the case of a Taking under this Section 9.1 that entitles either party to elect to terminate this Lease, such election, which may be made notwithstanding the fact that Landlord's or Tenant's entire interest may have been divested, shall be made by the giving of notice by Landlord or Tenant to the other within thirty (30) days after Landlord or Tenant, as the case may be, shall receive notice of the Taking.         Section 9.2.    Restoration.  In the event of a Taking or a Casualty, unless Landlord or Tenant shall exercise an election to terminate provided in Section 9.1, this Lease shall continue in force and a just proportion of the Annual Rent and other charges hereunder, according to the nature and extent of the damages sustained by the Premises, but not in excess of an equitable portion of the net proceeds of insurance recovered by Landlord under the rental insurance carried pursuant to Section 6.2, shall be abated until the Premises, or what may remain thereof, shall be put by Landlord in proper condition for use subject to zoning and building laws or ordinances then in existence, which, unless Landlord or Tenant has exercised its option to terminate pursuant to Section 9.1, Landlord covenants to do with reasonable diligence at Landlord's expense. Landlord's obligations with respect to restoration shall not require Landlord to expend more than the net proceeds of insurance recovered or damages awarded for such Casualty or Taking and made available for restoration by Landlord's mortgagees. "Net proceeds of insurance recovered or damages awarded" refers to the gross amount of such insurance or damages less the reasonable expenses of Landlord in connection with the collection of the same, including without limitation, fees and expenses for legal and appraisal services.         Section 9.3.    Award.  Irrespective of the form in which recovery may be had by law, all rights to damages or compensation shall belong to Landlord in all cases. Tenant hereby grants to Landlord all of Tenant's rights to such damages and compensation and covenants to deliver such further assignments thereof as Landlord may from time to time request. 26 -------------------------------------------------------------------------------- SECTION 10 Default         Section 10.1.    Events of Default.  If         (a)    Tenant shall default in the performance of any of its obligations to pay the Annual Rent, Additional Rent or any other sum payable hereunder and if such default shall continue for five (5) days after notice to Tenant; provided, however, that Landlord shall not be obligated to provide such notice of non-payment to Tenant if within the then prior twelve calendar month period, Landlord has provided two such notices of non-payment to Tenant;         (b)    Tenant shall default in the performance of any of its other obligations hereunder and if such default shall continue for thirty (30) days; provided, however, that such thirty (30) day period shall be extended for such additional time as is necessary to cure such default if such obligation cannot be cured within such initial thirty (30) day period and provided that Tenant shall have commenced the necessary cure within such initial thirty (30) day period, but in no event shall the total cure period for such default (inclusive of the initial thirty (30) day period) be greater than ninety (90) days.         (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;         (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 27 -------------------------------------------------------------------------------- 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 10.2.    Remedies.  In the event that this Lease is terminated under any of the provisions contained in Section 10.1, Tenant shall pay forthwith to Landlord, as compensation, the excess of the total rent reserved for the residue of the Term over the fair market rental value of the Premises for the residue of the term; provided that such excess amount shall be computed by discounting such excess amount at the then applicable discount rate of the Federal Reserve Bank located in Boston, Massachusetts. In calculating the rent reserved there shall be included, in addition to the Annual Rent and Additional Rent, the value of all other considerations agreed to be paid or performed by Tenant during the residue. As additional and cumulative obligations after any such termination, Tenant shall also pay punctually to Landlord 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 any amount paid to Landlord pursuant to the first sentence of this Section 10.2 and also with the net proceeds of any rent obtained by Landlord by reletting the Premises, after deducting all Landlord's expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, reasonable 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.         Section 10.3.    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 10.4.    Landlord's Right to Cure Defaults.  At any time following twenty (20) 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 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 28 -------------------------------------------------------------------------------- provided in Section 10.7 from the date of payment by Landlord to the date of payment by Tenant.         Section 10.5.    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 10.6.    No Accord and Satisfaction.  No acceptance by Landlord of a lesser sum than the Annual Rent, Additional Rent or any other sum 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 10.7.    Interest on Overdue Sums; Late Charge.  If Tenant fails to pay Annual Rent, Additional Rent or other sums payable by Tenant to Landlord within five (5) days after the due date thereof (i.e., the due date disregarding any requirement of notice from Landlord or any period of grace allowed to Tenant), the amount so unpaid shall bear interest at a variable rate (the "Delinquency Rate") equal to four percent (4%) in excess of the prime rate published in The Wall Street Journal 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.         In addition to all of the rights and remedies of Landlord set forth in this Lease, including the above paragraph, if Tenant shall fail to pay any item of rental due hereunder (whether denominated as Annual Rent, Additional rent or otherwise) within five (5) days after the same shall have become due and payable (i.e., the due date disregarding any requirement of notice from Landlord or any period of grace allowed to Tenant), then and in such event Tenant shall also pay to Landlord a late payment service charge (in order to partially defray Landlord's administrative and other overhead expenses) equal to the greater of three hundred (300) dollars or one percent (1%) of such unpaid sum. It being 29 -------------------------------------------------------------------------------- understood that nothing herein shall be deemed to extend the due date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligation to pay such sums at the time or times required by this Lease. SECTION 11 Mortgages         Section 11.1.    Rights of Mortgage Holders.  No Annual 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 12.1, of such act or omission to the holder of any mortgage encumbering the Premises whose name and address shall have been furnished to Tenant in writing, at the last address so furnished, and (b) until thirty (30) days shall have elapsed following the giving of such notice or such reasonable period of time thereafter as is necessary for remedying such act or omission, 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.         Section 11.2.    Subordination and Attornment.  (a) This Lease is subject and subordinate to all current or future mortgages and ground leases affecting the Building and/or Lot, and, at the request of any mortgagee or ground lessor, Tenant shall attorn to such mortgagee or ground lessor, its successors in interest or any purchaser in a foreclosure sale, provided that the mortgagee or ground lessor, as the case may be, agrees, by a written instrument in recordable form and in the customary form of such mortgagee or ground lessor ("Nondisturbance Agreement") that, as long as Tenant shall not be in default of the obligations on its part to be kept and performed under the terms of this Lease, this Lease will not be affected and Tenant's possession hereunder will not be disturbed by any default in, termination, and/or foreclosure of, such mortgage or ground lease, as the case may be.         (b)    If a ground lessor or mortgagee or any other person or entity shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or the delivery of a new lease or deed, or otherwise, then at the request of the successor landlord, Tenant shall be deemed to have attorned to and recognized such successor landlord as Landlord under this Lease. The provisions of this Article are self-operative and require no further instruments to give effect hereto; provided, however, that Tenant shall promptly execute and deliver any instrument that such successor landlord may reasonably request (i) evidencing such attornment, (ii) setting forth the terms and conditions of Tenant's tenancy, and (iii) containing such other terms and conditions as may 30 -------------------------------------------------------------------------------- be required by such mortgagee or ground lessor, provided that such successor landlord is obligated to recognize Tenant pursuant to the provisions of a Nondisturbance Agreement, as defined in Section 10.1(a). Upon such attornment this Lease shall continue in full force and effect as a direct lease between such successor landlord and Tenant upon all of the terms, conditions and covenants set forth in this Lease except that such successor landlord shall not be:         (i)    liable for any act or omission of any prior landlord except for any continuing defaults relating to the maintenance or repair of the Premises of which Tenant shall have given such ground lessor or mortgagee prior written notice;         (ii)    subject to any defense, claim, counterclaim, set-off or offsets which Tenant may have against any prior landlord;         (iii)    bound by any prepayment of more than one month's rent to any prior landlord;         (iv)    bound by any obligation to make any payment to Tenant which was required to be made prior to the time such successor landlord succeeded to Landlord's interest;         (v)    bound by any obligation to perform any work or to make improvements to the Premises; or         (vi)    bound by any modification, amendment or renewal of this Lease made without the successor landlord's consent.          Section 11.3.    Subordination of Mortgage.  Any mortgagee may elect that this Lease shall have priority over the mortgage that it holds and, upon notification to Tenant by such mortgagee, this Lease shall be deemed to have priority over such Mortgage, regardless of the date of this Lease.         Section 11.4.    Provisions.  The provisions of this Article shall (a) inure to the benefit of Landlord, any future owner of the Building or the Lot, ground lessor or mortgagee and (b) apply notwithstanding that, as a matter of law, this Lease may terminate upon the termination of any such ground lease or mortgage. SECTION 12 Miscellaneous Provisions         Section 12.1.    Notices from One Party to the Other.  All notices required or permitted hereunder shall be in writing and shall be sent by overnight delivery via a nationally recognized overnight carrier that maintains delivery receipts or shall be sent via in-hand delivery and shall be 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 31 -------------------------------------------------------------------------------- designated by notice in writing to Tenant. Any notice shall be deemed duly given when delivered or tendered for delivery at such address.         Section 12.2.    Quiet Enjoyment.  Landlord agrees that upon Tenant's paying the rent and performing and observing the terms, covenants, conditions and provisions on its part to be performed and observed, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises during the term without any manner of hindrance or molestation from Landlord or anyone claiming under Landlord, subject, however, to the terms of this Lease.         Section 12.3.    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 12.4.    Bind and Inure; Limitation of Landlord's Liability.  The obligations of this Lease shall run with the Lot, 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 Premises 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 Premises 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 Premises 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 12.5.    Acts of God.  In any case where either party hereto is required to do any act (other than the payment of money), delays caused by or resulting from acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, 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.         Section 12.6.    Landlord's Default.  Landlord shall not be deemed to be in default in the performance of any of its obligations hereunder unless it shall fail to perform such obligations within thirty (30) days after notice from Tenant to Landlord specifying such default or, if such default cannot be cured within such 30 day period, Landlord has not commenced diligently to correct the default so specified within 30 days or has not thereafter diligently pursued such correction to completion. Tenant shall have no right, for any default by Landlord, to offset or counterclaim against any rent due hereunder. 32 --------------------------------------------------------------------------------         Section 12.7.    Brokerage.  Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Lease other than the Brokers set forth in Section 1 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 other than the Broker set forth in Section 1.         Section 12.8.    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 12.9.    Security Deposit.  Tenant shall deposit the Security Deposit with Landlord upon the execution of this Lease in cash as security for the faithful performance and observance by Tenant of the terms, covenants and conditions of this Lease, including the surrender of possession of the Premises to Landlord as herein provided.         In lieu of a cash deposit, Tenant may deliver the Security Deposit to Landlord in the form of a clean, irrevocable, non-documentary and unconditional letter of credit (the "Letter of Credit") issued by and drawable upon any commercial bank satisfactory to Landlord, trust company, national banking association or savings and loan association (the "Issuing Bank"), which has outstanding unsecured, uninsured and unguaranteed indebtedness, or shall have issued a letter of credit or other credit facility that constitutes the primary security for any outstanding indebtedness (which is otherwise uninsured and unguaranteed), that is then rated, without regard to qualification of such rating by symbols such as "+" or "-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA" or better by Standard & Poor's Rating Service, and has combined capital, surplus and undivided profits of not less than $500,000,000. Such Letter of Credit shall (a) name Landlord as beneficiary, (b) be in the amount of the Security Deposit, (c) have a term of not less than one year, (d) permit multiple drawings, (e) be fully transferable by Landlord without the payment of any fees or charges by Landlord, and (f) otherwise be in form and content satisfactory to Landlord. If upon any transfer of the Letter of Credit, any fees or charges shall be so imposed, then such fees or charges shall be payable solely by Tenant and the Letter of Credit shall so specify. The Letter of Credit shall provide that it shall be deemed automatically renewed, without amendment, for consecutive periods of one year each thereafter during the Term unless the Issuing Bank sends a notice (the "Non-Renewal Notice") to Landlord by certified mail, return receipt requested, not less than 45 days next preceding the then expiration date of the Letter of Credit stating that the Issuing Bank has elected not to renew the Letter of Credit. Landlord shall have the right, upon receipt of the Non-Renewal Notice, to draw the full amount of the Letter of Credit, by sight draft on the Issuing Bank, and shall thereafter hold or apply the cash proceeds of the Letter of Credit pursuant to the terms of this Section. The Issuing Bank shall agree with all drawers, endorsers and bona fide holders that drafts drawn under and in compliance with the terms of the Letter of Credit will be duly honored upon presentation to the Issuing Bank at an office location in Boston or another location acceptable to Landlord. The Letter of Credit shall be subject in all respects to the Uniform Customs and Practice for Documentary Credits (1993 revision), International Chamber of Commerce Publication No. 500. 33 --------------------------------------------------------------------------------         If Tenant defaults in the payment or performance of any of the terms, covenants or conditions of this Lease beyond the expiration of applicable notice and cure periods, if any, including the payment of Annual Rent or Additional Rent, Landlord may apply or retain the whole or any part of the cash Security Deposit or may notify the Issuing Bank and thereupon receive all or a portion of the Security Deposit represented by the Letter of Credit and use, apply, or retain the whole or any part of such proceeds, as the case may be, to the extent required for the payment of any such rent or any other sums as to which Tenant is in default including (a) any sum which Landlord may expend or may be required to expend by reason of Tenant's default, and/or (b) any damages or deficiency to which Landlord is entitled pursuant to this Lease or applicable legal requirements, whether such damages or deficiency accrues before or after summary proceedings or other reentry by Landlord. If Landlord applies or retains any part of the Security Deposit, Tenant, upon demand, shall deposit with Landlord the amount so applied or retained so that Landlord shall have the full Security Deposit on hand at all times during the Term. If Tenant shall fully and faithfully comply with all of the terms, covenants and conditions of this Lease, the Security Deposit shall be returned to Tenant after the expiration of the Term and after delivery of possession of the Premises to Landlord in the manner required by this Lease. Tenant expressly agrees that Tenant shall have no right to apply any portion of the Security Deposit against any of Tenant's obligations to pay rent or other sums due hereunder.         Upon a sale of the Lot or the Building or any financing of Landlord's interest therein, Landlord shall transfer the cash Security Deposit or the Letter of Credit, as applicable, to the vendee or lender (if required by such lender). With respect to the Letter of Credit, within five days after notice of such sale or financing, Tenant, at its sole cost, shall arrange for the transfer of the Letter of Credit to the new landlord or the lender (if required by such lender), as designated by Landlord in the foregoing notice or have the Letter of Credit reissued in the name of the new landlord or the lender. Provided that such cash Security Deposit or Letter of Credit is transferred to the new landlord or lender, Tenant shall look solely to the new landlord or lender for the return of such cash Security Deposit or Letter of Credit and the provisions hereof shall apply to every transfer or assignment made of the Security Deposit to a new landlord. Tenant shall not assign or encumber or attempt to assign or encumber the cash Security Deposit or Letter of Credit and neither Landlord nor its successors or assigns shall be bound by any such action or attempted assignment, or encumbrance.         Notwithstanding any terms or provisions of this Lease to the contrary, provided that there shall be no default under this Lease beyond the expiration of applicable notice and cure periods at the time, the Security Deposit shall be reduced to $299,587.50 (the "Reduced Security Deposit") (i) within 30 days of the BroadVision Assignment or (ii) within thirty (30) days of the date that BroadVision delivers an unconditional guaranty to Landlord (in a form acceptable to Landlord) of all of Tenant's obligations under this Lease, whenever arising, and BroadVision otherwise meets (on the date of the execution and delivery of such guaranty) the requirements for Landlord's consent to the BroadVision Assignment (except for clause iii thereof) described in the third paragraph of Section 8.15 34 -------------------------------------------------------------------------------- as if such guaranty were instead the BroadVision Assignment. If the reduction of the Security Deposit is required under the prior sentence, Landlord shall nevertheless not be obligated to deliver the portion of the security deposit (i.e., $800,919.00) to be so reduced (or, if applicable, the original Letter of Credit) to Tenant unless and until Landlord shall have received (i) if applicable, a Letter of Credit meeting the above requirements of this Section 12.9 in the amount of the Reduced Security Deposit and (ii) a written direction from both Interleaf, Inc. and BroadVision regarding the return of such funds, which direction shall include wiring or delivery instructions and a release of liability by such parties for the benefit of Landlord with respect to the return of such amount of the Security Deposit.         Section 12.10.    Waiver of Trial By Jury.  LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ON ANY MATTERS IN ANY WAY ARISING OUT OR CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY STATUTE, EMERGENCY OR OTHERWISE. If Landlord commences any summary process proceeding against Tenant, Tenant will not interpose any counterclaim of any nature or description in any such proceeding (unless failure to impose such counterclaim would preclude Tenant from asserting in a separate action the claim which is the subject of such counterclaim), and will not seek to consolidate such proceeding with any other action which may have been or will be brought in any other court by Tenant.         Section 12.11.    No Surrender or Release.  No act or thing done by Landlord or Landlord's agents or employees during the Term shall be deemed an acceptance of a surrender of the Premises, and no provision of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing and is signed by Landlord, and any such waiver shall be effective only for the specific purpose an in the specific instance in which given.         Section 12.12.    No Representations.  Except as expressly set forth herein, Landlord and Landlord's agents have made no warranties, representations, statements or promises with respect to the Building, the Lot or the Premises and no rights, easements or licenses are acquired by Tenant by implication or otherwise. This Lease contains the entire agreement between the parties and all understandings and agreements previously made between Landlord and Tenant are merged in this Lease, which alone fully and completely expresses their agreement. Tenant is entering into this Lease after full investigation and is not relying upon any statement or representation made by Landlord not embodied in this Lease.         Section 12.13.    No Money Damages.  Wherever in this Lease Landlord's consent or approval is required, if Landlord refuses to grant such consent or approval, whether or not Landlord expressly agreed that such consent or approval would not be unreasonably withheld, Tenant shall not make, and Tenant hereby waives, any claim for money damages (including any claim by way of set-off, counterclaim or defense) based upon Tenant's claim 35 -------------------------------------------------------------------------------- or assertion that Landlord unreasonably withheld or delayed its consent or approval; and Tenant's sole remedy shall be to seek injunctive relief.         Section 12.14.    Financial Statements.  Within ten (10) days after Landlord's request, which request may be made from time to time during the Term, Tenant shall deliver to Landlord the current audited financial statements of Tenant with an opinion of a certified public accountant, including 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 12.15.    Tenant's Signage.  Subject to Tenant's receipt of all necessary approvals therefore from all applicable governmental agencies (including, without limitation, the City of Waltham) and subject to Landlord's review and prior written reasonable approval of the size, location and design of such sign, Tenant shall be allowed to install, at Tenant's sole cost and expense, a single-tenant tenant identification monument sign in front of the Building (on which Tenant shall have the exclusive right to maintain a Tenant identification sign); provided, however, that if Tenant shall at any time lease in excess of 73,000 square feet at the Building, Tenant shall have the right to erect a sign on the exterior of the Building facade facing Fifth Avenue in a location designated by Landlord and having a design and size approved by Landlord. Upon the expiration or sooner termination of the term of this Lease, Tenant shall remove all such signage at its expense and shall pay for any damage caused to the Building or the monument caused by the installation or removal of such signage. Upon the expiration of the term, Landlord shall have the right to direct Tenant to either remove the monument bearing such sign or to leave the same for use by a future tenant.         Section 12.16.    Intentionally Omitted.         Section 12.17.    Renovation of Lobby and Cafeteria.  Landlord shall use reasonable efforts to substantially complete the renovation of the existing Building lobby and the existing cafeteria within sixty (60) days of the Term Commencement Date, subject to the duration of any delays described in Section 12.5 and subject to the duration of any delays caused by the failure of the existing tenant(s) of the First Floor Premises to vacate the same on the dates scheduled for vacation of the same.         Section 12.18.    Satellite Dish.  Landlord hereby grants to Tenant a non-exclusive and non-transferable license ("License"), coterminous with the term hereof unless, at Landlord's election, earlier terminated due to Tenant's failure to comply with the provisions of this Section 12.18, to use, after prior written notice to Landlord, such area of the roof of the Building as shall be designated by Landlord (so as to avoid interference with, to or from other current or future users on the roof) for the installation and operation of a satellite dish and connecting equipment (the "Satellite Dish"). Tenant shall pay a fee for the License at the then prevailing market rate for such a License on the roof the Building, as determined by Landlord from time to time. The Satellite Dish shall be installed and maintained in accordance with plans and specifications approved in writing by Landlord and such other reasonable requirements as Landlord shall impose. The 36 -------------------------------------------------------------------------------- provisions of this Lease shall apply to Tenant's use of the License pursuant to this Section 12.18 just as if the License were part of the Premises except that the License is non-exclusive and non-transferable, and is subject to termination by Landlord in the event of Tenant's failure to comply with any provision of this Lease related to the use of the License or upon the occurrence of an Event of Default by Tenant under this Lease. The cost of any repair to any damage to the Building caused by Tenant in connection with installation, maintenance, repair, replacement or removal of the Satellite Dish shall be paid by Tenant.         Tenant will save Landlord harmless and will exonerate, defend and indemnify Landlord, from any against any and all claims, liabilities and penalties, including reasonable attorneys' fees, asserted by or on behalf of any person, firm corporation or public authority in connection with the installation, operation, repair, maintenance, replacement or removal of the Satellite Dish.         Tenant may have access to the roof of the Building (accompanied by a representative of Landlord if Landlord so requires) where necessary in connection with the installation, maintenance, repair, replacement and removal of the Satellite Dish. Landlord shall have right to cause Tenant to relocate, at Tenant's sole cost and expense, the Satellite Dish to another portion of the roof of the Building by written notice delivered to Tenant. Landlord shall not grant a license for the installation of a satellite dish to another tenant of the Building that will materially interfere with the operation of Tenant's satellite dish.         Section 12.19.    Generator Pad.  Subject to Tenant's receipt of all necessary approvals therefor from all applicable governmental agencies (including, without limitation, the City of Waltham) and subject to Landlord's review and prior written approval of the plans and the location for the same, Tenant shall have the right to erect a concrete generator pad outside of the Building on the Lot and operate a generator on such pad that shall serve the Premises exclusively; provided, however, that the location of all interior Building connections, piping and wiring to the same shall be subject to Landlord's prior written approval, which Landlord may withhold in its sole discretion. Upon the expiration or sooner termination of the term of this Lease, Tenant shall remove the generator (but leave the generator pad) and, at Landlord's direction, all piping and connections to the same, and Tenant shall repair all damage to the Building caused by such removal.         Tenant will save Landlord harmless and will exonerate, defend and indemnify Landlord, from any against any and all claims, liabilities and penalties, including reasonable attorneys' fees, asserted by or on behalf of any person, firm corporation or public authority in connection with the installation, operation, repair, maintenance, replacement or removal of the generator.         Section 12.20.    Confidentiality Agreement.  Tenant and Landlord agree that all of the terms and provisions of this Lease shall be kept and treated as confidential by each party and each party's partners, officers, directors, employees, representatives and agents. Neither Landlord nor Tenant may divulge or disclose, at any time, any terms or provisions of this Lease to any person, entity, firm, organization or corporation, except for disclosures 37 -------------------------------------------------------------------------------- made to comply with law and except for disclosures made to (i) each party's employees, directors, representatives, attorneys or agents obligated to maintain the confidentiality thereof for the sole purposes of interpreting the terms and provisions of this Lease and (ii) to prospective lenders, purchasers, assignees, or sublessees. In the event that either party shall be required to disclose any of the terms and provisions of this Lease in connection with any court, administrative or other governmental proceeding, such party shall be permitted to do so provided that such party has provided the other party with prompt notice of such requirement so that the other party has had an opportunity to seek an appropriate protective order. Each party agrees that a breach of this confidentiality provision, or such a breach by any person to whom it has disclosed any of the terms and provisions hereof, will cause irreparable harm to the non-disclosing party.        WITNESS the execution hereof under seal as of the day and year first above written. LANDLORD:   VEF III FUNDING, LLC, a Delaware limited liability company   By: Value Enhancement Fund III, LLC,   a Georgia limited liability company,   its manager   By: Lend Lease Real Estate Investments, Inc., its manager   By: Name: -------------------------------------------------------------------------------- Title:   TENANT:   INTERLEAF, INC.   By: -------------------------------------------------------------------------------- Name: Title: 38 -------------------------------------------------------------------------------- SCHEDULE 1 LANDLORD'S WORK First Floor Second Stage Premises, Second Floor Premises, Third Floor Premises and Fourth Floor Premises A. Reapplication of fireproofing in accordance with Landlord's Building fireproofing program.   First Floor First Stage Premises A. Erection of partition walls to demise First Floor First Stage Premises from adjacent space on First Floor of the Building to be utilized by DOME imaging systems, inc.   B. Reapplication of fireproofing in accordance with Landlord's Building fireproofing program. 39 -------------------------------------------------------------------------------- EXHIBIT A 40 -------------------------------------------------------------------------------- EXHIBIT B 41 -------------------------------------------------------------------------------- EXHIBIT C 42 -------------------------------------------------------------------------------- EXHIBIT D 43 -------------------------------------------------------------------------------- EXHIBIT E 44 -------------------------------------------------------------------------------- EXHIBIT F 45 -------------------------------------------------------------------------------- EXHIBIT A:                Plan of Premises E   EXHIBIT B:                Description of Lot   EXHIBIT C:                Parking Area   EXHIBIT D:                Cleaning Specifications   EXHIBIT E:                Rules and Regulations   46 --------------------------------------------------------------------------------
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 ESCROW AGREEMENT     THIS ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of July 21, 2000 by and among STEPHEN F. DWYER, an individual, and a resident of the State of Nebraska, ("Guarantor"), SD ACQUISITION INC., a Nebraska corporation ("Buyer") and TRANSGENOMIC, INC., a Delaware corporation ("Seller"), and DWYER, SMITH, GARDNER, LAZER, POHREN, ROGERS & FORREST, a Nebraska general partnership, as escrow agent ("Escrow Agent"). PRELIMINARY STATEMENTS     A.  Buyer and Seller entered into an Asset Purchase Agreement, dated as of May 16, 2000 (the "Agreement"), pursuant to which Buyer has acquired certain assets of the Seller related to Seller's non-life sciences instrument product line, which sale was completed as of the date hereof.     B.  At the closing of such sale, Seller accepted a promissory note in the principal amount of $2,000,000 representing a portion of the purchase price (the "Purchase Money Note") and agreed to assume two additional notes with an aggregate principal amount of $4,635,000 that were delivered by Buyer to certain financial institutions on the date hereof in order to finance the remaining purchase price and to provide working capital to the Buyer (the "Bank Notes").     C.  On the date the Seller completes its initial public offering (the "Assumption Date"), Seller will assume the Bank Notes and the parties have agreed that the Purchase Money Note and Bank Notes will be consolidated into a single promissory note from Buyer to Seller in a principal amount reflecting the aggregate principal amount of the Purchase Money Notes and the Bank Notes plus interest accrued thereon through the Assumption Date (the "Takeout Note").     D.  In order to induce Seller to accept the Purchase Money Note from the Buyer on the date hereof and to assume the Bank Notes and consolidate them into the Takeout Note, Guarantor, being the sole shareholder of the Buyer, has delivered a personal guarantee of the payment of principal and interest on the Purchase Money Note (which shall automatically convert into a guarantee of the Buyer's obligations under the Takeout Note on the Assumption Date (the "Guarantee").     E.  As collateral for the Guarantee, Guarantor has pledged 1,200,000 shares of the Seller's common stock owned by him (the "Escrowed Shares") to the Seller and has agreed to deposit the Escrowed Shares in escrow with the Escrow Agent pursuant to the terms of this Agreement. AGREEMENT     In consideration of the mutual covenants, obligations and agreements set forth herein and in the Agreement and the Takeout Note and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:     Section 1. Deposit of Escrowed Shares and Related Instruments.  Upon the execution hereof, Guarantor shall deliver to the Escrow Agent:     (a) certificates evidencing all of the Escrowed Shares; and     (b) a signed and undated stock power in substantially the form attached as Exhibit A hereto (a "Stock Power").     All Escrowed Shares shall be delivered by the Guarantor to the Escrow Agent free and clear of any lien or encumbrance (other than created hereby) and Guarantor agrees that he will not pledge, hypothecate or otherwise encumber any Escrowed Shares or grant any option or create any other right with respect thereto during the term hereof. Escrow Agent agrees hold the Escrowed Shares and the Stock Power in accordance with the terms and conditions of this Escrow Agreement. -------------------------------------------------------------------------------- Section 2. Dividends and Other Distributions.     (a) All cash dividends or other distributions declared by Seller on the Escrowed Shares (other than a distribution made in connection with a liquidation of Seller or a distribution of substantially all of the assets of Seller with respect to the Escrowed Shares) (a "Cash Dividend") and payable to the shareholders of Seller of record at any time after the date hereof, shall be payable to Guarantor, as record holder of the Escrowed Shares, and will not be deposited with Escrow Agent.     (b) All dividends or distributions declared by Seller on the Escrowed Shares that are payable in stock or any instrument convertible into stock of Seller and payable to the shareholders of Seller of record at any time after the date hereof, shall be payable to Guarantor, as record holder of the Escrowed Shares, and will not be deposited with Escrow Agent.     (c) If the Seller declares a stock split (which shall include any stock dividend of more than 20%) affecting the Escrowed Shares, the certificates or other instruments relating thereto shall be immediately deposited by Guarantor with the Escrow Agent as additional Escrowed Shares to be held and distributed by Escrow Agent in accordance with this Escrow Agreement and the Agreement.     (d) Guarantor shall retain all right to vote the Escrowed Shares at any annual or special meeting of the shareholders of Seller unless and until such shares are disposed of pursuant to Section 3(b) hereof.     Section 3. Disposition of Escrowed Shares.  The Escrowed Shares shall be delivered by the Escrow Agent as follows:     (a) Upon written notice from an officer of the Seller that all principal of, and interest on, the Takeout Note has been paid in full and no further obligation of the Buyer remains thereunder, the Escrowed Shares (along with the Stock Power) shall be delivered to Buyer;     (b) Upon written notice from an officer of the Seller that Buyer has delivered a partial payment of the principal balance of the Takeout Note, which notice shall instruct the Escrow Agent to release a pro rata number of shares according to the percentage of the outstanding principal balance paid to Seller as part of such partial payment, that portion of the Escrowed Shares shall be delivered to Buyer;     (c) Upon written notice from an officer of the Seller that an Event of Default has occurred (unless written evidence that such Event of Default has not occurred is received from Guarantor within 48 hours thereof), the Escrow Agent is hereby authorized and directed to take any and all such actions (including delivery of certificates for the Escrowed Shares and the Stock Power to such broker or other party as the Seller shall direct) as may be necessary to cause the sale of such number of the Escrowed Shares as Escrow Agent reasonably determines in good faith is necessary to generate sufficient net cash proceeds to pay all outstanding principal of, and accrued and unpaid interest on, the Purchase Money Note or Takeout Note, as the case may be. Upon receipt of such net proceeds, the Escrow Agent shall deliver same to the Seller and, assuming such net proceeds equal the then outstanding principal of, and accrued and unpaid interest on, the Purchase Money Note or Takeout Note, Seller shall mark the original Purchase Money Note or Takeout Note, as the case may be, as "cancelled" and deliver same to the Escrow Agent. Escrow Agent shall promptly thereafter remit such cancelled note to the Buyer along with any remaining Escrowed Shares and any cash proceeds from the sale of Escrow Shares in excess of the amounts delivered to Seller to pay principal of, and interest on, the Purchase Money Note or Takeout Note.     (d) The obligation of Escrow Agent to cause the sale of the Escrowed Shares on behalf of Seller under paragraph (c) of this Section 3, is subject to any restriction on the transferability of the Escrowed Shares imposed on Guarantor under federal and state securities laws or any contractual obligation entered into by Guarantor at the request of the Seller or its underwriters in connection with the initial public offering of its common stock. Escrow Agent may request, and will be entitled to rely 2 -------------------------------------------------------------------------------- on, an opinion from Seller's legal counsel as to its ability to sell or cause the sale of Escrowed Shares under such laws or contractual restrictions. In that regard, Seller and the Escrow Agent acknowledge that the Escrowed shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") and bear a legend to that effect. To the extent it determines that registration of the Escrowed Shares under the Securities Act is necessary, the Seller may file a registration statement relating thereto (at its sole expense) and the Buyer and Guarantor hereby agree to cooperate and take such actions as may be reasonably requested by Seller in order to complete same.     Section 4. Events of Default.  Any one of the following shall constitute an Event of Default under this Agreement:     (a) Buyer or Guarantor has made any material misstatement of fact, misrepresentation or omission with respect to, or has otherwise defaulted in the performance of any term, condition, covenant or other agreement, which default has not been waived or cured with respect to, any provision, representation or warranty set forth in the Purchase Money Note, the Takeout Note, the Agreement, this Escrow Agreement or any other agreements between Buyer and Seller;     (b) Buyer fails to pay the principal balance and all accrued and unpaid interest on either the Purchase Money Note or the Takeout Note on or before the respective maturity dates thereof and Guarantor fails to immediately pay same pursuant to the terms of the Guarantee or either Buyer or Guarantor advise Seller in writing that it or he will not honor their obligations under the Purchase Money Note, the Takeout Note or the Guarantee or otherwise authorize the Seller and the Escrow Agent in writing to take actions hereunder as if an Event of Default has occurred; and     (c) Buyer or Guarantor (i) fails to pay or otherwise defaults with respect to any material indebtedness, installment contract or any other material obligation if such failure or default remains after the expiration of any applicable cure period or is not subject to a bona fide dispute between the parties thereto; (ii) becomes insolvent, generally fails to pay, or admits in writing its inability to pay, its debts as they become due; (iii) makes an assignment for the benefit of creditors; or (iv) files or has filed against it involuntarily a petition in bankruptcy or institutes any action under any applicable laws providing for the relief of debtors or seeks or consents to the appointment of an administrator, receiver, custodian, or similar official for his assets (or has such a petition or action filed against it and such petition or action or appointment is not dismissed or stayed within ninety (90) days). The Buyer expressly waives presentment, protest, demand, notice of dishonor or default.     Section 5. General Rights and Duties of Escrow Agent.       (a) Escrow Agent agrees to use its best efforts to ensure the security of the Escrowed Shares, and Escrow Agent agrees to perform its duties hereunder with the same degree of care exercised by Escrow Agent in connection with its own property.     (b) Escrow Agent does not have an interest in the Escrow Shares and has possession thereof only as escrow holder in accordance with the terms of this Escrow Agreement. Escrow Agent acknowledges and agrees that Escrow Agent is not a "holder" of the Escrow Shares as that term is defined under the Uniform Commercial Code of the State of Nebraska, and, as such, Escrow Agent acknowledges and agrees that the Escrow Shares may not be subject to any existing or hereafter filed and perfected security interests in any of the property of Escrow Agent held by any now or hereafter existing creditors of Escrow Agent.     (c) In performing its duties hereunder, Escrow Agent shall be entitled to rely upon (i) the service, accuracy and authenticity of any order, judgment, certification, demand or judicial or administrative notice and (ii) any written notice or other document delivered to Escrow Agent in connection herewith believed by it to be genuine and correct and executed and delivered by the appropriate party. Escrow Agent may conclusively presume that the representative of any entity other than a natural person which is a party hereto has full power and authority to execute any such written 3 -------------------------------------------------------------------------------- notice or other document and to issue instructions to Escrow Agent on behalf of such party unless written notice to the contrary is delivered to Escrow Agent.     (d) Escrow Agent shall not be liable for any claim, loss or other damage resulting from (i) the performance of the respective obligations or breach of any covenant, representation, warranty or any other promise or obligation of the Agreement by any of the parties thereto and (ii) compliance by Escrow Agent with any legal process, subpoena, writs, orders, judgements and decree of any court whether issued with or without jurisdiction and whether or not consequently vacated, modified, set aside or reversed.     (e) Each of the Seller, Buyer and Guarantor agree to indemnify and hold harmless Escrow Agent in its capacity as such from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses (including those of its outside counsel) or disbursements of any kind whatsoever which may at any time be imposed upon, incurred by or asserted against Escrow Agent in its capacity as such in any way relating to or arising out of this Escrow Agreement, except to the extent resulting from the gross negligence or willful misconduct of Escrow Agent.     (f)  In the event of disagreement about the interpretation of this Escrow Agreement, or about the rights and obligations or the propriety of any action contemplated by Escrow Agent thereunder, Escrow Agent may, in its sole discretion, file an action to interpleader to resolve the disagreement.     (g) Escrow Agent shall not be bound by any agreements among the Seller, Buyer or Guarantor other than by this Escrow Agreement and any other escrow agreement to which Escrow Agent is a party with the Seller, Buyer and/or Guarantor.     Section 6. Notices.  (a) All notices, written instructions or other documents deliverable to any of the parties hereto pursuant to the terms and conditions of this Escrow Agreement shall be validly given when 4 -------------------------------------------------------------------------------- hand-delivered or sent by a courier or express service guaranteeing overnight delivery to the parties at the following addresses: If to Escrow Agent:   Dwyer, Smith, Gardner, Lazer,   Pohren, Rogers & Forrest 8712 West Dodge Road Suite 400 Omaha, Nebraska 68114 Attention: Michael Lazer   If to Buyer or Guarantor:       SD Acquisition, Inc 5600 South 42nd Street Omaha, Nebraska 68107 Attention: Stephen F. Dwyer   with a copy to:       Michael Lazer Dwyer, Smith, Gardner, Lazer,   Pohren, Rogers & Forrest 8712 West Dodge Road Suite 400 Omaha, Nebraska 68114   If to Seller:       Transgenomic, Inc 5600 South 42nd Street Omaha, Nebraska 68107 Attention: William Rasmussen   with a copy to:       Steven Amen Kutak Rock LLP 1650 Farnam Street Omaha, Nebraska 68102                 The delivery of the Stock to any party hereto shall be by hand delivery or U.S. Mail, postage prepaid, return receipt requested and copies of any correspondence delivered therewith may be delivered in any manner authorized herein.     Section 7. Tax Matters.  Guarantor agrees that he is responsible for the payment of income taxes with respect to any dividend payable to him with respect to the Escrowed Shares during the term of this Escrow Agreement.     Section 8. Governing Law.  This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Nebraska notwithstanding the conflict of laws principles thereof.     Section 9. Waiver.  No waiver of any of the obligations or provisions of this Escrow Agreement shall be enforceable against any of the parties unless such waiver is (a) executed by each of the parties hereto and (b) acknowledged in writing by Escrow Agent. Any waiver effected hereby shall not constitute a waiver of any other obligations or provisions of this Escrow Agreement.     Section 10. Amendment.  This Escrow Agreement may be amended, modified or terminated only by written instrument or written instruments signed by the parties hereto. No act, omission or course of dealing shall be deemed to constitute an amendment, modification or termination hereof.     Section 11. Headings.  The headings contained in this Escrow Agreement are provided for convenience only and form no part of this Agreement and shall not affect the construction or interpretation of this Escrow Agreement. 5 --------------------------------------------------------------------------------     Section 12. Successors and Assigns.  This Escrow Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective legal representatives, successors, heirs and assigns.     Section 13. Entire Agreement.  This Escrow Agreement sets forth the entire agreement among the parties with respect to the subject matter hereof, and this Agreement supersedes and replaces any agreement or understanding that may have existed between the parties prior to or contemporaneously with the date hereof in respect of the such subject matter expressly set forth herein.     Section 14. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original.     IN WITNESS WHEREOF, the parties have executed and delivered this Escrow Agreement as of the date first above written.     BUYER:           SD Acquisition, Inc.           By       /s/ STEPHEN F. DWYER    -------------------------------------------------------------------------------- Stephen F. Dwyer, President           GUARANTOR:           /s/ STEPHEN F. DWYER    -------------------------------------------------------------------------------- Stephen F. Dwyer           SELLER:           Transgenomic, Inc.           By       /s/ WILLIAM P. RASMUSSEN    -------------------------------------------------------------------------------- William P. Rasmussen, Chief Financial Officer           ESCROW AGENT:           Dwyer, Smith, Gardner, Lazer, Pohren, Rogers & Forrest           By       /s/ MICHAEL LAZER    -------------------------------------------------------------------------------- Michael Lazer, Partner [SIGNATURE PAGE TO ESCROW AGREEEMENT] 6 -------------------------------------------------------------------------------- QUICKLINKS ESCROW AGREEMENT PRELIMINARY STATEMENTS AGREEMENT
EXHIBIT 10.18       LOAN AND SECURITY AGREEMENT HEARME --------------------------------------------------------------------------------        This LOAN AND SECURITY AGREEMENT (this Agreement ) dated May 2, 2000, between SILICON VALLEY BANK ( Bank ) located at 3003 Tasman Drive, Santa Clara, CA 95054 and HEARME ( Borrower ), located at 685 Clyde Avenue, Mountain View, CA 95054, provides the terms on which Bank, will lend to Borrower and Borrower will repay Bank. The parties agree as follows: 1.     ACCOUNTING AND OTHER TERMS        Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term financial statements includes the notes and schedules. The terms including and includes always mean including (or includes) without limitation in this or any Loan Document. Capitalized terms in this Agreement shall have the meanings set forth in Section 13. This Agreement shall be construed to impart upon Bank a duty to act reasonably at all times. 2.     LOAN AND TERMS OF PAYMENT 2.1    Credit Extensions. Borrower will pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 2.1.1 Equipment Advances.        (a)          Through September 30, 2000 (the Equipment Availability End Date ), Bank will make advances ( Equipment Advance and, collectively, Equipment Advances ) not exceeding the Committed Equipment Line. The Equipment Advances may only be used to purchase or refinance Equipment purchased on or after 120 days before the Closing Date and may not exceed 100% of the invoice for such Equipment, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Software, leasehold improvements and other soft costs may constitute up to 20% of an Equipment Advance.        (b)          Interest accrues from the date of each Equipment Advance at the rate of 1% plus the Prime Rate per annum and is payable monthly until the Equipment Availability End Date occurs. Equipment Advances outstanding on the Equipment Availability End Date are payable in 36 equal monthly installments of principal, plus accrued interest, beginning on October 7, 2000 and ending on September 7, 2003 the ( Equipment Loan Maturity Date ). Equipment Advances when repaid may not be reborowed.        (c)          To obtain an Equipment Advance, Borrower must notify Bank (the notice is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1 Business Day before the day on which the Equipment Advance is to be made. The notice in the form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer or designee and include a copy of the invoice for the Equipment being financed. 2.2     Interest Rate; Payments.         (a)          Interest Rate. Advances accrue interest on the outstanding principal balance at a per annum rate equal to 0.25 percentage points above the Prime Rate. After an Event of Default arising out of Borrower s failure to comply with any of Sections 6.7, 7, or 8.1, Obligations accrue interest at 5 percent above the rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360 day year for the actual number of days elapsed.         (b)          Payments. Interest is payable on the second day of each month. Bank may debit any of Borrower s deposit accounts including Account Number__________ for principal and interest payments or any amounts Borrower owes Bank. Bank will notify Borrower when it debits Borrower s accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest accrue. 1 -------------------------------------------------------------------------------- 2.3     Fees. Borrower will pay to Bank:         (a)          Facility Fee. A fully earned, non-refundable facility fee of $12,000, of which $6,000 is due on the Closing Date, and $6,000 is due on October 31, 2000; and         (b)          Bank Expenses. All Bank Expenses (including reasonable attorneys fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Closing Date when due, not to exceed $10,000. 3.     CONDITIONS OF LOANS 3.1   Conditions Precedent to Initial Credit Extension. Bank's obligation to make the initial Credit Extension is subject to the condition precedent that it receive the agreements, documents and fees it requires. 3.2    Conditions Precedent to all Credit Extensions. Bank's obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following:           (a)          timely receipt of any Payment/Advance Form; and        (b)          the representations and warranties in Section 5 must be materially true on the date of the Payment/Advance Form and on the effective date of each Credit Extension and no Event of Default shall have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower s representation and warranty on that date that the representations and warranties in Section 5 remain true. 4.     CREATION OF SECURITY INTEREST 5.     REPRESENTATIONS AND WARRANTIES           Borrower represents and warrants as follows: 5.1    Due Organization and Authorization. Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower s formations documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 5.2    Collateral. Borrower has good title to the Collateral, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner or licensee of the Intellectual Property used in Borrower s business, except for non-exclusive licenses granted to its customers in the ordinary course of business. As of the Closing Date, each Patent is valid and enforceable and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party. 2 -------------------------------------------------------------------------------- 5.3     Litigation. Except as shown in the Schedule, there are no actions or proceedings pending or, to Borrower s knowledge, threatened by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change. 5.4     No Material Adverse Change in Financial Statements. All consolidated financial statements for Borrower and any Subsidiary delivered to Bank fairly present in all material respects Borrower s consolidated financial condition and Borrower s consolidated results of operations. There has not been any material deterioration in Borrower s consolidated financial condition since the date of the most recent financial statements submitted to Bank. 5.5     Solvency. The fair salable value of Borrower s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. xcept those being contested in good faith with adequate reserves under GAAP. To the best of Borrower s knowledge, Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 5.7     Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 5.8     Full Disclosure. No representation, warranty or other statement of Borrower in any certificate or written statement given to Bank taken together with all such certificates and written statements given to Bank contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results). 6.     AFFIRMATIVE COVENANTS           Borrower will do all of the following: 6.1    Government Compliance. Borrower will maintain its and all Subsidiaries corporate existence and good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which the failure to so qualify could have a material adverse effect on Borrower s business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower s business or operations or cause a Material Adverse Change. 6.2     Financial Statements, Reports, Certificates.         (a)          Borrower will deliver to Bank: (i) as soon as available, but no later than 45 days after the last day of each fiscal quarter (and the last day of each month at any time that Borrower s balance of unrestricted cash is less than $25,000,000), a company prepared consolidated balance sheet and income statement covering Borrower s consolidated operations during the period, in a form acceptable to Bank and certified by a Responsible Officer; 3 financial information Bank requests.         (b)          Within 45 days after the last day of each quarter (and the last day of each month at any time that Borrower s balance of unrestricted cash is less than $25,000,000), Borrower will deliver to Bank with the financial statements due under Section 6.2(a) a Compliance Certificate signed by a Responsible Officer in the form of Exhibit D.         (c)           As a condition to making any Advances, Bank has the right to audit Borrower s Accounts at Borrower s expense. Thereafter, Bank may conduct audits at Borrower s expense, but not more often than once every 12 months unless an Event of Default has occurred and is continuing. 6.3     Inventory; Returns. Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower s customary practices as they exist at the Closing Date. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than $150,000. 6.4     Taxes. Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments and will deliver to Bank, on demand, appropriate certificates attesting to the payment. nt property shall be deemed Collateral in which Bank has been granted a first priority security interest. If an Event of Default has occurred and is continuing, then, at Bank s option, proceeds payable under any policy will be payable to Bank on account of the Obligations. 6.6     Primary Accounts. Borrower will maintain its primary depository and operating accounts with Bank. 6.7     Financial Covenants.         Borrower will maintain as of the last day of each fiscal quarter (or, as to the Quick Ratio, the last day of each month in which the balance of Borrower s unrestricted cash is less than $25,000,000) the following financial ratios and covenants:         (a)          Quick Ratio [Adjusted]. A ratio of Quick Assets to Current Liabilities (including all amounts owed to Bank, to the extent not already included as a Current Liability) minus Deferred Maintenance Revenue of at least 1.75 to 1.0.         (b)          Revenue. The revenue in each quarter shall exceed the revenue in each previous fiscal quarter, except the revenue may decline from the fourth quarter of 2000 to the first quarter of 2001. 4 --------------------------------------------------------------------------------         (c)          Profitability. Borrower will not suffer a loss in excess of $12,500,000 for the fiscal quarter ending June 30, 2000, a loss in excess of $12,000,000 for the fiscal quarter ending September 30, 2000, a loss in excess of $11,500,000 for the fiscal quarter ending December 31, 2000, or a loss in excess of $11,000,000 for the fiscal quarter ending March 31, 2001. Profitability and loss covenants for subsequent quarters (i.e. quarters ending June 30, 2001 through March 31, 2002) shall be established to the mutual satisfaction of Bank and Borrower by April 30, 2001, provided that if no such agreement is reached in good faith by such date, this Agreement shall terminate, and all amounts outstanding hereunder, shall be due on April 30, 2001. Calculation of losses under this section shall not include amortization charges related to the AudioTalk acquisition 6.8     Further Assurances. Borrower will execute any further instruments and take further action as Bank requests to perfect or continue Bank s security interest in the Collateral or to effect the purposes of this Agreement. 7.     NEGATIVE COVENANTS         Borrower will not do any of the following without the Bank s written consent, which will not be unreasonably withheld: 7.1     Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively a Transfer ), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than a Transfer (i) of its property (other than Equipment financed under this Agreement) in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; or (iii) of worn-out or obsolete Equipment or (iv) other Transfers which in the aggregate do not exceed $50,000 in any fiscal year. 7.2     Changes in Business, Ownership, Management or Business Locations. Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto, or have a material change in its ownership (other than the sale of Borrower s equity securities in a public offering or to venture capital investors approved by Bank) of greater than 25%, or its management. Borrower will not, without at least 30 days prior written notice to Bank, relocate its principal executive office or add any new offices or business locations. 7.3     Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except where (i) such acquisitions do not involve consideration other than Borrower s equity securities with an aggregate value greater than $250,000 and (ii) no Event of Default has occurred and is continuing or would exist after giving effect to the transactions. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower. 7.4     Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 7.5     Encumbrance. Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens. 7.6     Investments; Distributions. (i) Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments and mergers and acquisitions permitted under Section 7.3, or permit any of its Subsidiaries to do so; or (ii) pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock, except for repurchases of stock from former employees or directors of Borrower under the terms of applicable repurchase agreements in an aggregate amount not to exceed $50,000 in the aggregate in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases. 5 -------------------------------------------------------------------------------- 7.7     Transactions with Affiliates. Directly or indirectly enter or permit any material transaction with any Affiliate, except transactions that are in the ordinary course of Borrower s business, on terms less favorable to Borrower than would be obtained in an arm s length transaction with a non-affiliated Person. 7.8     Subordinated Debt. Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt, without Bank s prior written consent. 7.9     Compliance. Undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Advance for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower s business or operations or cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 8.     EVENTS OF DEFAULT           Any one of the following is an Event of Default: 8.1     Payment Default. Borrower fails to pay any of the Obligations within 5 days after their due date. During the additional period the failure to cure the default is not an Event of Default (but no Credit Extensions will be made during the cure period); 8.2     Covenant Default. Borrower does not perform any obligation in Section 6 or violates any covenant in Article 7 or does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and as to any default under a term, condition or covenant that can be cured, has not cured the default within 10 Business Days after it occurs, or if the default cannot be cured within 10 Business Days or cannot be cured after Borrower s attempts in the 10 Business Day period, and the default may be cured within a reasonable time, then Borrower has an additional time, (of not more than 30 days) to attempt to cure the default. During the additional period the failure to cure the default is not an Event of Default (but no Credit Extensions will be made during the cure period); 8.3     Material Adverse Change. (i) A material impairment in the perfection or priority of Bank s security interest in the Collateral or in the value of such Collateral that is not covered by adequate insurance occurs; or (ii) there occurs a material adverse change in Borrower s business or financial condition; 8.4     Attachment. (i) Any material portion of Borrower s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days; (ii) Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business; (iii) a judgment or other claim becomes a Lien on a material portion of Borrower s assets; or (iv) a notice of lien, levy, or assessment is filed against any of Borrower s assets by any government agency and not paid within 10 days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made during the cure period); 8.5     Insolvency. (i) Borrower becomes insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 8.6     Misrepresentations. If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any communication delivered to Bank or to induce Bank to enter this Agreement or any Loan Document. 6 -------------------------------------------------------------------------------- 9.     BANK S RIGHTS AND REMEDIES 9.1    Rights and Remedies. When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:         (a)          Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);         (b)          Stop advancing money or extending credit for Borrower s benefit under this Agreement or under any other agreement between Borrower and Bank;         (c)          Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable;         (d)          Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank s rights or remedies;         (e)          Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;         (f)          Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower s labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank s exercise of its rights under this Section, Borrower s rights under all licenses and all franchise agreements inure to Bank s benefit; and           (g)          Dispose of the Collateral according to the Code. 9.2     Power of Attorney. When an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower s name on any checks or other forms of payment or security; (ii) sign Borrower s name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower s insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (v) dispose of the Collateral in accordance with the Code. Bank may exercise the power of attorney to sign Borrower s name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank s appointment as Borrower s attorney in fact, and all of Bank s rights and powers, coupled with an int erest, are irrevocable until all Obligations have been fully repaid and performed and Bank s obligation to provide Credit Extensions terminates. 9.3     Accounts Collection. When an Event of Default occurs and continues, Bank may notify any Person owing Borrower money of Bank s security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit. 9.4     Bank Expenses. If Borrower fails to pay any amount or furnish any required proof of payment to third persons Bank may make all or part of the payment or obtain insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank s waiver of any Event of Default. 7 -------------------------------------------------------------------------------- 9.5     Bank's Liability for Collateral. If Bank complies with reasonable banking practices, it is not liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person.  Borrower bears all risk of loss, damage or destruction of the Collateral. 9.6     Remedies Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative.  Bank has all rights and remedies provided under the Code, by law, or in equity.  Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver.  Bank's delay is not a waiver, election, or acquiescence.  No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 9.7     Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guaranties held by Bank on which Borrower is liable. 10.     NOTICES         All notices or demands by any party to this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile at the addresses listed at the beginning of this Agreement. A Party may change its notice address by giving the other Party written notice. 11.    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER             California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California. BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 12.      GENERAL PROVISIONS 12.1      Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or Obligations under it without Bank s prior written consent which may be granted or withheld in Bank s discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank s obligations, rights and benefits under this Agreement, the Loan Documents or any related agreement. 12.2      Indemnification. Borrower will indemnify, defend and hold harmless Bank and its officers, employees and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank s gross negligence or willful misconduct. 12.3      Severability of Provision. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 12.4      Amendments in Writing, Integration. All amendments to this Agreement must be in writing signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter, and supersedes prior or contemporaneous negotiations or agreements. All prior or contemporaneous 8 -------------------------------------------------------------------------------- agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents. 12.5      Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, are one Agreement. 12.6      Survival. All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. from disclosing the information. 12.8     Attorneys Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled, whether or not a lawsuit is filed. 13.      DEFINITIONS 13.1     Definitions.             "Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.             "Advance" or "Advances" is a loan advance (or advances) under the Committed Revolving Line.             "Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person s managers and members.             "Bank Expenses" are all audit fees and expenses and reasonable costs or expenses (including reasonable attorneys fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings).             "Borrower's Books" are all Borrower s books and records including ledgers, records regarding Borrower s assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information.             "Business Day" is any day that is not a Saturday, Sunday or a day on which the Bank is closed.             "Closing Date" is the date of this Agreement.             "Code" is the California Uniform Commercial Code. 9 --------------------------------------------------------------------------------             "Collateral" is the property described on Exhibit A.             "Committed Equipment Line" is a Credit Extension of up to $3,000,000.             "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but Contingent Obligation does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or , if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement.             "Copyrights" are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held.             "Credit Extension" is each Equipment Advance or any other extension of credit by Bank for Borrower s benefit.             "Current Assets" are amounts that under GAAP should be included on that date as current assets on Borrower s consolidated balance sheet.             "Current Liabilities" are the aggregate amount of Borrower s total liabilities which mature within one (1) year.             "Deferred Maintenance Revenue" is all amounts received in advance of performance under maintenance contracts and not yet recognized as revenue.             "Equipment" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.             "Equipment Advance" is defined in Section 2.1.             "Equipment Availability End Date" is defined in Section 2.1.             "Equipment Maturity Date" is defined in Section 2.1.             "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations.             "GAAP" is generally accepted accounting principles.             "Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.             "Insolvency Proceeding" is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.              "Intellectual Property" is: 10 --------------------------------------------------------------------------------                (a)     Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties from the use;                (b)     Any trade secrets and any Intellectual Property Rights in computer software and computer software products now or later existing, created, acquired or held;                (c)     All design rights which may be available to Borrower now or later created, acquired or held;                (d)     Any claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use or infringement of the intellectual property rights above;                     All proceeds and products of the foregoing, including all insurance, indemnity or warranty payments.             "Inventory" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title.             "Investment" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.             "Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.             "Loan Documents" are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated.             "Material Adverse Change" is defined in Section 8.3.             "Maturity Date" is the Equipment Loan Maturity Date.             "Obligations" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including letters of credit and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank.             "Patents" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.             "Permitted Indebtedness" is:             (a)     Borrower s indebtedness to Bank under this Agreement or the Loan Documents;              (b)     Indebtedness existing on the Closing Date and shown on the Schedule;              (c)     Subordinated Debt;             (d)    Indebtedness to trade creditors and with respect to surety bonds and similar obligations incurred in the ordinary course of business; and             (e)     Indebtedness secured by Permitted Liens, including equipment purchase and lease agreements; 11 --------------------------------------------------------------------------------             (f)      Indebtedness of Borrower to any Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that the primary obligations are not prohibited hereby), and Indebtedness of any Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations are not prohibited hereby);             (g)     Other Indebtedness not otherwise permitted by Section 7.4 not exceeding $150,000 in the aggregate outstanding at any time; and             (h)     Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.             "Permitted Investments" are:             (a)      Investments shown on the Schedule and existing on the Closing Date; and             (b)     (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor s Corporation or Moody s Investors Service, Inc., and (iii) Bank s certificates of deposit issued maturing no more than 1 year after issue and (iv) any Investments permitted by Borrower s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved by Bank;             (c)      Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;             (d)      Investments accepted in connection with Transfers permitted by Section 7.1;             (e)      Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $250,000 in the aggregate in any fiscal year             (f)      Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower s Board of Directors             (g)     Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;             (h)     Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;             (i)      Joint ventures or strategic alliances in the ordinary course of Borrower s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash investments by Borrower do not exceed $50,000 in the aggregate in any fiscal year;             (j)     Other Investments not otherwise permitted by Section 7.7 not exceeding $50,000 in the aggregate outstanding at any time; and             (k)     Investments made in accordance with Borrower s investment policy in the form attached hereto, as amended from time to time with Bank s prior written consent.             "Permitted Liens" are: 12 --------------------------------------------------------------------------------             (a)      Liens existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents;             (b)      Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank s security interests;             (c)      Liens granted in Equipment being leased to the lessor thereof, and purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment;             (d)      Leases or subleases and licenses or sublicenses granted in the ordinary course of Borrower s business,if the leases, subleases, licenses and sublicenses permit granting Bank a security interest;             (e)      Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;             (f)       Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;             (g)       Liens in favor of other financial institutions arising in connection with Borrower s deposit accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit accounts; and             (h)       Other Liens not described above arising in the ordinary course of business and not having or not reasonably likely to have a material adverse effect on Borrower and its Subsidiaries taken as a whole.             "Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.             "Prime Rate" is Bank s most recently announced prime rate, even if it is not Bank s lowest rate.             "Quick Assets" is, on any date, the Borrower s consolidated, unrestricted cash, cash equivalents, net billed accounts receivable and investments with maturities of less than 12 months determined according to GAAP.             "Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower.             "Revolving Maturity Date" is the day before the first anniversary of the date of this Agreement.             "Schedule" is any attached schedule of exceptions.             "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower s debt to Bank (and identified as subordinated by Borrower and Bank).             "Subsidiary" is for any Person, joint venture, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person.             "Trademarks" are trademark and service mark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of Assignor connected with the trademarks. 13 -------------------------------------------------------------------------------- BORROWER: HEARME By: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- SILICON VALLEY BANK By: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   14 -------------------------------------------------------------------------------- EXHIBIT A COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT           The Collateral shall consist of all right, title and interest of Borrower in and to the following:           (a)          All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;           (b)         All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower s custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower s Books relating to any of the foregoing;           (c)         All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind;           (d)         All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower s Books relating to any of the foregoing;           (e)         All documents, cash, deposit accounts, securities, securities accounts, security entitlements, financial assets, investment property, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower s Books relating to the foregoing; and           (f)         Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. Notwithstanding the foregoing, Collateral shall not include any copyrights, trademarks, servicemarks, tradestyles, trade names, patents, patent applications, copyright rights, copyright applications and like protections in each work of authorship and derivative work thereof; trade secret rights, including rights to unpatented inventions, know how, operating manuals, license rights and agreements and confidential information, mask works or similar rights for the protection of semiconductor chips, or any claims for damages by way of any past, present and future infringement of any of the foregoing. (collectively, the Intellectual Property ), except that the Collateral shall include the proceeds of all the Intellectual Property, including proceeds in the form of accounts and general intangibles. 15 -------------------------------------------------------------------------------- EXHIBIT B LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME TO: CENTRAL CLIENT DIVISION DATE:    -------------------------------------------------------------------------------- FAX #: (408) 496-2426 TIME:  -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FROM: --------------------------------------------------------------------------------   CLIENT NAME (BORROWER) REQUESTED BY: --------------------------------------------------------------------------------   AUTHORIZED SIGNER S NAME AUTHORIZED SIGNATURE:   -------------------------------------------------------------------------------- PHONE NUMBER: -------------------------------------------------------------------------------- FROM ACCOUNT # TO ACCOUNT # -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT   $       -------------------------------------------------------------------------------- PRINCIPAL INCREASE (ADVANCE) $       -------------------------------------------------------------------------------- PRINCIPAL PAYMENT (ONLY) $       -------------------------------------------------------------------------------- INTEREST PAYMENT (ONLY) $       -------------------------------------------------------------------------------- PRINCIPAL AND INTEREST (PAYMENT) $       -------------------------------------------------------------------------------- OTHER INSTRUCTIONS:     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------           All representations and warranties of Borrower stated in the Loan Agreement are true, correct and complete in all material respects as of the date of the telephone request for and Advance confirmed by this Borrowing Certificate; provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- BANK USE ONLY TELEPHONE REQUEST: The following person is authorized to request the loan payment transfer/loan advance on the advance designated account and is known to me.   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Authorized Requester   Phone #       --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Received By (Bank)   Phone #         --------------------------------------------------------------------------------     Authorized Signature (Bank)   -------------------------------------------------------------------------------- 16 -------------------------------------------------------------------------------- EXHIBIT C COMPLIANCE CERTIFICATE TO:           SILICON VALLEY BANK FROM:    HEARME      The undersigned authorized officer of HEARME certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the Agreement ), (i) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered . Please indicate compliance status by circling Yes/No under Complies column. Reporting Covenant Required   Complies         Quarterly financial statements1 Quarterly within 45 days1 Yes             No Annual (CPA Audited) FYE within 90 days  Yes             No 10-Q, 10K and 8-K Within 5 days after filing with SEC Yes             No         Financial Covenant Required Actual Complies Maintain on a Quarterly Basis:            Minimum Quick Ratio 1.75:1.002 _____:1.00 Yes             No      Minimum Revenue 3 $_____ Yes             No         Profitability          Quarterly 4 $___________ Yes             No         1 Monthly when unrestricted cash is less than $25,000,000.  2 Monthly when unrestricted cash is less than $25,000,000. 3 Greater than previous quarter, except decline permitted for Q499 to Q100. 4 Quarterly loss not to exceed: 6/30/00 ($12,500,000) 9/30/00 ($12,000,000) 12/31/00 ($11,500,000) 3/31/01  ($11,000,000)     -------------------------------------------------------------------------------- Comments Regarding Exceptions: See Attached.   BANK USE ONLY                 Received by:     -------------------------------------------------------------------------------- Sincerely,   AUTHORIZED SIGNER     Date:     --------------------------------------------------------------------------------     Verified: --------------------------------------------------------------------------------     --------------------------------------------------------------------------------  SIGNATURE   AUTHORIZED SIGNER           Date: --------------------------------------------------------------------------------   --------------------------------------------------------------------------------  TITLE         Compliance Status Yes   No   --------------------------------------------------------------------------------      DATE         -------------------------------------------------------------------------------- 17 -------------------------------------------------------------------------------- CORPORATE RESOLUTIONS TO BORROW -------------------------------------------------------------------------------- Borrower: HEARME --------------------------------------------------------------------------------    I, the undersigned Secretary or Assistant Secretary of HEARME (the Corporation ), HEREBY CERTIFY that the Corporation is organized and existing under and by virtue of the laws of the State of Delaware.      I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and complete copies of the Certificate of Incorporation, as amended, and the Bylaws of the Corporation, each of which is in full force and effect on the date hereof.      I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly called and held, at which a quorum was present and voting (or by other duly authorized corporate action in lieu of a meeting), the following resolutions were adopted.      BE IT RESOLVED, that any one (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below: NAMES   POSITION   ACTUAL SIGNATURES -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------           --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- acting for and on behalf of this Corporation and as its act and deed be, and they hereby are, authorized and empowered:       Borrow Money. To borrow from time to time from Silicon Valley Bank ("Bank"), on such terms as may be agreed upon between the officers, employees, or agents and Bank, such sum or sums of money as in their judgment should be borrowed, without limitation, including such sums as are specified in that certain Loan and Security Agreement between Bank and the Corporation (the "Loan Agreement").      Execute Loan Documents. To execute and deliver to Bank the Loan Agreement and any other agreement entered into between Borrower and Bank in connection with the Loan Agreement, all as amended or extended from time to time (collectively, with the Loan Agreement, the Loan Documents ), and also to execute and deliver to Bank one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for the Loan Documents, or any portion thereof.      Grant Security. To grant a security interest to Bank in the Collateral described in the Loan Documents, which security interest shall secure all of the Corporation s Obligations, as described in the Loan Documents.      Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable.      Letters of Credit; Foreign Exchange. To execute letters of credit applications, foreign exchange agreements and other related documents pertaining to Bank s issuance of letters of credit and foreign exchange contracts.      Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions.      BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank 18      -------------------------------------------------------------------------------- may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any of the Corporation s agreements or commitments in effect at the time notice is given .      I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever.      IN WITNESS WHEREOF, I have hereunto set my hand on May 2, 2000 and attest that the signatures set opposite the names listed above are their genuine signatures.   CERTIFIED AND ATTESTED BY:   X --------------------------------------------------------------------------------   19 --------------------------------------------------------------------------------
EXHIBIT 10.3j TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 20, 2000 between Harcourt General, Inc. and Gail S. Mann (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 20, 2000 (the "Effective Date") and shall remain in effect until June 19, 2002 (the "Term"); provided, however, that commencing with June 20, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B e. Retiree Medical. Following Executive's entitlement to continued active employee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool In the event of a Change of Control, Executive shall be entitled to a 1.82% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. 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, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and 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 Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty 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 the Gross-Up Payment required to be paid. 7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10. 11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive. 16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement on the 20th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Gail S. Mann                 EXECUTIVE   Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice; or (5) Executive's notice of termination of employment within the thirty-day period following the 183rd day following the Change of Control; provided Executive's employment actually terminates within such 30 day period. Except as provided in (5) above, Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means the lesser of (i) the quotient of (A) 24 months plus one month for each full year of service with the Company or any of its Subsidiaries divided by (B) twelve and (ii) three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 35% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1. Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive=s age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females. 3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed
EXHIBIT 10.2 AUTOZONE, INC. 123 South Front Street Memphis, Tennessee 38103-3607 October 10, 2000 ESL Investments, Inc. One Lafayette Place Greenwich, Connecticut 06830 Ladies and Gentlemen:             The purpose of this letter, which shall be a binding agreement between us upon its execution by ESL Investments, Inc., a Delaware corporation ("ESL"), is to set forth the agreement between AutoZone, Inc., a Nevada corporation (the "Company"), and ESL concerning the voting of certain shares of the Company's stock not currently owned by ESL.             The Company will terminate its Rights Agreement, dated as of March 21, 2000 (the "Rights Agreement"), by amending the Rights Agreement's expiration date to October 20, 2000. ESL, on behalf of itself and each of its affiliates (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), agrees to take such action as may be required to ensure that during the period from October 20, 2000 through April 1, 2004, without the prior written consent of the Company, any shares of common stock of the Company acquired by ESL or any of its affiliates after October 20, 2000 and before April 1, 2004 (the "Acquired Shares") are not voted on any matter presented at any meeting of shareholders of the Company and that no written consent is executed with respect to any Acquired Shares for any matter presented to the shareholders of the Company. In addition, during such period, ESL, on behalf of itself and each of its affiliates, agrees to use all reasonable efforts to provide for the Acquired Shares to be present for determining a quorum at all shareholder meetings of the Company. The term "Acquired Shares" shall not include any securities received by ESL or any of its affiliates directly from the Company. This letter agreement shall not affect ESL's voting rights with respect to shares held by ESL or any of its affiliates that are not Acquired Shares.             If this letter is countersigned by ESL and becomes a binding agreement, the Company and ESL agree that this agreement shall be governed by, and construed in accordance with the internal laws of the state of Nevada, without giving effect to the principles of conflicts of laws thereof. In addition, we each acknowledge that money damages are an inadequate remedy for breach of this agreement because of the difficulty of ascertaining the amount of damage that will be suffered in the event that such agreement were breached. Therefore, we each agree that the parties to this agreement may obtain specific performance of such agreement and injunctive or other equitable relief as a remedy for any such breach, and each party further waives any requirement for the securing or posting of any bond in connection with any such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this agreement, but shall be in addition to all other remedies available at law or at equity. In the event that either party to this agreement believes that the other party is in breach of this agreement, prior to commencing any litigation with respect to such breach, the non-breaching party shall give written notice of the alleged breach to the breaching party and provide the breaching party with a reasonable opportunity to respond. This agreement may be modified or waived only by a separate writing between the Company and ESL expressly so modifying or waiving such agreement.             If you are in agreement with the foregoing, please so indicate by signing and returning one copy of this letter, which will constitute our agreement with respect to the matters set forth herein. Very truly yours, AUTOZONE, INC. By: /s/ Harry L. Goldsmith Name: Harry L. Goldsmith Title: Sr. V.P. & Secretary By: /s/ Robert J. Hunt Name: Robert J. Hunt Title: Executive V.P. & CFO     Confirmed and agreed to as of the date first above written, upon which this shall become a binding agreement: ESL INVESTMENTS, INC., on behalf of itself and its affiliates By: /s/ William C. Crowley Name: William C. Crowley Title: President
JOINT VENTURE AGREEMENT (this Agreement) made on June 19, 2000 Between : (1) FINANCIAL TIMES GROUP LIMITED incorporated under the laws of England and Wales whose registered office is at Number One, Southwark Bridge, London SE1 9HL (Financial Times); (2) MARKETWATCH.COM, INC. incorporated under the laws of the State of Delaware, whose principal place of business is at 825 Battery Street, San Francisco, California 94111 (MarketWatch). (3) PEARSON INTERNET HOLDINGS BV incorporated under the laws of the Netherlands whose principal place of business is at Media Centre, 4th FI, Rm 405, Sumatralaan 45, 1217 GP Hilversum, Netherlands (Pearson Internet). (4) PEARSON OVERSEAS HOLDINGS LIMITED incorporated under the laws of England and Wales whose registered office is at 3 Burlington Gardens, London W1X 1LE (POHL). Whereas : (A) Financial Times and MarketWatch entered into a Joint Venture Agreement on 6 January 2000 (the Original Joint Venture Agreement) pursuant to which they agreed to form a new jointly-owned company incorporated under the laws of England and Wales as a private limited company (the JVC) to establish the leading Internet provider in the Territory (as defined below)of comprehensive, real time business news, financial programming and analytical tools, initially in the English language, but thereafter also in other languages, in a co-branded joint venture company owned by Financial Times and MarketWatch under the brand name Financial Times MarketWatch.com. (B) Following signing of the Original Joint Venture Agreement it was agreed to make certain changes in the parties to and terms of the Original Joint Venture Agreement including for an additional class of shares to be created in the JVC (the B Shares), which would be issued to POHL. This Agreement is a restatement of the terms of the Original Joint Venture Agreement amended to reflect the changes proposed. (C) Pearson Internet Holdings B.V., Pearson Overseas Holdings Limited, Financial Times and MarketWatch are entering into this Agreement to establish the JVC and to set out the terms governing Pearson Internet Holdings BV, POHL and MarketWatch's relationship as shareholders in the JVC. (D) Financial Times and MarketWatch have agreed that the licensing to the JVC of the use of the "FINANCIAL TIMES" trade mark pursuant to the Financial Times Trade Mark Licence and the procuring, for a fee of no more than 10 pounds sterling per advertisement (such fees in aggregate not to exceed 50,000 pounds sterling), by Financial Times of fifteen million pounds sterling worth, at Effective Rate Card, of advertising over five (5) years across certain business publications in the Territory as provided for in this Agreement, on the one hand, and the licensing to the JVC of the use of the "MarketWatch" trade mark pursuant to the MarketWatch Trade Mark Licence and of the use of certain of its technology pursuant to the MarketWatch Technology Licence, on the other hand, are of equivalent value. It is agreed as follows: Interpretation Definitions 1.1 In this Agreement: Accounting Principles means the accounting principles and policies to be adopted by the Board of the JVC, pursuant to clause 13.1; Additional Capital Contributions has the meaning ascribed to it in clause 8.2 and the expression Additional Capital Contributions shall be construed accordingly; A Shares means the A Shares in the JVC's capital; A Shareholders means the Pearson Group Member(s) and the MarketWatch Group Member(s) who hold A Shares for the time being (and A Shareholder shall be construed accordingly) and any person to whom they transfer their A Shares in accordance with this Agreement; B Shares means the B shares in the JVC's capital; B Shareholder means POHL who holds B Shares for the time being (and B Shareholder shall be construed accordingly) and any person to whom they transfer their Shares in accordance with this Agreement; Board means the JVC's board of directors; Budget means for the JVC for a particular Financial Year (i) the budgeted profit and loss account and cash flow statement (including capital expenditure) phased by month, (ii) the balance sheet phased at least quarterly, (iii) in relation to the first two Financial Years, the Funding Schedule, and (iv) Milestones for the first two Financial Years; together with detailed schedules supporting the statements, including (but not limited to) media marketing spends the whole of the above in a format approved from time to time by the Board; Business means the business intended to be carried on by the JVC, as described in clause 2.1; Business Day means a day (other than a Saturday) on which banks generally are open in London and New York for a full range of business; Business Plan means the Budget for the JVC relating to a Financial Year and draft Budgets for the succeeding Financial Year, in a format to be decided from time to time by the Board, to be updated annually (and including, in relation to the first two Financial Years, the requisite Funding Schedule); Capital Contribution means the capital contributions as defined in clause 8.1; Chairman means the chairman from time to time of the Board; Chief Executive means the chief executive from time to time of the JVC; company includes any body corporate, wherever incorporated; Completion means completion of the establishment of the JVC in accordance with clause 7; Conditions means the conditions specified in clause 4.1; Control means the ability of one person to direct the activities of another or the beneficial ownership by one person of more than fifty per cent. (50%) of the voting rights generally exercisable at general or equivalent meetings of the other and Controlled shall be construed accordingly; Core Services means, in respect of Financial Times, the services provided pursuant to the FT Trade Mark Licence and the media advertising to be procured pursuant to clause 7.3 and, in respect of MarketWatch, the services provided pursuant to the MarketWatch Trade Mark Licence and the MarketWatch Technology Licence; Directors means the JVC's directors or, where applicable, an alternate director of the JVC; Effective Rate Card means with respect to any advertising buy by the JVC the lower of the published rate card or the amount actually charged by the Financial Times to unaffiliated third parties with respect to the placement of advertising substantially similar to such advertising purchased by the JVC; Equity Proportions means the respective proportions in which the A Shareholders hold the issued share capital of the JVC from time to time; Fair Price means the open market value of the relevant A Shares between a willing seller and a willing third party buyer for a wholly cash consideration at the date of the Transfer Notice without any premium or discount by reference to the percentage of the A Shares being sold or transferred; Financial Year means a financial period of the JVC commencing on 1 January, other than in the case of its initial financial period which shall commence on the date hereof, and ending on 31 December; Ft.com means the web site owned and operated by the Financial Times Group and located on the Internet under the domain name "ft.com"; FT Trade Mark Licence means the trade mark licence between Financial Times and the JVC substantially in the form of the copy which is attached hereto marked Exhibit "A"; Ftyourmoney means the web site owned and operated by the Financial Times Group and located on the Internet under the domain name "ftyourmoney.com"; Funding Schedule means a schedule, to be attached to and form part of the Business Plan for each of the first two Financial Years, setting out details of the funds required by the JVC in such year and stipulating, on a quarterly basis, the amounts in which, and periods during which, such funds may be drawn down by the JVC from the A Shareholders; Group means, in relation to the JVC or a party, that company, its Subsidiaries, its Holding Company (if any) and the Subsidiaries of any such Holding Company for the time being; Holding Company shall be construed in accordance with Section 736 and 736A of the Companies Act 1985; Internet means the global network of interconnecting computer systems including without limitation the worldwide web; IP Transaction Documents means the FT Trade Mark Licence, the MarketWatch Trade Mark Licence and the MarketWatch Technology Licence; JVC has the meaning ascribed to it in Recital (A); JVC Group means the JVC and its Subsidiaries from time to time; JVC Group Member means any member of the JVC Group; MarketWatch.com means the web site owned and operated by MarketWatch and located on the Internet under the domain name "marketwatch.com"; MarketWatch Directors means the JVC's directors appointed by MarketWatch from time to time; MarketWatch Group means MarketWatch and its Subsidiaries from time to time; MarketWatch Group Member means any member of the MarketWatch Group; MarketWatch Trade Mark Licence means the trade mark licence a copy of which is attached hereto marked Exhibit "B"; MarketWatch Technology Licence means the licence, in respect of MarketWatch's web site infrastructure, content authoring tools and techniques, network operations technologies, web site architecture and databases (the MarketWatch Technology) a copy of which is attached hereto marked Exhibit "C"; Memorandum and Articles means the JVC's Memorandum and Articles of Association in the agreed form to be adopted pursuant to clause 3.1(b), as amended from time to time; Milestone Termination Event has the meaning ascribed to it in clause 8.2; Milestones means the milestones, i.e. twice yearly criteria, by reference to numbers of page views and to revenues for assessing the progress of the Business, to be agreed between the A Shareholders and included in the Budget for each of the first two Financial Years (and the word Milestone shall be construed accordingly); Other Group means, in the case of the Pearson Internet Group, the MarketWatch Group and, in the case of MarketWatch Group, the Pearson Group; Outside Director has the meaning given to it in clause 10.3; parties means Pearson Internet, POHL, Financial Times and MarketWatch (and party shall be construed accordingly); Pearson Group means Pearson plc and its Subsidiaries from time to time; Pearson Internet Group means Pearson Internet and its Subsidiaries from time to time; Pearson Group Member means any member of the Pearson Group; Pearson Internet Group Member means any member of the Pearson Internet Group; Pearson Internet Directors means the JVC's directors appointed by Pearson Internet from time to time; Regulatory Action means: (a) any order of a court of competent jurisdiction; or (b) any order, decision or conclusive view made, given or expressed by a competent supranational, governmental or regulatory authority or agency; or (c) an enactment of a legislative body which: (i) materially prohibits or restricts Completion of the transactions contemplated by this Agreement or requires it to be delayed beyond the latest date referred to in clause 7.1; or (ii) after Completion would materially prohibit or restrict the carrying on of the Business of the JVC; Regulatory Approvals means the clearances and consents referred to in clauses 4.1(b), (c) and (d) and any approvals required by any competent supranational, governmental or regulatory agencies or authorities; Reserved Matters means those matters defined in clause 10.2; Shares means the A Shares and the B Shares; Shareholders means A Shareholders and B Shareholders; Subsidiary means, in relation to an undertaking (the holding undertaking), any other undertaking in which the holding undertaking (or persons acting on its or their behalf) for the time being directly or indirectly holds or controls either: (a) a majority of the voting rights exercisable at general meetings of the members of that undertaking on all, or substantially all, matters; or (b) the right to appoint or remove directors having a majority of the voting rights exercisable at meetings of the board of directors of that undertaking on all, or substantially all, matters, and any undertaking which is a Subsidiary of another undertaking is also a Subsidiary of any further undertaking of which that other is a Subsidiary; (provided that, for the purposes of this Agreement, neither the JVC nor any Subsidiary of the JVC is to be regarded as a Subsidiary of Pearson Internet or MarketWatch or any other Pearson Group Member or MarketWatch Group Member); Territory means Europe; undertaking means a body corporate or partnership or an unincorporated association carrying on trade or a business with or without a view to profit. In relation to an undertaking which is not a company, expressions in this Agreement appropriate to companies are to be construed as references to the corresponding persons, officers, documents or organs (as the case may be) appropriate to undertakings of that description. Currency 1.2 Any reference in this Agreement to an amount in pounds sterling includes the equivalent amount at the relevant time in any other currency or combination of currencies. Construction and Interpretation 1.3 The headings in this Agreement do not affect its interpretation and are not to be taken into account in the construction or interpretation of any provision to which they refer. 1.4 Where the context allows, words denoting the singular include the plural meaning and vice versa, words importing one gender include both other genders and may be used interchangeably, and words denoting natural persons include corporations and vice versa. 1.5 Unless the contrary intention appears, references to numbered clauses and schedules are references to the relevant clauses in, or schedules to, this Agreement and to a numbered paragraph in a schedule are references to the relevant paragraph in that Schedule. 1.6 For all purposes of this Agreement the interests of the Pearson Group in the JVC through the MarketWatch Group and vice versa shall be ignored. Agreed form 1.7 A reference to a document in this Agreement in the agreed form is to a document agreed by the parties and initialled by them or on their behalf for identification purposes. Status 1.8 References in this Agreement to a statute or statutory instrument include a statute or statutory instrument amending, consolidating or replacing them, and references to a statute include statutory instruments and regulations made pursuant to it. Purpose of the JVC Bu siness 2.1 The business of the JVC shall be to seek to establish the leading Internet provider in the Territory of comprehensive real time business news, financial programming and analytical tools, initially in the English language but thereafter also in other languages, in all cases under the brand name Financial Times MarketWatch.com. Commercial principles 2.2 Each of the parties shall so conduct itself and, so far as lies reasonably within its rights and powers of control which it is entitled to exercise (whether directly or indirectly) over the affairs of any other person, cause such other person or persons to conduct themselves, in good faith, so that: (i) the Business of the JVC shall be conducted in the best interests of the JVC in accordance with the general principles of the then current Business Plan and on sound commercial profit- making principles, so as to generate the maximum achievable profits available for distribution with any profits available for distribution in accordance with applicable law which are surplus to the funding requirements shown, in the draft Budget for the following Financial Year attached to the relevant Business Plan, being distributed to the A Shareholders, (ii) all third parties directly or indirectly under its control refrain from acting in a manner which hinders or prevents the JVC and its Subsidiaries from carrying on the Business in a proper and reasonable manner, and (iii) no action is taken which is intended and does directly and materially disadvantage the JVC (and, for the avoidance of doubt, it is agreed that editorial comment does not count as action which can constitute such material disadvantage). Hyperlinks 2.3 Financial Times and MarketWatch agree that there will be hypertext links between the JVC's web sites and those from time to time of Financial Times Group (including Ft.com and Ftyourmoney.com) and MarketWatch (including MarketWatch.com). The hypertext links shall be of the following types: (a) hypertext links appearing on the home page of the JVC's web sites providing links of equal prominence to the home pages operated by Financial Times Group and MarketWatch Group, in each case making use of the trademark of the web site to which the hypertext link gives access in a manner consistent with the conditions for use specified in the FT Trade Mark Licence or MarketWatch Trade Mark Licence (as the case may be); and (b) hypertext links appearing on pages of the JVC's web site (other than the home page) linking content on those pages to content on relevant pages (other than home pages) of the web sites of Financial Times Group and MarketWatch Group. The extent and style of these hypertext links shall be subject to the prior approval (which shall not be unreasonably withheld) of Financial Times and MarketWatch respectively. 2.4 The parties agree that: (a) subject to clause 2.4(b) below, the home pages of each of the web sites of Financial Times Group and MarketWatch Group shall have hypertext links of reasonable prominence, and including trade marks owned by the other party, linking those pages to the home pages of the other's web site; and (b) the right of each of MarketWatch and Financial Times to include a hypertext link on web sites operated by its Group to web sites operated by the other's Group or to include the other party's trade marks on its Group's web sites, and the manner of use of those trade marks, shall be subject to that other party's express prior approval, which shall not be unreasonably withheld. 2.5 Upon a change of Control of MarketWatch or the Financial Times, the other party may elect to terminate, by 90 days prior notice, the rights and obligations in: (a) clause 2.3 to the extent only that they permit the use of hypertext links to any page of that other party's own websites or use of its trade marks; and (b) clause 2.4. 2.6 (a) Each party acknowledges that it shall have no rights to use or register trade marks of the other party in any manner, including as part of a domain name, except as expressly permitted by the terms of this Agreement or the IP Transaction Documents. (b) MarketWatch agrees that it shall, as soon as practicable, transfer any domain names it has registered including or making use of the names "ft" or "financial times", including without limitation "ftmarketwatch.com", to the JVC and pending the transfer shall not use or permit use of such names in any manner except as expressly permitted by the MarketWatch Trade Mark Licence. Source attribution 2.7 Whenever content of a web site of either Group is viewed as part of the JVC's Business, it shall only be viewed on the source web site itself with that web site's branding only. Composite Marks 2.8 The parties agree that: (a) the JVC may apply for and maintain registrations for internet domain names consisting of the marks "FTMarketWatch.com", "FT MarketWatch", "Financial Times MarketWatch", "FTMW", "FTMW.com", "FTMKTW.com" and "FTMKTW" and for other confusingly similar domain names (and for any other domain names with the consent of the A Shareholders) (the Composite Marks); (b) subject to clause 2.8(a) above, the JVC shall not in any territory acquire or claim any interest in or title to the Composite Marks or the goodwill attaching thereto through its use of those marks pursuant to this Agreement, the Financial Times Trade Mark Licence or the MarketWatch Trade Mark Licence; and (c) all goodwill arising through use of the Composite Marks by the JVC in any territory shall at all times be deemed to have accrued jointly to Financial Times Limited and MarketWatch. Incorporation of the JVC 3.1 As soon as reasonably practicable after the date of this Agreement, but before the JVC commences trading, the parties shall use all reasonable endeavours to take or cause to be taken all requisite steps to cause the JVC to be incorporated in England and Wales as a private company limited by shares with the following characteristics: (a) its name shall be `Financial Times MarketWatch.com (Europe) Limited' (or such other name as the parties may agree); (b) the Memorandum and Articles shall be in the agreed form; (c) it shall have an authorised share capital of 55,000 pounds sterling divided into 250,000 A Shares of 10p and 30,000 B Shares of 1 pound sterling each of which: (i) 4,989 A Shares shall be allotted and issued credited as fully-paid in cash at a premium of 99.90 pounds sterling per A Share to, and registered in the name of and beneficially owned by, Pearson Internet; (ii) 1 A Share shall be allotted and issued credited as fully paid in cash at a premium of 1,098.90 pounds sterling to, and registered in the name of and beneficially owned by, Pearson Internet; (iii) the original subscriber share shall be transferred to, and registered in the name of, Pearson Internet and subdivided and converted into 10 A Shares of 10p each; (iv) 5,000 A Shares shall be allotted and issued credited as fully paid in cash at a premium of 99.90 pounds sterling per A Share to, and registered in the name of and beneficially owned by, such of MarketWatch (or MarketWatch Group Members) as MarketWatch shall have decided; and (v) 30,000 B Shares shall be allotted and issued credited as fully paid in cash at par to, and registered in the name of and beneficially owned by, POHL. (d) its initial directors shall be the persons listed in clause 9.3; (e) the initial Chairman shall be Larry Kramer, the initial Editor in Chief shall be Thom Calandra and the initial Chief Executive Officer shall be Zach Leonard; (f) its initial Secretary shall be Sarah Robinson; (g) its registered office shall be at Number One, Southwark Bridge, London SE1 9HL. Redemption of B Shares 3.2 Each A Shareholder hereby undertakes that, if any of them serves notice in writing on the others proposing that the JVC should exercise its rights under Article 4 of the Articles to redeem the B Shares or if the JVC shall become obliged to redeem the B Shares, it shall co-operate to the extent necessary to redeem the B Shares, including without limitation in relation to: (a) the exercise of its voting rights as a member of the JVC; (b) the obtaining of such approvals of the Pearson Internet Directors and the Marketwatch Directors as may be required pursuant to the provisions of clause 10; and (c) the subscription by the A Shareholders, pro-rata to their existing holdings of A Shares, for any fresh issue of A Shares (at par) as may be required in order to enable the B Shares to be redeemed lawfully. No activity prior to Completion 3.3 The A Shareholders shall ensure that the JVC shall not carry on any business and shall have no assets or liabilities of any nature whatsoever before Completion, except as contemplated by this clause 3.3 and by clauses 5.2 and 5.3. When any party proposes to enter into any commitment prior to Completion for the benefit of, and for the account of the JVC, where the commitment would exceed 20,000 pounds sterling individually or would cause all such commitments by that party to exceed 50,000 pounds sterling in aggregate, the party concerned shall not enter into such commitment without the authority of the Chief Executive Officer. No party has any authority to enter into commitments on behalf and for the account of the JVC following Completion without the written agreement of a party. In the event of failure to achieve Completion, the Shareholders shall ensure that the JVC does not undertake any further commitments other than for the purpose of its liquidation. Conditions Conditions 4.1 Completion is conditional on each of the following conditions being fulfilled (or waived) by such party or parties for whose benefit it exists: (a) the JVC being formed in accordance with the terms of clause 3.1; (b) to the extent any clearances under any relevant national or supranational merger control rules, or other anti-trust or similar legislation are required or are reasonably considered desirable by either party, such clearances having been received on terms reasonably satisfactory to the parties or the relevant time limits or waiting periods (including any extensions) having expired or been terminated (as the case may be) without any decision having been made to investigate the transaction further; (c) all other government, governmental body or regulatory authority (including any stock exchange) consents (including the expiry of any period following a notification such that consent is deemed to be given or no consent is required) which are required for the actions contemplated by this Agreement being obtained in terms satisfactory to each of the Financial Times and MarketWatch; (d) no material Regulatory Action (or action, proceeding or proposal which if successfully pursued by the person initiating the same would result in a Regulatory Action) being taken which has not been revoked, annulled, withdrawn, discontinued, abandoned, repealed, discharged or otherwise ceased to have effect; (e) the A Shareholders having agreed upon the Business Plan (including Budget and Funding Schedule) for each of the first two Financial Years in accordance with clause 5.2 and upon the total of Additional Capital Contributions that each of them may be required to make pursuant to clause 8.2 below; and (f) agreement by the parties of the terms upon which the JVC shall use the Financial Times MarketWatch trade mark and upon which that trade mark will be owned and used following termination of this Agreement. Endeavours to fulfil Conditions 4.2 Each party shall use all reasonable endeavours to ensure (so far as it lies within its respective powers to do so) that each of the Conditions (to the extent that they are not waived) are fulfilled as soon as possible but in any event before June 30, 2000. Non-fulfilment of Conditions 4.3 If any Condition set out in clause 4.1 is not fulfilled (or waived) on or before June 30, 2000, the provisions with respect to termination of this Agreement in Clause 6 shall apply. Conduct before Completion 5.1 Each of the parties will ensure that, until Completion: (a) its business is conducted in such a way as not to prejudice its ability to perform its obligations under this Agreement; and (b) it takes all reasonable measures to protect and maintain the assets to be contributed by it to the Business. Agreement on Funding Schedule and Business Plans 5.2 Financial Times and MarketWatch have instructed the Chief Executive to draw up a draft Business Plan for each of the first two Financial Years of the JVC including drafts of the relative Budgets and Funding Schedule. The A Shareholders shall use all reasonable endeavours to consider such draft Business Plans and to amend them and agree final Business Plans (including, for the avoidance of doubt, relative Budgets and Funding Schedule) for the first two Financial Years by no later than June 30, 2000 (the Cut-Off Date). 5.3 The A Shareholders will procure that, during the period ending on the earlier of Completion and the Cut-Off Date, the JVC shall conduct the Business permitted by clause 5.2 in the ordinary and usual course and so as to ensure that total commitments (including liabilities) undertaken by the JVC up until then (whatever dates such commitments fall to be discharged) do not exceed 1,000,000 pounds sterling. Termination 6.1 In the event that the Conditions have not been satisfied (or waived) by the Cut-Off Date, then this Agreement (other than clause 14 (Confidentiality), clause 24 (Announcements), clause 30 (Settlement of Disputes) and clause 32 (Governing Law), shall automatically terminate and no party shall be entitled to make any claim against the other (except for accrued rights arising from an earlier breach of any of the terms of this Agreement). 6.2 Following such termination pursuant to clause 6.1, none of the parties (the Remaining Party) shall be entitled to carry on the Business and all parties shall take the requisite steps to put the JVC into liquidation by no later than July 31, 2000. Completion 7.1 Completion shall take place within ten days after the Conditions are fulfilled, or waived), whereupon the following events shall take place as provided in this clause 7.1: (a) the A Shareholders shall ensure that, to the extent not carried out by that date, the JVC is promptly established with the characteristics set out in clause 3; and (b) Financial Times or, as appropriate, MarketWatch shall execute or procure the execution of, and the Shareholders shall ensure that the JVC executes and delivers, the following ancillary agreements on the same terms and conditions and otherwise substantially in the form attached hereto: (i) the Financial Times Trade Mark Licence; (ii) the MarketWatch Trade Mark Licence; (iii) the MarketWatch Technology Licence. Further Services 7.2 For so long as the A Shares in the JVC are owned as to at least 20 per cent. by each of Pearson Internet and MarketWatch, Pearson Internet and MarketWatch respectively shall procure that from and following Completion all further services provided by any member of the Pearson Group or MarketWatch Group as the case may be, shall be provided at fair market value to the JVC. 7.3 Financial Times shall procure that the JVC may, following Completion and for so long as a member of the Pearson Group is a Shareholder or until five years from the date of this Agreement if earlier, place media advertising, for a fee of no more than 10 pounds sterling per advertisement (such fees in aggregate not to exceed 50,000 pounds sterling), (i) in business publications managed by the Financial Times Group of companies, including for the avoidance of doubt, without limitation, Financial Times Deutschland, Financial Times newspaper and associated publications (including Investors Chronicle) and Les Echos group publications, for so long as such publications remain within the control of the Financial Times Group of companies; and (ii) business publications managed by such other Pearson Group companies as are notified to the JVC, from time to time, by Pearson Internet (for so long as they are so managed) in volumes and at times consistent with the Business Plan from time to time up to a total of 15 million pounds sterling worth, calculated at Effective Rate Card prices from time to time. Rescission 7.4 If any party fails or is unable to comply with any of its obligations under clause 7.1, any party in the Other Group shall have the right to elect not to perform any of its obligations under that clause and to rescind this Agreement without liability on the part of any party (other than the party so failing or unable to comply with its obligations). No party may rescind this Agreement for any other reason whatsoever, whether before or after Completion. Change of name 7.5 If Completion does not take place by 30 June 2000 (or such later date as the parties agree), the parties shall ensure that the JVC changes its name as soon as practicable to a name which does not include the name `Financial Times', the letters "FT" or the name `MarketWatch' or any similar or confusing name or names. Incentivisation plan 7.6 The A Shareholders shall use best endeavours to cause the JVC to adopt schemes for employee incentivisation through options over ordinary shares or through the ownership of ordinary shares of up to fifteen per cent (15%) of the equity of the JVC (on a fully diluted basis) as soon as possible, with the aim of agreeing upon such schemes by 31 August 2000. Capital and further finance Issues of new shares 8.1 The A Shareholders agree to take, and procure the taking of, all requisite steps to increase the JVC's authorised share capital from time to time and to allot and issue at par, credited as fully paid, A Shares in consideration of the further capital contributions made by any party pursuant to clause 8.3 but (unless the parties agree otherwise) the A Shareholders shall procure that the JVC shall not issue any shares (other than pursuant to share option schemes approved by the Board) unless: (a) one-half of the additional shares are issued to Pearson Internet or such other member of the Pearson Group as shall be nominated by Pearson Internet; or (b) one-half of the additional shares are issued to MarketWatch and/or such other member of the MarketWatch Group as shall be nominated by MarketWatch, except to the extent that different proportions, as between Pearson Internet and MarketWatch, would arise by reason only of default by any party in performing an obligation to subscribe A Shares or of an issue of A Shares where any party fails to exercise any right to subscribe. 8.2 The A Shareholders shall procure that such further number of B Shares are issued, from time to time, if POHL so elects, for cash at par to POHL as is required to ensure that the B Shares held by members of the Pearson Group continue to represent not less than sixty per cent, or such percentage (being not more than 60 per cent.) as POHL shall from time to time notify to the JVC in writing, by nominal value of the entire issued share capital of the JVC. 8.3 Each of Pearson Internet and MarketWatch shall make such further capital contributions (its Additional Capital Contributions) (but so that the total for Additional Capital Contributions agreed pursuant to clause 4.1(e) shall not be exceeded) to the JVC in the first two Financial Years as are requested by the JVC in accordance with this clause 8.3 and as approved by the JVC's Board. The JVC may request Additional Capital Contributions to be paid in by not less than five Business Days' notice in writing to each of Pearson Internet and MarketWatch at such times and for such amounts as are provided in the Funding Schedule (with a copy in writing at the same time to POHL, together with a notice in writing showing how many further B Shares are to be subscribed in cash at par). If such payments are not made by Pearson Internet and MarketWatch within five Business Days after receipt of the payment request, interest at the rate of 3 per cent. above the Base Rate of Barclays Bank PLC from time to time shall be added to the payment due. Notwithstanding the foregoing provisions of this clause 8.3, the JVC may not request and neither Pearson Internet nor MarketWatch shall have any obligation to make any Additional Capital Contribution if any Milestone, specified in the Budget for achievement before the due date for payment of the Additional Capital Contribution, shall not have been met in which case there shall be a Milestone Termination Event. Funding support by the parties 8.4 Save for payments under clause 3.1(c), the Capital Contributions and the Additional Capital Contributions and subject to clause 8.5, the parties intend that the JVC should be self-financing. No party is obliged to contribute further funds or participate in any guarantee or similar undertaking for the JVC's benefit. Further finance 8.5 The Shareholders are not obliged to provide any finance over and above that required pursuant to clauses 3.1(c) and 8.3 unless Pearson Internet and MarketWatch both agree on the amount and method of providing the finance. If the Board considers at any time that the Business requires further finance over and above that to which the parties are committed under this Agreement in order to be able to achieve the Business Plan then current, the Board shall first approach the JVC's A Shareholders for the subscription of further A Shares in the JVC in their Equity Proportions on the basis that if an A Shareholder does not (at any point before full subscription of the further A Shares as envisaged in this clause 8.5) wish to subscribe the portion then available to it, those other A Shareholders who have committed to take up all the further A Shares made available to them as envisaged in this clause 8.5 (including A Shares made available because other A Shareholders are not taking up their entitlements) will be entitled to subscribe, in proportion to their Equity Proportions, the further A Shares not so subscribed (but so that if any Shareholder would otherwise thereby, alone or with any other member(s) of its Group, hold more than 50 per cent. of the A Shares in the JVC, such Shareholder's rights to subscribe A Shares under this clause 8.5 shall be limited so that it can subscribe A Shares only to the extent that it will not thereby, alone or with any other member(s) of its Group, hold more than 50 per cent. of the A Shares in the JVC). Thereafter, the A Shareholders shall each use reasonable commercial endeavours to procure that the requirements of the JVC and its Subsidiaries for working capital to finance the Business are met, as far as practicable, by the JVC borrowing from banks and other similar sources on the most favourable terms reasonably obtainable as to interest, repayment and security, but without allowing a prospective lender a right to participate in the Equity Capital of the JVC or any of its Subsidiaries as a condition of a loan. Guarantees 8.6 No party (nor any member of its respective Group) shall be obliged (nor, unless an A Shareholder, entitled) to participate for the benefit of the JVC in any guarantee, bond or financing arrangement with any bank or financial institution, whether as a guarantor or in any other capacity whatsoever. If and to the extent that the A Shareholders are willing to participate (or to procure that members of their respective Groups participate) in any such guarantee, bond or financing arrangement then, unless the A Shareholders agree otherwise, any liability or obligation to be assumed by them in relation to any such guarantee, bond or financing arrangement shall be borne in their Equity Proportions. Any such liability or obligation shall be several and not joint or joint and several, unless they agree otherwise. If an A Shareholder (or a member of its Group) incurs any such joint or joint and several liability, that A Shareholder shall be entitled to a contribution from the other A Shareholder to ensure that the aggregate liability of the A Shareholders or members of their respective Groups (as the case may be) is borne by the Pearson Internet Group and the MarketWatch Group in the Equity Proportions of the relevant A Shareholders. Directors and management Supervision by the Board 9.1 The Board shall be responsible for the overall direction, supervision and management of the JVC. The Board shall not, however, take any decision in relation to any of the Reserved Matters except by unanimous agreement of those at the relevant Board meeting at which a quorum is present. Board of Directors, Chief Executive and Editor in Chief 9.2 The appointment (subject to the next following sentence of this clause 9.2) and removal of any Chief Executive or Editor in Chief shall be by agreement between the A Shareholders by notice in writing to the JVC signed by or on behalf of each A Shareholder. The appointments of the initial Chief Executive and Editor in Chief are as stated in Clause 3.1(e). 9.3 Until such time as the A Shareholders unanimously agree otherwise, the Board shall be comprised of three (3) Pearson Internet Directors and three (3) MarketWatch Directors. The initial Board appointments at Completion shall be: Pearson Internet Holdings Directors MarketWatch Directors Josh Bottomley Lawrence Kramer Peter Martin Joan Platt Olivier Fleurot William Bishop The Chairman shall be appointed alternately by MarketWatch and Pearson Internet for periods of two Financial Years. The Chairman shall have no second or casting vote. The first Chairman shall be Lawrence Kramer. Appointment and removal of Directors 9.4 Pearson Internet and MarketWatch may each appoint or remove a Director nominated by it by notice to the JVC signed by it or on its behalf. 9.5 The appointment or removal of any Director , Chief Executive or Editor in Chief shall take effect when the notice is delivered to the JVC, unless the notice indicates otherwise. Quorum 9.6 The quorum for transacting business at any Board meeting (other than an adjourned meeting) shall be at least one Pearson Internet Director and at least one MarketWatch Director present when the relevant business is transacted. If that quorum is not present within thirty minutes from the time when the meeting should have begun or if during the meeting there is no longer a quorum, the meeting shall be adjourned for seven (7) Business Days and at that adjourned meeting any two Directors (or their alternates) present shall be a quorum. A Director shall be regarded as present for the purposes of a quorum if represented by an alternate Director in accordance with clause 9.9. Notice and Agenda 9.7 At least fourteen days written notice shall be given to each Board member of any Board meeting, unless at least one Pearson Internet Director (or his alternate) and at least one MarketWatch Director (or his alternate) approve a shorter notice period. Any notice shall include an agenda identifying in reasonable detail the matters to be discussed at the meeting together with copies of any relevant papers to be discussed at the meeting. If any matter is not identified in reasonable detail, the Board shall not decide on it, unless all Board members agree in writing. Frequency of Meetings 9.8 The A Shareholders shall procure that the Board meets at least quarterly. Board voting 9.9 The Board shall decide on matters by simple majority vote. Each Director shall have one vote. Any Director who is absent from a meeting may nominate any other Director to act as his alternate and to vote in his place at the meeting. If the A Shareholders are not represented at any Board meeting by an equal number of Directors (whether present in person or by alternate), then one of the Directors, nominated by the party which is represented by the fewer Directors, who is present may exercise such additional vote or votes at that meeting as results in the Directors so present representing each party having in aggregate an equal number of votes. Reserved matters Use of powers 10.1 The A Shareholders shall use their respective powers to ensure, so far as they are legally able, that no action or decision relating to any of the matters specified in clause 10.2 (Reserved Matters) is taken by the JVC, any Subsidiary of the JVC or any of the officers or managers within the JVC Group unless each of the Pearson Internet Directors and the MarketWatch Directors gives his or her prior approval (whether or not through his or her alternate) to proceed. Any item provided for in an approved Budget shall not require further consent as a Reserved Matter under clause 10.2 below unless (a) the related expenditure would exceed 110 per cent of the amount approved in the Budget; (b) aggregate expenditures would have exceeded 105 per cent. of the sums provided for in respect of the relevant items in the approved Budget; or, being an item mentioned in clause 10.2(l) or 10.2(q), the item would exceed at all the amount approved for it in the Budget. Reserved Matters 10.2 The Reserved Matters are: (a) Memorandum and Articles adopting or altering the Memorandum and Articles or other constitutional documents of the JVC; (b) changes in share capital changing the authorised or issued share capital of the JVC; (c) issuance of Shares the issue of shares or instruments convertible into shares by any Subsidiary of the JVC, otherwise than to the JVC or its designated nominees; (d) securities convertible into Shares issuing debentures, securities convertible into Shares, Share warrants or options in respect of Shares; (e) change in nature of Business materially changing the nature or scope of the Business (as described in clause 2.1) of the JVC including any decision to change or extend the Business beyond the Territory; (f) Business Plan, Budgets and Funding Schedule adopting or materially changing the Business Plan, Budget or Funding Schedule; (g) dividends declaring any dividend or a pay out of the general reserves or the redemption of any equity securities in the capital of the JVC; (h) changing the branding approving the form of branding of the Business (including approval of the form of any proposed Composite Marks). Any proposal to alter the branding of the Business; (i) Board of Directors increasing or decreasing the size of the Board or the appointing of any committee of Directors or local board or delegation of the powers of the Directors to a committee or local board, in any such case otherwise than as expressly provided for in this Agreement; (j) dissolution, liquidation, winding up doing or permitting to be done anything as a result of which the JVC may be wound up (whether voluntarily or compulsorily), except as otherwise provided for in this Agreement; (k) encumbrances creating a fixed or floating charge , lien (other than a lien arising by operation of law) or other encumbrance over all or part of its undertaking or assets except to secure its indebtedness to its bankers for sums borrowed in the normal course of the Business or as otherwise approved pursuant to this Clause 10.2; (l) borrowings borrowing or raising money (including entering into any finance lease, but excluding normal trade credit) to any extent not provided for as a cost item in an approved Budget; (m) advances making a loan or advancing or giving credit (other than normal trade credit) in excess of 5,000 pounds sterling to any person, other than the JVC or a wholly-owned Subsidiary of the JVC and excluding deposits with bankers repayable upon the giving of not more than seven (7) days notice; (n) guarantees giving a guarantee or indemnity to secure the liabilities or obligations of any person (other than the JVC or a wholly-owned Subsidiary of the JVC); (o) sale or other disposition of assets selling, leasing, creating an interest in or otherwise disposing of a material part of its undertaking or assets, or contracting to do so, otherwise than in the normal course of the Business; (p) merger, reorganisation, recapitalization, etc. any merger, consolidation, acquisition, divestiture, joint venture, partnership or other business combination with, by or of the Company into or with any other person ; (q) capital expenditures entering into of any contract or arrangement not provided for in an approved Budget involving expenditure on capital account or the realisation of capital assets if the amount or the aggregate amount of the expenditure or realisation by the JVC and all of its Subsidiaries would exceed 5,000 pounds sterling in any year or in relation to any one project; and for the purpose of this sub-clause the aggregate amount payable under any agreement for hire, hire purchase or purchase on credit sale or conditional sale terms is deemed to be a capital expenditure incurred in the year in which the agreement is entered into; (r) material agreements entering into a contract or arrangement which is not in the normal course of the Business and on arms-length terms; (s) transactions with Financial Times or MarketWatch Groups any transaction (but excluding the entering into by the JVC of the IP Transaction Documents) by the JVC with any Financial Times Group Member or MarketWatch Group Member which is either: (i) outside the ordinary course of business; or (ii) within the ordinary course of business but has a value of more than 10,000 pounds sterling or is not on commercial arm's length terms; (t) Employee incentives creating or altering any scheme for the incentivisation of the JVC's Employees and/or management; (u) agreements for real property taking or agreeing to take an interest in, or license over, any real property; (v) investments acquiring shares, or securities of a person other than a wholly-owned Subsidiary of the JVC or enters into a partnership or profit sharing arrangement with any person; (w) subsidiaries the formation of, acquisition of or sale to another party of any subsidiary of the JVC; (x) initial public offering any proposal to Shareholders for filing any registration statement, selecting any underwriter, or taking any other action to implement an initial public offering of any of the shares of the capital stock of the JVC; (y) commencing litigation initiating (by commencement of proceedings) or the settling of any litigation, arbitration or mediation (save for debt collection in the ordinary course of business) or any claim with the exception of measures requiring immediate relief or arising out of or relating to the breach by any Shareholder of its obligations under this Agreement; (z) Chief Executive and Editor-in-Chief appointing either of the JVC's Chief Executive or Editor-in-Chief except as other provided herein; (aa) legal counsel appointing or removing the JVC's outside legal counsel; or (bb) auditors appointing or removing the JVC's auditors. Deadlock 10.3 If a deadlock arises because the Board fails to agree on any of the Reserved Matters or any other management matter requiring its decision, the matter shall be referred for resolution to a Director of each of Pearson plc and MarketWatch who is not also employed as an executive of the relevant party or any member of its Group (an Outside Director) with a view to it being resolved as early as possible in the best interests of the JVC. Each A Shareholder shall endeavour, and shall instruct their Outside Directors to endeavour, to resolve any disagreement in the best interests of the JVC. Shareholder deadlock 10.4 If a dispute relating to the JVC's affairs cannot be resolved within thirty days after referring the dispute to the A Shareholders' respective Outside Directors pursuant to clause 10.3 (a Shareholder Deadlock), and the Shareholder Deadlock is with respect to a Reserved Matter or otherwise materially adversely affects the JVC's ability to carry on the Business, then either A Shareholder may give written notice (a Warning Notice) that it intends to implement the deadlock procedure provided in this clause 10. If the dispute cannot be resolved within thirty (30) days of the Warning Notice, either A Shareholder may within a further thirty days notify the other in writing (a Deadlock Notice) of such fact. A Deadlock Notice is irrevocable. Deadlock Notice 10.5 Within a period of thirty days after receiving a Deadlock Notice, both A Shareholders shall be required to concur in taking all steps required promptly to place the JVC into liquidation. Default (including Insolvency) Event of Default 11.1 It is an Event of Default in relation to either A Shareholder (a Defaulting Party): (a) if a Defaulting Party (or any member of its Group) does not pay any amount payable by it under clause 8.3 of this Agreement in the manner in which it is expressed to be payable in this Agreement within ten (10) Business Days of the due date; (b) if a Defaulting Party (or any member of its Group) commits a breach of any of its other obligations under this Agreement (not being a breach referred to in clause 11.1(a)) or under any of the IP Transaction Documents which, alone or taken together with any other such breach or breaches, is material in the context of the Business of the JVC and the other A Shareholder (the Non-Defaulting Party) serves written notice upon the Defaulting Party specifying the breach in reasonable detail and requiring the Defaulting Party immediately to stop or procure the stopping of the breach and if the breach is remediable, to make, or cause to be made, good the results of the breach within thirty (30) days, and (i) the Defaulting Party fails to so stop, or (ii) if either the breach is not remediable, or, if remediable, is not remedied within such thirty (30) days; (c) if that A Shareholder convenes a meeting of its creditors or makes or proposes any arrangement or composition with, or any assignment for the benefit of, its creditors; or (d) a court of competent jurisdiction makes an order or a resolution is passed, for the dissolution or administration of that A Shareholder (otherwise than in the course of a reorganisation or restructuring previously approved in writing by the other A Shareholder, such approval not to be unreasonably withheld or delayed); or (e) any person other than a member of the other A Shareholder's Group takes any step (and it is not withdrawn or discharged within ninety (90) days) to appoint a liquidator, manager, receiver, administrator, administrative receiver or other similar officer in respect of any assets which include either (i) the Shares held by that A Shareholder, its Holding Company or any Subsidiary of such Holding Company or (ii) shares in that A Shareholder or any Holding Company of it. Put Option Notices and Call Option Notices 11.2 If an Event of Default occurs, the Non- Defaulting Party may elect to: (a) require the Defaulting Party to buy (the Put Option) all of the Non-Defaulting Party's A Shares on the terms set out in clause 11.3. The Put Option may be exercised by notice (the Put Option Notice) from the Non-Defaulting Party given at any time within thirty (30) days of the Event of Default (and following any cure period, if applicable); (b) require the Defaulting Party to sell to the Non-Defaulting Party, or procure the sale to it, (the Call Option) all of the A Shares held by the Defaulting Party, its Holding Company and subsidiary of such Holding Company on the terms set out in clause 11.4. The Call Option may be exercised by notice (the Call Option Notice) from the Non-Defaulting Party to the Defaulting Party given at any time within thirty (30) days of the Event of Default; or (c) require by notice to the Defaulting Party that the JVC be put into liquidation immediately. 11.3 If a Put Option Notice is served, it must state: (a) the price at which the Non-Defaulting Party's A Shares are to be bought; and (b) the terms (if any) on which the Non-Defaulting Party in its absolute discretion is willing to continue to provide or procure the provision of any or all of the Core Services provided by it or any of it. For the avoidance of doubt the provisions of this clause 11.3 shall not constitute an obligation on the Non-Defaulting Party to continue to provide such Core Services. 11.4 If a Call Option Notice is served: (a) it must state the price at which the Defaulting Party's A Shares (and those of any Holding Company of the Defaulting Party or of any Subsidiary of such Holding Company) are to be sold; and (b) the Defaulting Party must continue to provide or procure the provision of the relevant Core Services on the same terms as such services have been provided in the twelve month period prior to the date of the Call Option Notice for (subject to the terms of the IP Transaction Documents) a period of two years (or a shorter period with the consent of the Non-Defaulting Party) from the date of the Call Option Notice. Reference to Expert 11.5 If the Defaulting Party notifies the Non-Defaulting Party in writing within ten days of the relevant notice being received by the Defaulting Party that is does not accept the price payable for the A Shares stated in either the Put Option Notice or the Call Option Notice (as the case may be) (the Option Price) and requires that a third party evaluates the price (the Evaluation Notice), an internationally recognised investment advisor (the Expert) shall be appointed to determine the price at which the A Shares shall be transferred, which shall be the Fair Price of the A Shares at the date of the Put Option Notice or the Call Option Notice (as the case may be) (the Sale Price). The Expert shall be such internationally recognised investment advisor as the Defaulting Party and the Non- Defaulting Party may agree or, if they fail to agree within fifteen (15) days of the Evaluation Notice (the Failure Date), the Expert shall be an investment advisor independent of both the Defaulting Party and the Non-Defaulting Party and which shall not have been engaged or otherwise performed services for the JVC or any of its Shareholders during any of the five years prior to the Default Date, as the President for the time being of the International Chamber of Commerce appoints at the request of the Defaulting Party. If the Defaulting Party fails to make such a request within fifteen (15) days from the Failure Date, it shall be deemed to have withdrawn the Evaluation Notice and accepted the Option Price. The Expert shall act as an expert and not as an arbitrator and its decision, which shall be incorporated in a Certificate (the Certificate), shall be final and binding on the parties. The Expert's fees and expenses shall be born in such proportion as the Expert shall determine and such determination as to such fees and expenses shall be final and binding as the parties. Core Services 11.6 In the case of a Put Option Notice only, the Defaulting Party shall confirm to the Non-Defaulting party whether it requires the Non-Defaulting Party to continue to provide or procure provision of the relevant Core Services as offered in the Put Option Notice. The Non-Defaulting Party shall be under no obligation to include in the Put Option Notice an offer to further provide such Core Services. The Non-Defaulting Party shall be obliged to provide such Core Services only on the terms and under the conditions which are set out in the Put Option Notice. Completion 11.7 Subject only to any Regulatory Approvals or if required by the rules and regulations of an internationally recognised stock exchange any necessary approval of shareholders, including of a Holding Company, in general meeting (Approvals): (a) in the case of a Call Option Notice, the Defaulting Party shall be bound to sell and the Non-Defaulting Party shall be bound to buy the Defaulting Party's Shares; and (b) in the case of a Put Option Notice, the Non-Defaulting Party shall be bound to sell and the Defaulting Party shall be bound to buy the Non-Defaulting Party's Shares in each case at the: (a) Option Price, if the Defaulting Party fails to notify the Non-Defaulting Party within the ten day period referred to in clause 11.5; (b) Sale Price, if the Defaulting Party notifies the exercise of its rights under clause 11.5. In such event, completion of the sale and purchase of the A Shares shall take place within sixty (60) days of the day on which the parties become so bound (the Reference Date) or, if any Approvals have not been obtained by the end of that period, within ten (10) days of the date on which the last Approval to be obtained is obtained. If any Approval has not been obtained within one-hundred and eighty (180) days after the Reference Date, the Put Option Notice or Call Option Notice (as the case may be) shall lapse and have no further effect. Transfer terms 11.8 The transfer of the A Shares shall be on the following terms: (a) the A Shares shall be sold free from all liens, charges and encumbrances and third party rights, together with all rights of any nature attaching to them including all rights to any dividends or other distributions declared, paid or made after the date of the Call Option Notice or Put Option Notice (as the case may be); (b) with effect from the completion date with respect to a Call Option Notice, the Non-Defaulting Party shall assume any obligations of the Defaulting Party and, with respect to a Put Option Notice, the Defaulting Party shall assume the obligations of the Non-Defaulting Party and any member of their respective Groups under, and shall ensure the release of, any guarantees, indemnities, letters of comfort and/or counter-indemnities to third parties in relation to the business of the JVC. This is without prejudice, in the case of a Call Option Notice, to the Non-Defaulting Party's right and, in the case of a Put Option Notice, the Defaulting Party's right to receive a contribution from the other A Shareholder for its share of any claims attributable to any liabilities arising in respect of the period before the completion date; (c) in the case of a Call Option Notice, the Defaulting Party shall deliver to the Non-Defaulting Party duly executed transfer(s) in favour of the Non-Defaulting Party or as it may direct and, in the case of a Put Option Notice, the Non- Defaulting Party shall deliver to the Defaulting Party duly executed transfer(s) in favour of the Defaulting Party or as it may direct, together with, if appropriate, share certificate(s) for the A Shares and a certified copy of any authority under which such transfer(s) is/are executed; (d) against delivery of the transfer(s), the Option Price or the Sale Price (as the case may be) shall be paid by electronic transfer to the relevant party's bank account; (e) the A Shareholders shall ensure (insofar as they are able) that the relevant transfer or transfers (subject to their being duly stamped, stamp duty to be paid by the party acquiring the Shares pursuant to the Put Option Notice or the Call Option Notice as the case may be) are registered in the name of the relevant Shareholder or as it may direct; (f) the A Shareholders shall do all such other things and execute all other documents (including any deed) to give effect to the sale and purchase of the A Shares pursuant to this clause 11. Power of attorney 11.9 Each of Pearson Internet and MarketWatch hereby irrevocably, and by way of security for the performance of its obligations under this clause 11, appoints the other its attorney in its name and as its act to execute, sign, deliver and do all such deeds, documents, acts or things which the attorney reasonably judges to be necessary for the performance of the obligations of its appointor under this clause 11. Liquidation upon Milestone Termination Event 11.10 Upon the occurrence of a Milestone Termination Event, an A Shareholder may by notice to the other and to the JVC require (subject to the Board's determination otherwise as provided below in this clause 11.10) that the JVC be put into liquidation. The Board may, upon receipt of such notice by the JVC, within ten (10) days thereafter decide and notify the parties that the JVC shall not be put into liquidation. Transfer of shares General 12.1 The provisions of this clause 12 apply in relation to any transfer, or proposed transfer, of Shares in the JVC or any interest in those Shares. Restriction on transfer 12.2 No Shareholder shall, except as permitted by this clause 12 or with the prior written consent of every other holder of A Shares: (a) transfer any Shares; (b) grant, declare, create or dispose of any right or interest in any Shares; or (c) create or permit to exist any pledge, lien, fixed or floating charge or other encumbrance over any Shares. Permitted Transfers 12.3 Except for transfers for which consent is given under clause 12.2 or for intra-Group transfers permitted under clause 12.11, no Shareholder may transfer Shares unless it (the Seller) and/or members of its Group transfer all (and not some only) of the Shares collectively held by them (the Seller's Shares). Initial period 12.4 Except for intra-Group transfers permitted under clause 12.11, no A Shareholder shall transfer any A Shares during a period of five (5) years from the date of this Agreement without the prior written consent of every other holder of A Shares. Transfer Notice 12.5 After the end of the initial period referred to in clause 12.4 and before the Seller (and/or any Shareholder in its Group) makes any transfer of the Seller's Shares, the Seller shall first give the other A Shareholder (the Continuing Party) notice (a Transfer Notice) of any proposed transfer together with details of any proposed third party purchaser (a Third Party Purchaser), the purchase price and all other material terms which the Seller and the Third Party Purchaser have agreed. A Transfer Notice is irrevocable except as provided in this clause 12. Right of Continuing Party to purchase 12.6 On receipt of the Transfer Notice, the Continuing Party shall have the right to buy all (but not some only) of the Seller's A Shares at the price specified in the Transfer Notice (or at such other price as the Seller and the Continuing Party agree) by giving notice to the Seller within sixty days of receiving the Transfer Notice (the Acceptance Period). The parties' obligations to complete the purchase are subject to the provisions of clause 12.7. Obligation to complete 12.7 The Continuing Party shall be bound (subject only if required by the rules and regulations of an internationally recognised stock exchange to any necessary approvals of its or its Holding Company's shareholders in general meeting and any Regulatory Approvals) to buy the Seller's A Shares on giving the Seller notice that it is exercising its rights under clause 12.6. In such event, completion of the sale and purchase of the Seller's A Shares shall take place within thirty (30) days of the giving of the notice or, if later, the obtaining of all Regulatory Approvals and any necessary shareholder approval of the shareholders of the Continuing Party. Notwithstanding the foregoing, such notice and the Continuing Party's right to buy the Seller's A Shares shall cease to have effect if: (a) any necessary approval of the Continuing Party's shareholders in general meeting is not obtained within the thirty (30) day period; or (b) any necessary Regulatory Approval is not obtained within one-hundred and eighty (180) days of the giving of the notice; or (c) earlier than the end of the one-hundred and eighty (180) day period referred to in clause 12.7(b), any relevant authority conclusively refuses to grant any such Regulatory Approval. Seller's right to sell to Third Party Purchaser 12.8 If the Continuing Party does not exercise its right to buy under clause 12.6 or any notice given under that clause ceases to have effect pursuant to clause 12.7, the Seller may (subject to clause 12.9 below) transfer the Seller's A Shares on a bona fide arm's length sale to a Third Party Purchaser at a price not less than the purchase price specified in the Transfer Notice provided that: (a) the Third Party Purchaser acquiring the Seller's A Shares would not, in the Continuing Party's reasonable opinion, be materially detrimental to the JVC's interests; (b) the Third Party Purchaser (or any shareholder of it) is not directly or indirectly a substantial competitor of the Continuing Party or the JVC; and (c) the transfer is completed within one-hundred and eighty (180) days after the latest of: (i) the date of the Transfer Notice; or (ii) if any notice given by the Continuing Party has ceased to have effect pursuant to clause 12.7, the date on which that notice ceased to have effect. The A Shareholders shall give (or ensure that any A Shareholders in their respective Groups shall give) any approvals required by the Articles in relation to any transfer of Shares permitted by the terms of this clause 12. Sale terms 12.9 The sale of any Seller's A Shares to the Continuing Party or a Third Party Purchaser shall be on the following terms: (a) the Seller's A Shares will be sold free from all liens, charges and encumbrances and third party rights and together with all rights of any nature attaching to them including all rights to any dividends or other distributions declared, paid or made after the date of the Transfer Notice; (b) the Continuing Party/Third Party Purchaser shall assume, with effect from the completion date, any obligations of the Seller and any member of its Group under (and shall procure the release of) any guarantees, indemnities, letters of comfort and/or counter-indemnities to third parties in relation to the business of the JVC. Where the buyer is the Continuing Party, any such assumption shall be without prejudice to the Continuing Party's right to receive a contribution from the Seller for its share of any claims attributable to any liabilities arising in respect of the period before the completion date; (c) if the buyer is a Third Party Purchaser, it shall take an assignment of, or make available equivalent finance in place of, any loans, loan capital, borrowings and indebtedness in the nature of borrowing (but excluding, for the avoidance of doubt, any debts incurred in the ordinary course of trade which are at the relevant time outstanding on inter-company accounts) owing at that time from the JVC to the Seller or any member of its Group; (d) the Seller shall deliver to the Continuing Party/Third Party Purchaser duly executed transfer(s) in favour of the Continuing Party/Third Party Purchaser, or as it may direct, together with the appropriate share certificate(s) in respect of the Seller's A Shares and a certified copy of any authority under which such transfer(s) is/are executed; (e) against delivery of the transfer(s), the Continuing Party/Third Party Purchaser shall pay the total consideration for the relevant Seller's A Shares to the Seller by electronic transfer of immediately available funds on the completion date. (f) the A Shareholders shall ensure (insofar as they are able) that the relevant transfer or transfers (subject to their being duly stamped, stamp duty to be paid by the Continuing Party/Third Party Purchaser) are registered in the name of the Continuing Party/Third Party Purchaser or as it may direct; (g) the Seller shall do all such other things and execute all other documents (including any deed) as the Continuing Party/Third Party Purchaser may reasonably request to give effect to the sale and purchase of the Seller's A Shares; (h) if the buyer is a Third Party Purchaser, it shall enter into an agreement with the Continuing Party to be bound (in terms reasonably satisfactory to the Continuing Party) by provisions corresponding to the Seller's obligations under this Agreement including (but without limitation) those under this clause 12. If requested by the Third Party Purchaser, the Seller shall ensure that all the Directors appointed by it resign and the resignation(s) take effect without any liability on the JVC for compensation for loss of office or otherwise. Agency Authority for Transfers 12.10 The A Shareholders agree that the Board may authorise any person to execute and deliver the necessary transfers of A Shares pursuant to clause 12.9 and the JVC may receive the purchase price on trust for the Seller and cause the Continuing Party or the Third Party Purchaser (or such other person as the Seller may direct pursuant to clause 12.9(d)) to be registered as the holder of the A Shares. The receipt by the JVC for the purchase money shall be a good discharge to the Continuing Party or the Third Party Purchaser. The A Shareholders shall procure that the JVC shall as soon as practicable pay to the Seller the purchase money so received by it. Intra-Group transfers 12.11 A Shareholder may at any time transfer any of the Shares held by it to a company which is a wholly- owned Subsidiary of that Shareholder or a Holding Company of such Shareholder or any Subsidiary of such Holding Company. Shareholder ceasing to be a Subsidiary 12.12 Each of Pearson Internet and MarketWatch undertakes to ensure that any Shareholder in its Group shall transfer all of the Shares which it then holds to a person which will still be a member of the Pearson Group or MarketWatch Group (as the case may be) before such Shareholder ceases being a wholly-owned Subsidiary of it at any time. Bring-along 12.13 The Seller shall use all reasonable endeavours (but without involving any financial obligation on its part) to ensure that the Transfer Notice which it gives under clause 12.5 is accompanied by an offer to the Continuing Party from the Third Party Purchaser to buy all the A Shares held by the Continuing Party on the same terms (including price per Ordinary Share) as are set out in the Transfer Notice. The offer shall be expressed to be irrevocable, governed by English law and open for acceptance by the Continuing Party during the Acceptance Period. If the Transfer Notice is not accompanied by such an offer: (a) the Acceptance Period for the purposes of clause 12.6 shall, notwithstanding the terms of clause 12.6, be extended to a period of one hundred and eighty days from the date of receipt of the Transfer Notice; (b) the Seller shall use all reasonable endeavours during the extended Acceptance Period (but without involving any financial obligation on its part) to ensure that: (i) the Third Party Purchaser makes an offer to the Continuing Party in the terms of this clause 12.13; and (ii) the Continuing Party may participate fully at its own expense in all negotiations and discussions between the Seller and the Third Party Purchaser or their respective agents; and (c) subject to any confidentiality obligations owed to third parties, the Seller shall give the Continuing Party full access to all documents and information in the Seller's possession or under its custody and control which: (i) directly or indirectly relates to the intended transfer of the Seller's A Shares to the Third Party Purchaser; and (ii) the Continuing Party may require in connection with negotiations and discussions with the Third Party Purchaser. 12.14 Whenever, subject to clause 12.15, an A Shareholder transfers A Shares in accordance with the provisions of clauses 12.4 to 12.10 inclusive, it may procure that all B Shares held by any member of its Group are transferred at the same time to the transferee of the A Shares or to any member of the transferee's Group nominated by such transferee. In the event that the intending transferor of A Shares does intend so to procure the transfer of B Shares, it shall say so in the relevant Transfer Notice. 12.15 Upon receipt of a Transfer Notice containing a statement of intention to procure the transfer of B Shares, an A Shareholder may, by written notice to the JVC and the prospective transferor during the Acceptance Period, refuse permission for the transfer of B Shares as contemplated in clause 12.14. In that event, the continuing A Shareholders and the JVC shall procure that the B Shares are redeemed on the date on which transfer of the transferor's A Shares is completed (and, if necessary for such purpose, the continuing A Shareholder shall subscribe further shares in the JVC to enable redemption to occur lawfully). Financial matters, Information and reporting Accounting Principles 13.1 The JVC shall adopt accounting principles to be approved by the Board in relation to its financial statements necessary or desirable to enable each of the parties hereto and members of their respective Groups to comply with the financial reporting requirements for public companies in each of the United Kingdom and the United States. Auditors 13.2 The JVC's auditors shall be PricewaterhouseCoopers or such other firm of chartered accountants of recognised international standing as the parties may agree from time to time. Financial Year 13.3 The JVC's Financial Year shall be 31 December, unless the A Shareholders agree otherwise. Dividend policy 13.4 The A Shareholders shall, unless they agree otherwise in relation to any Financial Year, take all steps to ensure that in respect of each Financial Year the JVC distributes promptly by way of dividend all profits, available for distribution in accordance with applicable law, that are surplus to the funding requirements shown in the draft Budget for the following Financial Year attached to the relevant Business Plan. The JVC's Memorandum and Articles shall provide for the ability to pay interim dividends whenever legally permitted. Inspection and information 13.5 Upon reasonable notice to the management of the JVC each A Shareholder and the Financial Times may examine the separate books, records and accounts to be kept by the JVC during its regular business hours. Each A Shareholder and the Financial Times shall be entitled to receive all information, including monthly management accounts and operating statistics and other trading and financial information as and, in such form as it reasonably requires to keep it properly informed about the business and affairs of the JVC, to enable such party to comply with all applicable laws, rules and regulations applicable to such party in its jurisdiction of organisation or as required by any stock exchanges on which its shares are listed and traded and generally to protect its interests pursuant to this Agreement. Accounts, Business Plan and Budgets 13.6 Without prejudice to the generality of clause 13.5 the A Shareholders shall procure that: (a) the JVC shall supply the parties with: (i) copies of unaudited accounts for the JVC (complying with all relevant legal requirements) not more than ten (10) days following the end of each quarterly period of each Financial Year, and (ii) a copy of the audited annual accounts for the JVC not later than sixty (60) days following the end of each Financial Year; (b) the draft Business Plan for any Financial Year, including the draft Budget and any requisite draft Funding Schedule, shall be submitted to the Board for approval at the latest three months before the end of the previous Financial Year and that the Board shall use its best efforts to agree the Business Plan for any Financial Year at the latest three months after the beginning of the Financial Year to which it relates; (c) if the Board has not approved the terms of the draft Budget at the beginning of the respective Financial Year, then the Business of the JVC shall continue for three months after the beginning of the Financial Year in question on the Budget for the previous Financial Year plus 3%; (d) the Board shall as soon as reasonably practical, but in any event not more than fifteen Business Days after the end of each calendar month, prepare management accounts (which, for the avoidance of doubt, compare the JVC's performance against the Budget and Business plan) for the JVC; and (e) the Board shall report at least monthly in writing on the implementation of the Business Plan and on all transactions outside the ordinary course of business and shall cause copies of the relevant Board Minutes to be settled and distributed promptly to the parties. Confidentiality Confidentiality obligation 14.1 Each party shall use (and shall ensure that each of its Subsidiaries shall use) all reasonable endeavours to keep confidential (and to ensure that its officers, employees, agents and professional and other advisers keep confidential) any information: (a) which it may have or acquire before or after the date of this Agreement in relation to the JVC's customers, business, assets or affairs; this includes, without limitation, any information provided pursuant to clause 11; (b) which it may have or acquire before or after the date of this Agreement in relation to the customers, business, assets or affairs of any member of the Other Group resulting from: (i) negotiating this Agreement; (ii) being a shareholder in the JVC; (iii) having appointees on the Board; or (iv) exercising its rights or performing its obligations under this Agreement; or (c) which relates to the contents of this Agreement (or any agreement or arrangement entered into pursuant to this Agreement including, without limitation, the IP Transaction Documents). No party shall use for its own business purposes or disclose to any third party any such information (collectively, Confidential Information) without the consent of the A Shareholders except to the extent that disclosure of such Confidential Information is necessary for the purposes of performing their obligations under this Agreement. In performing its obligations under this clause 14, each party shall apply the confidentiality standards and procedures it applies generally in relation to its own confidential information. Exceptions from confidentiality obligation 14.2 The obligation of confidentiality under clause 14.1 does not apply to: (a) the disclosure (subject to clause 14.3) on a `need to know' basis to another member of the same Group or a party hereto where the disclosure is reasonably necessary for the purpose of this Agreement; (b) information which is independently developed by the relevant party or acquired from a third party to the extent that it is acquired with the right to disclose the same; (c) the disclosure of information to the extent required to be disclosed by law, any stock exchange regulation or any binding judgement, order or requirement of any court or other competent authority provided, that the disclosing party shall first give the other party such prior notice of such requirement as is reasonably practicable and to the extent that it is reasonably practicable, shall act to obtain or permit the other party to act to obtain confidential treatment for all such Confidential Information required to be disclosed; (d) the disclosure of information to any tax authority to the extent reasonably required for the purposes of the tax affairs of the party concerned or any member of its Group; (e) the disclosure (subject to clause 14.3) in confidence to a party's professional advisers of information reasonably required to be disclosed for a purpose reasonably incidental to this Agreement; (f) information which becomes within the public domain (otherwise than as a result of a breach of this clause 14); or (g) any announcement made in accordance with the terms of clause 24. For the avoidance of doubt, it is agreed by the parties that Financial Times has a need to know within clause 14.2(a) above all Confidential Information and a reasonable need for the disclosure of all Confidential Information to it for the purpose of this Agreement if and for so long as both (a) it is a member of the Pearson Group and (b) it provides or carries out any service or function to or for or on behalf of the JVC or Pearson Internet in connection with the Business or this Agreement (other than solely by means of the FT Trade Mark Licence). Employees, agents and advisers 14.3 Each party shall inform (and shall ensure that any Subsidiary shall inform) any officer, employee or agent or any professional or other adviser advising it in relation to the matters referred to in this Agreement, or to whom it provides Confidential Information, that such information is confidential and shall instruct them: (a) to keep it confidential; and (b) not to disclose it to any third party (other than those persons to whom it has already been disclosed in accordance with the terms of this Agreement). The disclosing party is responsible for any breach of this clause 14 by the person to whom the Confidential Information is disclosed. Return of Confidential Information 14.4 If this Agreement terminates, each party undertakes to the other that it shall (and shall use all reasonable endeavours to procure that its Subsidiaries and its officers, employees, agents, professional and other advisers and those of its Subsidiaries shall) promptly: (a) return to the other party or the JVC all original documents containing Confidential Information belonging to, or relating to, such other party or the JVC which it has or they have; and (b) destroy any copies of such documents and any other document or other written record reproducing, containing or made from or with reference to the Confidential Information and shall, upon request, provide a certificate of an authorised officer attesting to such destruction. (save, in each case, for any submission to or filings with governmental, tax or regulatory authorities). 14.5 Each Party shall ensure that all computer files comprising reports, summaries or other material or information relating to or derived from any documents or copy documents mentioned in clause 14.4 (a) or 14.4 (b) in the possession of such Party shall (in so far as they can, with reasonable effort, be identified and deleted) be deleted from any computer, word processor or other device containing the same. 14.6 Notwithstanding clauses 14.4 and 14.5, the written documents referred to in clause 14.4 which are created and/or owned by such Party or any of its professional advisers and relating to the Business (including any working papers, attendance notes, mark-ups of drafts and similar materials so owned and/or created) and (b) a diskette copy of the computer files referred to above in clause 14.5 (which can, with reasonable effort, be identified and deleted) may be securely stored by such Party but shall be used, or disclosed thereafter to any third party, only for the purpose of actual or potential litigation arising out of or in connection with this Agreement. Survival after termination 14.7 The provisions of this clause 14 continue to apply if this Agreement is terminated. Regulatory matters Co-operation 15.1 The parties shall co-operate with each other to ensure that all information necessary or desirable for making (or responding to any requests for further information following) any notification or filing made in respect of this Agreement, or the transactions contemplated by it, is supplied to the party dealing with such notification and filing and that they are properly, accurately and promptly made. Regulatory Action 15.2 If any material Regulatory Action is taken or threatened, the parties shall promptly meet to discuss: (a) the situation and the action to be taken as a result; and (b) whether any modification to the terms of this Agreement (or any agreement entered into pursuant to this Agreement) should be made in order that any requirement (whether as a condition of giving any approval, exemption, clearance or consent or otherwise) of the European Commission or any other regulatory authority may be reconciled with, and within the intended scope of, the business arrangement contemplated by this Agreement. The parties shall co-operate to give effect to any agreed modifications. Relationship with JVC and Group Members Contracts 16.1 Each party shall ensure that any contracts (other than the IP Transaction Documents) between the JVC and members of that party's Group are made on an arm's length commercial basis and on terms that are not unfairly prejudicial to the interests of either party or the JVC. Claims by JVC 16.2 If the JVC has or may have any claim against a party arising out of any agreement entered into by the JVC and any member of that party's Group, that party will ensure that the Directors nominated by any member of its Group shall not do anything to prevent or hinder the JVC asserting or enforcing the claim against the first mentioned party and that they shall, if necessary, enable all decisions regarding such claims to be taken by the directors nominated by the party wishing to assert or enforce the claim. This is without prejudice to any right of the latter party itself to dispute the claim. Tax matters Consortium relief 17.1 Each party shall use all reasonable endeavours so that, subject to clause 17.2, all of the JVC's trading losses and other amounts eligible for relief from corporation tax under Chapter IV of Part X of the Income and Corporation Taxes Act 1988 (ICTA) (consortium relief) are surrendered or made available to such Shareholders and/or other members of the relevant party's Group as wish to accept such surrenders to the extent that such persons wish to accept such surrenders and such surrenders are permitted by law. For this purpose: (a) the JVC and each party shall give all consents and take such other action (including, in the case of the JVC, submission of computations) as may reasonably be required to ensure that surrenders are promptly and effectively made within any relevant time limits; (b) each party shall ensure, in respect of each surrender that the relevant claimant company makes a payment in relation to the amount surrendered (as referred to in s402(6) ICTA) within nine (9) months of the end of the relevant claim period date (within the meaning of s403A ICTA); (c) the amount of any payment referred to in paragraph (b) shall be equal to 25 pence in the pound for the losses surrendered); (d) to the extent that it is determined that relevant losses or other amounts surrendered are not available for surrender for reasons other than insufficiency of profits of the claimant or other members of the relevant party's Group then so much (up to a maximum of fifteen (15) per cent.) of the relative payment made pursuant to paragraph (b) above shall be subject to return. 17.2 No further surrenders of trading losses may be made by the JVC pursuant to clause 17.1 after completion, pursuant to clause 11.7, of the transfer (following occurrence of an Event of Default pursuant to clause 11.1) of A Shares of a Defaulting Party whose Group includes the holder of the B Shares. Assurances Exercise of rights and powers of control 18.1 So far as it is legally able, each party agrees with the other to exercise all voting rights and powers (direct or indirect) available to it in relation to any person and/or the JVC to ensure that the provisions of this Agreement (and the other agreements referred to in this Agreement) are completely and punctually fulfilled, observed and performed and generally that full effect is given to the principles set out in this Agreement. Without limitation to the generality of the foregoing, if the B Shares are at any time required, pursuant to this Agreement or the JVC's articles of association, to be redeemed, the parties holding A Shares and B Shares shall cooperate in taking all requisite steps to permit redemption Provided that no party shall be obliged to subscribe further shares to enable such redemption to occur unless specifically required by this Agreement to do so. Performance by Subsidiaries 18.2 Each A Shareholder and Financial Times shall ensure that its Subsidiaries perform: (a) all obligations under this Agreement which are expressed to relate to members of its respective Group (whether as Shareholders or otherwise) and (b) all obligations under any agreement entered into by any of its Group pursuant to this Agreement. The liability of a party under this clause 18.2 shall not be discharged or impaired by any amendment to or variation of this Agreement any release of or granting of time or other indulgence to any of its Subsidiaries or any third party or any other act, event or omission which but for this clause would operate to impair or discharge the liability of such party under this clause 18.2. Non- assignment 19. No party nor any Shareholder in its Group shall, nor shall purport, to assign, transfer, charge or otherwise deal with all or any of its rights and/or obligations under this Agreement nor grant, declare, create or dispose of any right or interest in it, or sub-contract the performance of any of its obligations under this Agreement in whole or in part (otherwise than pursuant to a transfer of Shares to a third party in accordance with the terms of this Agreement) or the assignment by a party of its interest herein to its wholly-owned direct or indirect subsidiary in accordance with clause 12.11 of this Agreement. Waiver of rights 20. No waiver by a party of a failure by the other party to perform any provision of this Agreement operates or is to be construed as a waiver in respect of any other failure whether of a like or different character. Amendments 21. A variation of this Agreement (or of any of the documents referred to in it) is valid only if it is in writing and signed by or on behalf of each party. Invalidity 22. If any provision of this Agreement is or is held to be invalid or unenforceable, then so far as it is invalid or unenforceable it has no effect and is deemed not to be included in this Agreement. This shall not invalidate any of the remaining provisions of this Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision by a valid provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. No partnership or agency 23.1 Nothing in this Agreement (or any of the arrangements contemplated by it) is or shall be deemed to constitute a partnership between the parties nor, except as may be expressly set out in it, constitute either party the agent of the other for any purpose. 23.2 Unless the parties agree otherwise in writing, neither of them shall: (a) enter into any contracts or commitments with third parties as agent for the JVC or for the other party; or (b) describe itself as such an agent or in any way hold itself out as being such an agent. Announcements 24.1 No formal public announcement or press release in connection with the signature or subject matter of this Agreement shall (subject to clause 24.2) be made or issued by or on behalf of any party or any of its Subsidiaries without the prior written approval of Pearson Internet if the press announcement or press release is to be made by MarketWatch or by MarketWatch if it is to be made by any other party (such approval not to be unreasonably withheld or delayed). 24.2 If a party has an obligation to make or issue any announcement required by law or by any stock exchange or by any governmental authority, the relevant party shall give the other parties reasonable opportunity to comment on any announcement or release before it is made or issued (provided that this shall not have the effect of preventing the party making the announcement or release from complying with its legal and/or stock exchange obligations). Costs 25. Each of the parties shall, subject to clause 11.5, pay its own costs, charges and expenses (including taxation) incurred in connection with negotiating, preparing and implementing this Agreement and the transactions contemplated by it. The approved costs, fees and other expenses incurred by any party on behalf of the JVC in accordance with the provisions herein in connection with the formation of the JVC prior to Completion shall be borne equally by the A Shareholders. Entire agreement 26.1 This Agreement, the IP Transaction Documents and set out the entire agreement and understanding between the parties with respect to the subject matter of it and supersedes any prior understanding or agreement in relation to such subject matter. 26.2 No party has relied or has been induced to enter into this Agreement in reliance on any representation, warranty or undertaking which is not set out in this Agreement. 26.3 A party may claim in contract for breach of warranty under this Agreement but no party shall be liable to any other for any misrepresentation or untrue statement which is not set out in this Agreement. Conflict with articles Supremacy of this Agreement 27.1 If the provisions of this Agreement at the date hereof or from time to time hereafter conflict with the Memorandum and Articles or the JVC's other constitutional documents the provisions of this Agreement shall prevail as between the parties. The parties shall: (a) exercise all voting and other rights and powers available to them to give effect to the provisions of this Agreement; and (b) (if necessary) ensure that any required amendment is made promptly (from time to time) to the Memorandum and Articles or other constitutional document of the JVC to ensure that there is no longer any such conflict. Transfers of Shares 27.2 Without prejudice to the generality of clause 27.1, the provisions of this Agreement shall prevail in relation to the transfer of Shares and, accordingly: (a) no Shareholder shall use the provisions of any Article of the Articles of the JVC to frustrate the operation of clauses 11 or 12 of this Agreement; (b) each A Shareholder shall promptly give (or ensure that any Shareholder in its Group promptly gives) any approval under the Articles of the JVC which is necessary or appropriate to give full and immediate effect to the procedure contemplated by the provisions of clauses 11 or 12 and/or any transfer of Shares permitted under this Agreement; and (c) each A Shareholder, irrevocably and by way of security for the performance of its obligations under this Agreement to transfer Shares, appoints each other party its attorney to execute, sign and do all such deeds, documents, acts and things as are reasonably required for the purpose of or in connection with effecting and perfecting any such transfer of Shares. Termination of agreement Duration 28.1 This Agreement shall continue in full force and effect until the earlier of (i) termination pursuant to clause 6.1, or (ii) the date that is fifteen years after the date hereof, or (iii) such time as a Pearson Group Member and a MarketWatch Group Member do not both hold A Shares in the JVC. If as a result of any issue, sale or disposal made in accordance with this Agreement the A Shares are not so held, then this Agreement shall terminate and cease to be of any effect. This shall not: (a) relieve any party from any liability or obligation for any matter, undertaking or condition which has not been done, observed or performed by that party before termination; (b) affect the terms of any agreement replacing this Agreement entered into by Pearson Internet and MarketWatch, or any successor of either of them holding A Shares; (c) affect the terms of clauses 11.4(b) and 11.6 (continuing provision of Core Services), clause 14 of this Agreement (Confidentiality), clause 24 (Announcements), clause 30 (Settlement of Disputes) and clause 32 (Governing Law). Notices Notices 29.1 Any notice or other formal communication to be given under this Agreement shall be in writing and signed by or on behalf of the party giving it. It shall be: (a) sent by fax to the number set out in clause 29.2 with confirmation of receipt; or (b) delivered by hand or sent by prepaid recorded delivery, special delivery, registered post or prepaid internationally recognised courier to the relevant address in clause 29.2. In each case it shall be marked for the attention of the relevant party set out in clause 29.2 (or as otherwise notified from time to time under this Agreement). Any notice given by hand delivery, fax or post shall be deemed to have been duly given: (a) if hand delivered, when delivered; (b) if sent by fax, twelve (12) hours after the time of despatch; (c) if sent by recorded delivery, special delivery or registered post, at 10 am on the second Business Day from the date of posting; (d) if sent by prepaid internationally recognised courier, 48 hours from the date of posting, unless there is evidence that it was received earlier than this and provided that, where (in the case of delivery by hand or by fax) the delivery or transmission occurs after 6 pm on a Business Day or on a day which is not a Business Day, service shall be deemed to occur at 9 am on the next following Business Day. References to time in this clause are to local time in the country of the addressee. Address of notices 29.2 The addresses and fax numbers of the parties for the purpose of clause 29.1 are: (a) Financial Times: Address: Number One, Southwark Bridge, London SE1 9HL Fax No: 0207 873 3960 For the attention of: Company Secretary (b) MarketWatch: Address: 825 Battery Street San Francisco, California 94111 U.S.A. Fax No: (415) 392-1954 For the attention of: Chief Executive Officer With a copy to: Fenwick & West LLP Two Palo Alto Square Palo Alto, CA 94306 Fax: (650) 494-1417 Attention: John W. Kastelic (c) Pearson Internet Address: Media Centre 4th FI Rm 405 Sumatralaan 45 1217 GP Hilversum Netherlands Fax No. + 31 3562 37458 For the attention of: The Directors (d) POHL Address: 3 Burlington Gardens London W1X 1LE Fax No. 0207 411 2390 For the attention of: Company Secretary English language 29.3 All notices or formal communications under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail. Settlement of disputes 30.1 If any dispute arises in connection with this Agreement or any associated agreement entered into pursuant to this Agreement, the parties concerned shall use all reasonable endeavours to resolve the matter amicably. If one party gives another notice that a material dispute has arisen and the relevant parties are unable to resolve the dispute within thirty (30) days of service of the notice, then the dispute shall be referred to the respective Chairman of MarketWatch and any director of Pearson plc nominated by the Chairman of Pearson plc. No party shall resort to litigation or arbitration against another under this Agreement until thirty (30) days after the referral. This shall not affect a party's right, where appropriate, to seek an immediate remedy for an injunction, specific performance or similar court order to enforce the obligations of another party. Arbitration 30.2 If any dispute arising out of or in connection with this Agreement is unresolved by the Chairman of MarketWatch and any director of Pearson plc nominated by the Chairman of Pearson plc pursuant to clause 30.1, it shall be referred to and finally settled by arbitration under the Rules of the London Court of International Arbitration by one or more arbitrators appointed in accordance with those Rules. The place of arbitration shall be London. The language of arbitration proceedings shall be English. Counterparts 31. This Agreement may be executed in any number of counterparts and by the parties to it on separate counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. Governing law 32. This Agreement shall be governed by and construed in accordance with the laws of England. As witness this Agreement has been signed by the duly authorised representatives of the parties the day and year first before written. SIGNED by _____ _____ _____ for and on behalf of FINANCIAL TIMES GROUP LIMITED SIGNED by _____ _____ _____ for and on behalf of MARKETWATCH.COM INC. LIMITED SIGNED by _____ _____ _____ duly authorised for and on behalf of PEARSON INTERNET HOLDINGS BV in the presence of: SIGNED by _____ _____ _____ duly authorised for and on behalf of PEARSON OVERSEAS HOLDINGS LIMITED in the presence of:   EXHIBIT A FT Trade Mark Licence TRADE MARK LICENCE AGREEMENT (this Licence Agreement) made on _____ _____ 2000 Between (1) FINANCIAL TIMES LIMITED, a company incorporated under the laws of England and Wales, whose registered office is at Number One, Southwark Bridge, London SE1 9HL (the Licensor) (2) LIMITACE LIMITED (the name of which is proposed to be changed shortly to FINANCIAL TIMES MARKETWATCH.COM (EUROPE) LIMITED), a company incorporated under the laws of England and Wales whose registered office is at Number One Southwark Bridge, London SE1 9HL (the Licensee). Whereas (A) The Licensor is the owner of "FT" and "FINANCIAL TIMES" trade marks, short details of the existing registrations and applications for which in the Territory are set out in the Schedule hereto. (B) The Financial Times Group Limited has entered into a Joint Venture Agreement with MarketWatch.com, Inc. (MarketWatch) (the JV Agreement). Pursuant to the JV Agreement Financial Times Group Limited, Pearson Internet Holdings BV and Pearson Overseas Holding Limited and MarketWatch have agreed to form a joint venture and acquire shares in the Licensee for the purpose of jointly developing the Business and to procure that the Licensee is accordingly given certain rights to use "FT" and "FINANCIAL TIMES" word marks, inter alia, as part of the Corporate Name of the Licensee and in connection with the Business to be conducted by the Licensee, subject to the terms and conditions of this Licence Agreement. It is agreed as follows Definitions 1.1 In this Licence Agreement, unless separately defined below or the context otherwise requires, all expressions shall have the meanings given to them in the JV Agreement: Accounting Period means each of the three month periods ending on 31 March, 30 June, 30 September and 31 December for each year of the Term and the part of any such period from the Effective Date to the end of such period and from the commencement of any such period until 1700 GMT on the final day of the Term or, as the case may be, the date of termination of this Licence Agreement; Co-Branded Site means a website containing content that derives from and is substantially similar to the content of the Website that is operated under an agreement between the Licensee and a third party to promote and derive revenue for the Business among other things. Corporate Name means the company, business or trading name of the Licensee; Domain Name means any domain name used as part of the uniform resource locator (URL) of Websites or Co-Branded Sites on the Internet registered in the name of the Licensee at the domain name registries in the Territory; Effective Date means the date of this Licence Agreement first set forth above; Ft.com means the website owned and operated by the Licensor and located on the Internet under the domain name "ft.com"; Internet means the global network of interconnecting computer systems including without limitation the worldwide web; Licensed Marks means the marks "FT" and "FINANCIAL TIMES" and registrations and applications for registration for these marks in any jurisdiction; Net Revenues means the total amount of all revenues received in the ordinary course of the Licensee's conduct of the Business less Value Added Tax or any analogous tax in any other jurisdiction, and less usual trade discounts, allowances for returns, and any product packing, insurance and transport costs, but in all events excluding: (a) any revenue derived from the Licensor or MarketWatch; and (b) revenue attributable to enterprises that are acquired by Licensee, with such revenue for each relevant year deemed fixed as of the date of such enterprises' acquisition, by computing the enterprise's revenue for the 12 month period ended immediately prior to the date of its acquisition; Promotional Material means any promotional and advertising materials in any media created by (or on behalf of) the Licensee for the purpose of promoting the Business in the Territory; Royalty Rate means five percent (5%) for the first five (5) years, and three percent (3%) for the next five years and two percent (2%) for the last five years thereafter until the fifteenth anniversary of the Effective Date. Term means the period from the Effective Date until the first to occur of the following events: (a) termination of this Licence Agreement pursuant to Clause 8.2 below; or (b) expiration or earlier termination of the JV Agreement pursuant to Clause 28.1 of the JV Agreement; or (c) on Financial Times ceasing to provide Core Services pursuant to Clause 11.6 of the JV Agreement; or (d) on liquidation of the JVC pursuant to Clauses 10.5 or 11.10 of the JV Agreement. Website means a website established by (or on behalf of) the Licensee for the purposes of the Business. 1.2 In this Licence Agreement, unless the context otherwise requires: (a) references to persons shall include individuals, bodies corporate (whenever incorporated), unincorporated associations and partnerships; (b) the headings are inserted for convenience only and shall not affect the construction of the Agreement; (c) references to one gender shall include each gender and all genders; (d) any reference to an enactment is a reference to it as from time to time amended, consolidated or re-enacted (with or without modification) and includes all instruments or orders made under such enactments. Grant of Licence 2.1 In consideration of the payment of the royalties pursuant to clause 6 of this Licence Agreement by the Licensee to the Licensor the Licensor hereby grants to the Licensee a non-exclusive, worldwide, royalty-based licence during the Term and for a period of ninety (90) days thereafter, throughout the Territory to use the Licensed Marks: (a) in any page of the Website and any Co-Branded Site (including in any hypertext links within the Website which link to ft.com); (b) as part of the Domain Name and to register such Domain Name at the domain name registries in the Territory; (c) on and in the Promotional Material; (d) as part of the Corporate Name; and (e) in connection with the Business, subject to the terms and conditions of this Licence Agreement. The Licensee may grant sublicenses of the foregoing rights but only as to combination brands listed in Clause 3(f) below (and not as stand alone Licensed Trade Marks) and only for use in connection with Co-Branded Sites (including in links to Co-Branded Sites from other websites), and on and in Promotional Material therefor; provided that, any such sublicensee must execute a sublicense agreement that contains provisions that are, as to the Licensed Trade Marks and as to Licensor, at least as protective as the provisions of this Licence Agreement. Any such sublicence agreements shall provide for expiry co-terminous with the expiry or earlier termination of this Licence Agreement. Acknowledgement 2.2 The Licensee acknowledges and accepts that, as at the date of this Licence Agreement, the Licensor has not obtained trade mark registrations for Licensed Trade Marks in all countries of the world and accordingly in countries where the licensor has not obtained such registrations the Licensor can and does licence under Clause 2.1 only such unregistered trade mark right, title and interest as it may own in and to the Licensed Trade Marks. The Licensor makes no express warranty or representation (and none shall be implied) as to the extent of rights in the Licensed Marks, if any. Conditions Of Use 3. The Licensee hereby undertakes that: (a) it will use the Licensed Marks only as licensed herein and not otherwise; (b) consistent with prudent business judgement and Clause 3.1(a) of the JV Agreement, the Licensed Marks shall form part of the branding of the Business will be used prominently in the Website; (c) the Website and the Promotional Material will conform to such standards of quality as the Licensor may from time to time reasonably require, which shall be no lower than that generally achieved by the Licensor in providing Ft.com and related goods and services in the course of its business as at the date of this Licence Agreement; (d) it will not use the Licensed Marks in a manner which is reasonably likely to be prejudicial to the use of the Licensed Marks by the Licensor or its successors, assignees or licensees; (e) the Licensed Marks shall be used in a layout, form, size, printing style, colour and type face to be approved by the Licensor in advance of use (such approval not to be unreasonably withheld or delayed); (f) it will not use the Licensed Marks together or in combination with any other marks, names, logos, symbols or devices without the prior written consent of the Licensor, other than in the forms: (i) as part of a hypertext link to Licensor's website only, "Financial Times" or "ft.com"; (ii) "Financial Times MarketWatch"; and (iii) as part of, or in reference to (including but not limited to use in keywords or metatags), the Domain Names only, "FT MarketWatch.com" "FT MarketWatch", "FTMKTW.com" and "FTMKTW". Provided, however, that the marks in paragraphs 3(f) (ii) and (iii) (but not the Licensed Marks alone) may be used in other combinations with third party trade marks in describing a Co-Branded Site. (g) it will not use any device mark, logo, or symbol which is substantially similar to or so nearly resembles the Licensed Marks as to be likely to cause deception or confusion; (h) it will include on the home page of the Website, a statement that "THE FINANCIAL TIMES and the "FT" are trade marks of The Financial Times Limited and are used under licence" (or as may be advised in writing to the Licensee, an equivalent statement in relation to the Licensor's successors in title or assignees as the case may be); (i) it will not use the Licensed Marks in a manner which is reasonably likely to cause material harm to the goodwill attaching to the Licensed Marks; (j) it will meet, no more than quarterly, if so required by the Licensor, to discuss the maintenance of the above standards of quality and presentation. Samples and Access 4. If it is found that any item of the Promotional Material or any page of the Website or a Co-Branded Site bearing or intended to bear the Licensed Marks (the Materials) is not in conformity to any material extent with any of the Licensee's obligations under this Licence Agreement, the Licensor shall give the Licensee written notice of that fact setting out the reasons for the lack of conformity in reasonable detail. The Licensee undertakes that it will not print, publish, distribute, issue to the public, sell or offer for sale any non-conforming Materials under the Licensed Marks without the prior written consent of the Licensor. Acknowledgement/Registration of the Marks 5.1 The Licensee acknowledges and agrees that: (a) all rights in and to the Licensed Marks belong to the Licensor (subject only to the limited rights granted herein); (b) it shall not in any territory acquire or claim any interest in or title to the Licensed Marks or the goodwill attaching thereto by virtue of the rights granted to it under this Licence Agreement or through its use of the Licensed Marks under this Licence Agreement; and (c) all goodwill arising through use of the Licensed Marks by the Licensee in any territory shall at all times be deemed to have accrued to the Licensor. 5.2 Further, the Licensee undertakes that: (a) it shall not, in any jurisdiction, apply to register, register or seek to register any trade marks, domain names, (other than Domain Names, the Corporate Name and name combinations set forth in paragraphs 3(f) (ii) and (iii) above, as licensed herein), copyright or analogous right which is identical with or substantially similar to or includes any of the Licensed Marks; (b) it shall use its best endeavours not to do anything which is reasonably likely to prejudice the Licensor's rights in and to the Licensed Marks; (c) at the Licensor's request and reasonable expense, it shall execute or procure the execution of any document which may be necessary to allow the recordal of the rights granted to the Licensee under this License Agreement and the corresponding cancellation of such recordal on the termination or expiry of this Licence Agreement, for whatever reason; (d) at the Licensor's request and reasonable expense, it shall provide the Licensor with such reasonable assistance as the Licensor considers necessary for the purpose of pursuing any application or obtaining or maintaining any registration of the Licensed Marks. Payment of Royalties 6.1 The Licensee agrees to pay the Licensor payments, calculated by multiplying the Net Revenues by the Royalty Rate, payable quarterly in arrears. Moneys payable pursuant to this clause shall accompany the statement furnished by the Licensee pursuant to Clause 6.2(a). 6.2 The Licensee shall deliver to the Licensor: (a) within thirty (30) days following each Accounting Period, a statement showing Net Revenues for the most recent Accounting Period and the calculation of the royalty based on the Royalty Rate; and (b) any other information reasonably required in order to understand the royalty payments and Net Revenues as shall be requested by the Licensor from time to time. 6.3 All moneys to be paid hereunder shall be made together with any value added tax (or other similar tax) chargeable thereon. 6.4 All moneys due hereunder shall be paid in full without deductions, except only for such tax as the Licensee is obliged to deduct under any applicable law. The Licensee shall give the Licensor all reasonable assistance without charge to the Licensor to recover (under the provisions of double tax conventions or other lawful manner) any tax so withheld and to obtain any necessary authorisations and the like to enable the Licensee lawfully to pay without deduction of tax or to enable the Licensor to recover such tax or to obtain a tax credit in respect of any amount of tax so withheld. 6.5 In the event of any payment required to be made by the Licensee under this Licence Agreement not being received by the Licensor on or before the due date of payment, interest shall become payable thereon both before and after judgment at the rate of 3 per cent above the base rate of Barclays Bank plc (or, if such rate is not available, the nearest equivalent rate of another clearing bank in the City of London nominated by the Licensor and reasonably acceptable to Licensee) for the time being in force from the due date for payment to the date when payment is actually received. In the event of any other rate being substituted for the base rate then such substituted rate shall apply for the purpose of this Clause 6. 6.6 If any dispute shall arise between the parties hereto as to any royalty payment to be made hereunder, such dispute shall be determined by an accountant appointed in default of agreement between the parties by the President for the time being of the Institute of Chartered Accountants in England and Wales who shall act as an expert and not as an arbitrator and the fees and expenses of the accountant shall be borne equally by the parties unless the accountant directs otherwise. 6.7 All payments to be made by the Licensee to the Licensor shall be made in a mutually agreed manner. 6.8 Licensor shall have the right, at its own expense, to use certified accounting representatives reasonably acceptable to Licensee to make examinations and audits, by prior arrangement, during normal business hours, of Licensee's accounts that contain information supporting or reflecting Licensee's calculation of the statement provided under Clause 6.2(a) of this Licence Agreement. Any information so revealed shall be maintained in strict confidence by both the certified accounting representative and Licensee, shall not be disclosed by either of them to any third party, and shall be used solely to verify Licensee's calculation of the statement provided under Clause 6.2(a). Infringements 7.1 The provisions of Section 30(2) of the Trade Marks Act 1994 (as amended, re-enacted or replaced from time to time) or similar or analogous legislation in any country in the world, if any, are expressly excluded by the parties for the purposes of this Licence Agreement. 7.2 (a) Subject as provided in clause 7.2(b) below, the Licensor shall have the exclusive right in its sole and absolute discretion, and at its own expense, to assume the conduct of all actions and proceedings relating to the Licensed Marks in any country in the world and the Licensee agrees to provide to the Licensor at the Licensor's reasonable expense all assistance which the Licensor may reasonably require in connection therewith. Any costs or damages recovered as a result of any such actions or proceedings shall be for the account of the Licensor unless any such infringements have clearly caused financial loss to the Licensee in which case the parties agree to negotiate in good faith an appropriate allocation of any damages so recovered. 7.2 (b) If the Licensor decides not itself to bring any action for infringement of the Licensed Marks in any jurisdiction, the Licensor shall at the request of the Licensee lend its name to infringement proceedings taken by the Licensee in that jurisdiction, subject to receiving an indemnity from the Licensee in respect of the costs or liabilities so incurred by the Licensor and provided always that the Licensor shall have the right to approve all matters relating to the conduct of any proceedings taken in its name such approval not to be unreasonably withheld or delayed. Any costs or damages recovered as a result of proceedings taken by the Licensee shall be for the account of the Licensee unless any such infringements have clearly caused financial loss to the Licensor in which case the parties agree to negotiate in good faith an appropriate allocation of any damages so recovered. 7.3 The Licensee shall stop using the Licensed Marks anywhere in the world as soon as reasonably practicable after receipt of written notice from the Licensor (or the Licensor's trade mark agents or legal advisers from time to time) which reasonably demonstrates that such use infringes the intellectual property rights of any third party. Term And Termination 8.1 This Agreement shall commence on the Effective Date and shall, subject only to the other provisions of this Clause 8, expire automatically without need for further notice on the expiration of the Term. 8.2 The Licensor may terminate this Licence Agreement by giving written notice to the Licensee and MarketWatch effective forthwith: (a) if the Licensee challenges, by formal action taken with any governmental agency, the validity of the Licensed Marks or the Licensor's right to use or license the Licensed Marks; or (b) if the Licensee commits a material breach of any term or condition of this Licence Agreement and such breach continues unremedied for more than 45 days after the Licensor has served a notice in writing on the Licensee giving details of the breach requiring its remedy by the Licensee or the Licensee, commits a material breach of any term or condition of this Licence Agreement which is not capable of remedy, or commits persistent breaches of any term or condition of this Licence Agreement (whether or not material and whether or not capable of remedy); or (c) if (save for the purposes of a voluntary reorganisation, reconstruction or amalgamation) an order is made or a resolution is passed for the winding-up of the Licensee or if a provisional liquidator is appointed in respect of the Licensee, or if an administration order is made in respect of the Licensee, or if a receiver (which expression shall include an administrative receiver) is appointed in respect of the Licensee or all or any of its assets and is not discharged within a period of 30 days, or if the Licensee is unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world, or if any voluntary arrangement is proposed in respect of the Licensee under Section 1 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world; or (d) upon a change of Control of MarketWatch. Effects Of Termination 9.1 Within ninety (90) days of expiry or termination of this License Agreement for any reason: (a) the rights and licence granted hereunder to the Licensee shall cease and the Licensee shall immediately discontinue any and all use of the Licensed Marks; and (b) the Licensor may request that the Licensee delete or remove the Licensed Marks from or (where such deletion or removal is not reasonably practicable) destroy and provide to the Licensor satisfactory evidence of destruction, deletion or removal or if the Licensor shall so elect deliver to the Licensor, at the Licensor's cost, for destruction all materials in the possession or control of the Licensee to which the Licensed Marks is affixed; and the Licensee shall otherwise cease all use of the Licensed Marks, including without limitation all use of the trade mark "Financial Times MarketWatch". 9.2 Within ninety (90) days of expiry or termination of this Licence Agreement for any reason the Licensee shall provide to the Licensor satisfactory evidence that it has changed its Corporate Name so as not to include any of the Licensed Marks. 9.3 Within ninety (90) days of expiry or termination of this License Agreement for any reason the Licensee shall provide to the Licensor satisfactory evidence that it has either changed the Domain Name so as not to include any of the Licensed Marks or cancelled the Domain Name. 9.4 Termination of this Licence Agreement shall be without prejudice to the rights of either party which may have accrued up to the date of such termination. General Successors in Title/Assignment/Sub-Licensing 10.1 The rights and obligations of the Licensee under this Licence Agreement are personal to the Licensee and, subject as expressly provided in Clause 2.1 above, the Licensee may not (and may not purport to) assign, transfer, charge, sublicense, or otherwise part with all or any of its rights and/or obligations under this Licence Agreement (except that the Licensor hereby expressly consents to the novation of this Licence Agreement in favour of the JVC). Notices 10.2.1 Any notice or other communication to be given by one party to the other under, or in connection with the matters contemplated by, this License Agreement shall be in writing and signed by or on behalf of the party giving it and may be served by leaving it or sending it by fax, pre-paid recorded delivery registered post or internationally recognised courier to the address and for the attention of the relevant party set out in Clause 10.2.2 (or as otherwise notified from time to time hereunder). Any notice so served by hand, fax, post or internationally recognised courier shall be deemed to have been received: (a) in the case of delivery by hand, when delivered; (b) in the case of fax, twelve (12) hours after the time of despatch; (c) in the case of recorded delivery, special delivery or registered post, at 10 a.m. on the Second Business Day from the date of posting; (d) in the case of prepaid internationally recognised courier, 48 hours from the date of posting. 10.2.2 The addresses of the parties for the purposes of Clause 10.2.1 are as follows (a) Address for notices to the Licensor: · Number One Southwark Bridge London SE1 9HL England Attention:  Company Secretary (b) Address for notices to the Licensee: · 825 Battery Street San Francisco, California 94111 U.S.A. Attention:  CEO Entire Agreement 10.3 This Agreement represents the entire agreement and understanding between the Licensor and the Licensee in relation to the use of the Licensed Marks by the Licensee and shall supersede all arrangements or agreements relating to the Licensed Marks previously entered into or made between the parties and all such arrangements or agreements are hereby terminated. Precedence of Agreements 10.4 In the event of any inconsistency between the provisions of this License Agreement and the JV Agreement, the provisions of the JV Agreement shall prevail. Legal relationship 10.5 Nothing in this Licence Agreement shall be construed to constitute either party the partner, joint venturer, agent or employee of the other party and, except as expressly provided in this Licence Agreement, neither party by virtue of this Licence Agreement has authority to transact any business in the name of the other party or on its behalf or incur any liability for or on behalf of the other party. Variation 10.6 Any right, power, privilege or remedy of a party under or pursuant to this Licence Agreement shall not be capable of being varied or waived, otherwise than by an express waiver or variation in writing. Waiver 10.7 No failure or delay by any party in exercising any right, power, privilege or remedy under this Licence Agreement shall impair such right, power, privilege or remedy, or operate or be construed as a waiver or variation thereof or preclude its exercise at any subsequent time or on any subsequent occasion and no single or partial exercise of any such right, power, privilege or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Counterparts 10.8 This Agreement may be executed in counterparts, each of which shall be considered an original, with the same effect as if the parties or their representatives signed the same instrument. Severance 10.9 If any provision of this Licence Agreement is held to be invalid or unenforceable, then such provision shall (so far as invalid or unenforceable) be given no effect and shall be deemed not to be included in this Licence Agreement but without invalidating any of the remaining provisions of this Licence Agreement. The parties shall then use all reasonable endeavours to replace the invalid or unenforceable provisions by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. Further Assurance 10.10 Each party agrees to execute such documents and waivers and generally do everything further that may be necessary to fulfil its obligations under this Licence Agreement. Law and jurisdiction 10.11 This Agreement shall be governed by and construed in accordance with English law and the parties irrevocably agree that the English Courts shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Licence Agreement. In Witness Whereof the parties have executed this Licence Agreement on the date hereinbefore mentioned: SIGNED by duly authorised for and on behalf of FINANCIAL TIMES LIMITED in the presence of: SIGNED by duly authorised for and on behalf of LIMITACE LIMITED in the presence of: EXHIBIT B MarketWatch Trade Mark Licence TRADEMARK LICENSE DEED (the Deed) made on _____ _____ 2000 Between (1) MARKETWATCH.COM, INC., a company incorporated under the laws of state of Delaware, USA whose business offices are located at 825 Battery Street, San Francisco, California 94111, USA (the Licensor); and, (2) LIMITACE LIMITED (the name of which is proposed to be changed shortly to FINANCIAL TIMES MARKETWATCH.COM (EUROPE) LIMITED), a company incorporated under the laws of England and Wales, whose registered office is at Number One, Southwark Bridge, London SE1 0HL (the Licensee) Whereas (A) The Licensor is the owner of the "MARKETWATCH", "MARKETWATCH.com" and "MKTW" trademarks and existing registrations and applications for such trademarks as set forth in Schedule A attached hereto. (B) MarketWatch has entered into a Joint Venture Agreement with the Financial Times Group Limited (Financial Times) (the JV Agreement). As provided in the JV Agreement, MarketWatch, Financial Times, Pearson Internet Holdings BV and Pearson Overseas Holdings Limited have agreed to form a joint venture and acquire shares in the Licensee for the purpose of jointly developing the Business. Accordingly, the Licensee is to be given certain rights to use the mark "MARKETWATCH" and certain other trademarks as part of the Corporate Name of the Licensee and in connection with the Business to be conducted by the Licensee, subject to the terms and conditions of this Deed. It is agreed as follows Definitions 1.1 In this Deed, unless separately defined below or the context otherwise requires, all expressions will have the meanings given to them in the JV Agreement: Co-Branded Site means a website containing content that derives from and is substantially similar to the content of the Website that is operated under an agreement between the Licensee and a third party to promote and derive revenue for the Business among other things. Corporate Name means the company, business or trading name of the Licensee; Domain Name means any domain name used as part of the uniform resource locator (URL) of Websites or Co-Branded Sites on the Internet registered in the name of the Licensee at the domain name registries worldwide; Effective Date means the date of this Deed first set forth above; Internet means the global network of interconnecting computer systems, including without limitation the worldwide web; Licensed Marks means the marks and names "MARKETWATCH", "MARKETWATCH.com", "MKTW" and "FTMARKETWATCH.com" and registrations and applications for registration for these marks and names in any jurisdiction; MarketWatch.com means the website owned and operated by MarketWatch and located on the Internet under the domain name "MarketWatch.com"; Promotional Material means any promotional and advertising materials in any media created by (or on behalf of) the Licensee for the purpose of promoting the Business in the world; Term means the period from the Effective Date until the first to occur of the following events: (a) termination of this Deed pursuant to Section 7.2 below; or (b) expiration or earlier termination of the JV Agreement pursuant to Clause 28.1 of the JV Agreement; or (c) on MarketWatch ceasing to provide Core Services pursuant to Clause 11.6 of the JV Agreement; or (d) on liquidation of the JVC pursuant to Clauses 10.5 or 11.10 of the JV Agreement. Website means a website established by (or on behalf of) the Licensee for the purposes of the Business. 1.2 In this Deed, unless the context otherwise requires: (a) references to persons will include individuals, bodies corporate (whenever incorporated), unincorporated associations and partnerships; (b) the headings are inserted for convenience only and will not affect the construction of the Deed; (c) references to one gender will include each gender and all genders; (d) any reference to any law is a reference to that law as it may be amended, consolidated or re-enacted (with or without modification) from time to time and includes all instruments or orders made under such laws. Grant of License 2.1 In consideration of the payment of the sum of 1.00 pound sterling by the Licensee to the Licensor, (receipt of which is acknowledged) the Licensor hereby grants to the Licensee a non-exclusive, worldwide, royalty-free license during the Term and for a period of ninety (90) days thereafter, to use the Licensed Marks: (a) in any page of the Website and any Co-Branded Site (including in any hypertext links within the Website which link to MarketWatch.com); (b) as part of Domain Names and to register such Domain Names at the domain name registries worldwide; (c) on and in the Promotional Material; (d) as part of the Corporate Name; and (e) in connection with the Business, subject to the terms and conditions of this Deed. The Licensee may grant sublicenses of the foregoing rights but only as to combination brands listed in Section 3(f) below (and not as stand alone Licensed Marks) and only for use in connection with Co-Branded Sites (including in links to Co-Branded Sites), and on and in Promotional Material therefor; provided that, any such sublicensee must execute a sublicense agreement that contains provisions that are, as to the Licensed Marks and as to Licensor, at least as protective as the provisions of this Deed. Any such sublicense agreements will provide for expiration coterminous with the expiration or earlier termination of this Deed. Acknowledgement 2.2 The Licensee acknowledges and accepts that, as at the date of this Deed, the Licensor has not obtained trademark registrations for the Licensed Marks in all countries worldwide. Accordingly, in countries where such registrations have not been obtained by Licensor or MarketWatch, the Licensor can and does license under Section 2.1 only such unregistered trademark right, title and interest as it may own or have the right to sublicense in and to the Licensed Marks. The Licensor makes no express warranty or representation (and none will be implied) as to the extent of rights in the Licensed Marks, if any. Conditions Of Use 3. The Licensee hereby agrees that: (a) it will use the Licensed Marks only as licensed herein and not otherwise; (b) consistent with prudent business judgement and Section 3.1(a) of the JV Agreement, the Licensed Marks will form part of the branding for the Business and will be used prominently in the Website; (c) the Website and the Promotional Material will conform to standards of quality as the Licensor may from time to time reasonably require, which will be no lower than that generally achieved by the Licensor in providing MarketWatch.com services and related goods and services in the course of its business as at the date of this Deed; (d) it will not use the Licensed Marks in a manner that is reasonably likely to be prejudicial to the use of the Licensed Marks by the Licensor or its successors, assignees or licensees; (e) the Licensed Marks will be used in and with the Website in a layout, form, size, printing style, color and type face to be approved by the Licensor in advance of use (such approval not to be unreasonably withheld or delayed); (f) it will not use the Licensed Marks together or in combination with any other marks, names, logos, symbols or devices without the prior written consent of the Licensor, other than in the forms: (i) as part of a hypertext link to the Licensor's Website only, "MarketWatch" and "MarketWatch.com"; (ii) "Financial Times Market Watch"; (iii) as part of, or in reference to (including but not limited to use in keywords or metatags), Domain Names only, "FT MarketWatch", "FT MarketWatch.com", "FTMKTW" and "FTMKTW.COM"; provided, however, that the marks in paragraphs 3(f)(ii) and (iii) above (but not the Licensed Marks alone) may be used in other combinations with third party trademarks, in describing a Co-Branded Site. (g) it will not use any device mark, logo, or symbol that is substantially similar to or so nearly resembles the Licensed Marks as to be likely to cause deception or confusion; (h) it will include on the home page of the Website, a statement that "MARKETWATCH, MARKETWATCH.com and MKTW" are Trademarks of MarketWatch.com, Inc. and are used under license" (or as may be advised in writing to the Licensee, an equivalent statement in relation to the Licensor's successors in title or assignees as the case may be); (i) it will not use the Licensed Marks in a manner that is reasonably likely to cause material harm to the goodwill attaching to the Licensed Marks; (j) it will meet, no more than quarterly, if so required by the Licensor, to discuss the maintenance of the above standards of quality and presentation. Samples and Access 4. If it is found that any of the Promotional Material or any page of the JV Website or a Co-Branded Site bearing or intended to bear the Licensed Marks (the Materials) does not conform to any material extent with any of the Licensee's obligations under this Deed, the Licensor will give the Licensee written notice of that fact setting out the reasons for the lack of conformity in reasonable detail. The Licensee agrees not to print, publish, distribute, issue to the public, sell or offer for sale any non-conforming Materials under the Licensed Marks without the prior written consent of the Licensor. Acknowledgement/Registration of the Marks 5.1 The Licensee acknowledges and agrees that: (a) all rights in and to the Licensed Marks belong to the Licensor (subject only to the limited rights granted herein); (b) it will not acquire or claim any interest in or title to the Licensed Marks or the goodwill attaching thereto by virtue of the rights granted to it under this Deed or through its use of the Licensed Marks under this Deed; and (c) all goodwill arising through use of the Licensed Marks by the Licensee in any territory will at all times be deemed to have accrued to the Licensor. 5.2 Further, the Licensee undertakes that: (a) it will not, in any jurisdiction, apply to register, register or seek to register any trademarks, domain names, (other than Domain Names, the Corporate Name and name combinations set forth in paragraphs 3(f) (ii) and (iii) above, as licensed under this Deed), copyright or analogous right which is identical with or substantially similar to or includes any of the Licensed Marks; (b) it will use its best efforts not to do anything that is reasonably likely to prejudice the Licensor's rights in and to the Licensed Marks; (c) at the Licensor's request and reasonable expense, it will execute or procure the execution of any document which may be necessary to allow the recordation of the rights granted to the Licensee under this Deed and the corresponding cancellation of such recordation upon the termination or expiration of this Deed , for whatever reason; (d) at the Licensor's request and reasonable expense, it will provide the Licensor and/or MarketWatch with such reasonable assistance as the Licensor and/or MarketWatch considers necessary for the purpose of pursuing any application or obtaining or maintaining any registration of the Licensed Marks. Infringement 6.1 The provisions of Section 30(2) of the Trade Marks Act 1994 (as amended, re-enacted or replaced from time to time) or similar or analogous legislation in any country in the world, if any, are expressly excluded by the parties for the purposes of this Deed. 6.2 (a) Except as provided in Section 6.2(b) below, the Licensor will have the exclusive right in its sole and absolute discretion, and at its own expense, to assume the conduct of all actions and proceedings relating to the Licensed Marks in any country in the world. The Licensee agrees to provide to the Licensor, at the Licensor's reasonable expense, all assistance that the Licensor may reasonably require in connection therewith. Any costs or damages recovered as a result of any such actions or proceedings will be for the account of the Licensor, unless any such infringement has clearly caused financial loss to the Licensee. In such case, the parties agree to negotiate in good faith an appropriate allocation of any damages so recovered. 6.2 (b) If the Licensor decides not to bring any action for infringement of the Licensed Marks in any jurisdiction, the Licensor will at the request of the Licensee cooperate to enable infringement proceedings by the Licensee in that jurisdiction. However, such cooperation may be conditioned upon the Licensor receiving an indemnity from the Licensee in respect of costs or liabilities incurred by the Licensor and the Licensor having the right to approve all matters relating to the conduct of any proceedings taken in its name such approval not to be unreasonably withheld or delayed. Any costs or damages recovered as a result of proceedings taken by the Licensee will be for the account of the Licensee unless the infringement has clearly caused financial loss to the Licensor. In such case, the parties agree to negotiate in good faith an appropriate allocation of any damages so recovered. 6.3 The Licensee will stop using the Licensed Marks anywhere in the world as soon as reasonably practicable after receipt of written notice from the Licensor (or the Licensor's trademark agents or legal advisers from time to time) which reasonably demonstrates that such use infringes the intellectual property rights of any third party. Term And Termination 7.1 This Deed will commence on the Effective Date and will, subject only to the other provisions of this Section 7, expire automatically without need for further notice on the expiration of the Term. 7.2 The Licensor may terminate this Deed by giving written notice to the Licensee and Financial Times effective forthwith: (a) if the Licensee challenges, by formal action taken with any governmental agency, the validity of the Licensed Marks or the Licensor's right to use or license the Licensed Marks; or (b) if the Licensee commits a material breach of any term or condition of this Deed and such breach continues unremedied for more than 45 days after the Licensor has served a notice in writing on the Licensee giving details of the breach requiring its remedy by the Licensee or the Licensee commits a material breach of any term or condition of this Deed that is not capable of remedy or the Licensee commits persistent breaches of any term or condition of this Deed (whether or not material and whether or not capable of remedy); or (c) if, except for purposes of a voluntary reorganization, reconstruction or amalgamation, an order is made or a resolution is passed for the winding-up of the Licensee or if a provisional liquidator is appointed in respect of the Licensee, or if an administration order is made in respect of the Licensee, or if an administrative receiver or other receiver is appointed in respect of the Licensee or all or any of its assets and is not discharged within a period of 30 days, or if the Licensee is unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world, or if any voluntary arrangement is proposed in respect of the Licensee under Section 1 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world; or (d) upon a change of Control of Financial Times. Effects Of Termination 8.1 Within ninety (90) days of expiration or termination of this Deed for any reason: (a) the rights and License granted hereunder to the Licensee will cease and the Licensee will immediately discontinue any and all use of the Licensed Marks; and (b) the Licensor may request that the Licensee delete or remove the Licensed Marks from or (where such deletion or removal is not reasonably practicable) destroy and provide to the Licensor satisfactory evidence of destruction, deletion or removal or if the Licensor will so elect deliver to the Licensor, at the Licensor's cost, for destruction all materials in the possession or control of the Licensee to which the Licensed Marks is affixed; and the Licensee will otherwise cease all use of the Licensed Marks, including but not limited to all use of the trademark "Financial Times MarketWatch". 8.2 Within ninety (90) days of expiration or termination of this Deed for any reason, or thereafter as soon as practicable, the Licensee will provide to the Licensor satisfactory evidence that it has changed its Corporate Name so as not to include any of the Licensed Marks. 8.3 Within ninety (90) days of expiration or termination of this Deed for any reason, or thereafter as soon as practicable, the Licensee will provide to the Licensor satisfactory evidence that it has either changed the Domain Name so as not to include any of the Licensed Marks or cancelled the Domain Name. 8.4 Termination of this Deed will be without prejudice to the rights of either party which may have accrued up to the date of such termination. General Successors in Title/Assignment/Sub-Licensing 9.1 The rights and obligations of the Licensee under this Deed are personal to the Licensee and, except as expressly provided in Section 2.1 above, the Licensee may not (and may not purport to) assign, transfer, charge, sublicense, or otherwise part with all or any of its rights and/or obligations under this Deed (except that the Licensor hereby expressly consents to the novation of this Deed in favour of the JVC). Notices 9.2.1 Any notice or other communication to be given by one party to the other under, or in connection with the matters contemplated by, this Deed will be in writing and signed by or on behalf of the party giving it and may be served by leaving it or sending it by fax, prepaid recorded delivery registered post or internationally recognised courier to the address and for the attention of the relevant party set out in Section 9.2.2 (or as otherwise notified from time to time hereunder). Any notice so served by hand, fax, post or internationally-recognized courier will be deemed to have been received: (a) in the case of delivery by hand, when delivered; (b) in the case of fax, twelve (12) hours after the time of transmittal; (c) in the case of recorded delivery, special delivery or registered post, at 10 a.m. on the Second Business Day from the date of posting; (d) in the case of prepaid internationally recognized courier, 48 hours from the date of transmittal. 9.2.2 The addresses of the parties for the purposes of Section 9.2.1 are as follows: (a) Address for notices to the Licensor: · 825 Battery Street San Francisco, California 94111 U.S.A. Attention:  CEO (b) Address for notices to the Licensee: · Number One Southwark Bridge London SE1 9HL England Attention:  Company Secretary Entire Agreement 9.3 This Deed represents the entire agreement and understanding between the Licensor and the Licensee in relation to the use of the Licensed Marks by the Licensee and supersedes all arrangements or agreements relating to the Licensed Marks previously entered into or made between the parties and all such arrangements or agreements are hereby terminated. Precedence of Agreements 9.4 In the event of any inconsistency between the provisions of this Deed and the JV Agreement, the provisions of the JV Agreement will prevail. Legal relationship 9.5 Nothing in this Deed will be construed to constitute either party the partner, joint venturer, agent or employee of the other party and, except as expressly provided in this Deed. Neither party by virtue of this Deed has authority to transact any business in the name of the other party or on its behalf or incur any liability for or on behalf of the other party. Variation 9.6 Any right, power, privilege or remedy of a party under or pursuant to this Deed will not be capable of being varied or waived, other than by an express waiver or agreement signed by both parties. Waiver 9.7 No failure or delay by any party in exercising any right, power, privilege or remedy under this Deed will impair such right, power, privilege or remedy, or operate or be construed as a waiver or variation thereof or preclude its exercise at any subsequent time or on any subsequent occasion and no single or partial exercise of any such right, power, privilege or remedy will preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Counterparts 9.8 This Deed may be executed in counterparts, each of which will be considered an original, with the same effect as if the parties or their representatives signed the same instrument. Severance 9.9 If any provision of this Deed is held to be invalid or unenforceable, then such provision will (so far as invalid or unenforceable) be given no effect and will be deemed not to be included in this Deed but without invalidating any of the remaining provisions of this Deed. The parties will then use all reasonable efforts to replace the invalid or unenforceable provisions by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. Further Assurance 9.10 Each party agrees to execute such documents and waivers and generally do everything further that may be necessary to fulfil its obligations under this Deed. Law and jurisdiction 9.11 This Deed will be governed by and construed in accordance with English law and the parties irrevocably agree that the English Courts will have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Deed. Duly delivered as a deed on the date inserted on page 1 SIGNED AS A DEED and DELIVERED on behalf of MARKETWATCH.COM INC. a company incorporated in the state of Delaware, USA by _________________________ being a person, who in accordance with the laws of that territory, is acting under the authority of the company EXECUTED as a DEED by LIMITACE LIMITED acting by two Directors/a Director and a Secretary EXHIBIT C MarketWatch Technology Licence TECHNOLOGY LICENSE AGREEMENT (this Technology Agreement) is entered into effective as of _____ _____ 2000 Between (1) MARKETWATCH.COM, INC. a company incorporated under the laws of the State of Delaware, USA, whose business officers are located at 825 Battery Street, San Francisco, California 94111 USA (Licensor); and, (2) LIMITACE LIMITED (the name of which is proposed to be changed shortly to FINANCIAL TIMES MARKETWATCH.COM (EUROPE) LIMITED), a company incorporated under the laws of England and Wales, whose registered office is at Number One, Southwark Bridge, London SE1 0HL (Licensee) Whereas (A) Licensor controls, has rights to or is the owner of the MarketWatch Technology; and, (B) MarketWatch has entered into a Joint Venture Agreement with the Financial Times Group Limited (Financial Times) (the JV Agreement). As provided in the JV Agreement, MarketWatch and Financial Times, Pearson Internet Holdings BV and Pearson Overseas Holdings Limited have agreed to form a joint venture and acquire shares in Licensee for the purpose of jointly developing the Business. Accordingly, Licensee is to be given certain rights to use the MarketWatch Technology in connection with the Business to be conducted by Licensee, subject to the terms and conditions of this Technology Agreement. It is agreed as follows Definitions 1.1 In this Technology Agreement, unless separately defined below or the context otherwise requires, all expressions will have the meanings given to them in the JV Agreement: Accounting Period means each of the three (3) month periods ending on 31 March, 30 June, 30 September and 31 December for each year (or part thereof) during the Term and the part of any such period from the Effective Date to the end of such period and from the commencement of any such period until 17.00 GMT on the final day of the Term or, as the case may be, the date of termination of this Technology Agreement; Effective Date means the date of this Technology Agreement first set forth above; MarketWatch Technology means the website infrastructure, content authoring tools and techniques, network operations techniques, website architecture and databases used by MarketWatch, including any modifications, improvements and enhancements to, and derivative works based upon such technology provided by MarketWatch by means of the Services. MarketWatch Technology does not include any source code. Services has the meaning given to it by Section 6.1. Services Costs means all costs incurred by the Licensor referable to providing the Services to the Licensee (including labour, employee benefits and administration, as well as other incremental costs attributable to the Services provided, but not including any costs that would otherwise be incurred by the Licensor in the normal course of its business) which will not exceed, in any one year, the maximum annual fee for that year approved by a unanimous vote of the Board of Directors of the Licensee. Term means the period from the Effective Date until the first to occur of the following events: (a) termination of this Technology Agreement according to Section 8.2 below; or (b) expiration or earlier termination of the JV Agreement according to Clause 28.1 of the JV Agreement; or (c) MarketWatch ceasing to provide Core Services pursuant to Clause 11.6 of the JV Agreement; or (d) on liquidation of the JVC pursuant to Clauses 10.5 or 11.10 of the JV Agreement. 1.2 In this Technology Agreement, unless the context otherwise requires: (a) references to persons will include individuals, bodies corporate (whenever incorporated), unincorporated associations and partnerships; (b) the headings are inserted for convenience only and will not affect the construction of the Agreement; (c) references to one gender will include each gender and all genders; (d) any reference to any law is a reference to it may be amended, consolidated or re-enacted (with or without modification) from time to time and includes all instruments or orders made under such enactments. Grant of License 2.1 In consideration of the payment of the Services Costs by Licensee pursuant to Section 6 of this Technology Agreement, and subject to the terms and conditions of this Technology Agreement, Licensor hereby grants to Licensee a non- exclusive, worldwide, non-transferable, royalty-free license for the Term to import, use, modify, perform, create derivative works, and reproduce the MarketWatch Technology, and to sub-license a Subsidiary or sub-contractor to perform any of the above functions, solely to the extent necessary for Licensee, its employees and contractors to operate the Business. Reservation of Rights 2.2 All rights not expressly granted in Section 2.1 above are reserved to Licensor. Confidentiality 3.1 Licensee agrees that the MarketWatch Technology is the confidential information of Licensor. Licensee shall: (i) hold the MarketWatch Technology in strict confidence, (ii) not disclose the MarketWatch Technology to any third party (including, without limitation, Financial Times) (iii) not use the MarketWatch Technology for any purpose except solely to the extent necessary for Licensee, its employees and contractors to operate the Business, and (iv) take all reasonable measures to maintain the confidentiality of the MarketWatch Technology, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance. Notwithstanding Section 3.1(ii) above, Licensee may disclose the MarketWatch Technology to its employees, subsidiaries, contractors and professional advisors with a bona fide need to know, but only to the extent necessary to operate the Business, and provided further that such disclosure is subject to a written non-disclosure agreement which includes terms at least as restrictive as those of this Section 3.1. 3.2 The obligations of Section 3.1 shall not apply to any part of the MarketWatch Technology that: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Licensee, generally known or available to the public; (ii) was rightfully acquired by the Licensee before its receipt from Licensor and without restriction as to use or disclosure; (iii) is hereafter rightfully furnished to Licensee by a third party, without restriction as to use or disclosure; (iv) which the Licensee can document was independently developed by Licensee; or (v) is required to be disclosed pursuant to law, provided the Licensee uses reasonable efforts to give the Licensor reasonable notice of such required disclosure sufficient for the Licensor to seek and obtain confidential treatment of the MarketWatch Technology so disclosed. Proprietary Rights 4.1 The MarketWatch Technology is and will remain the sole and exclusive property of Licensor and its suppliers, if any, whether the MarketWatch Technology is separate or combined with any other technology, subject only to the licenses expressly granted herein. Subject to the License granted in Section 2.1, Licensor's rights and ownership under this Section 4.1 will include and cover, but not be limited to: (i) all copies of the MarketWatch Technology, in whole and in part; (ii) all Intellectual Property Rights in the MarketWatch Technology; and (iii) all modifications, improvements and enhancements to, and derivative works based upon, the MarketWatch Technology. Licensee agrees to assign, as requested by Licensee from time to time, and Licensee does hereby assign any and all right, title and interest in and to any and all such modifications, improvements, enhancements and derivative works, whether created by Licensee or for Licensee by third parties. 4.2 Rights Notices. Licensee will not delete or in any manner alter the Intellectual Property Rights notices of Licensor and its suppliers, if any, appearing on the MarketWatch Technology as delivered to Licensee. Licensee will reproduce and display such notices on each copy it makes of the MarketWatch Technology. 4.3 Licensee's Duties. Licensee will use its reasonable efforts to protect Licensor's Intellectual Property Rights in and to the MarketWatch Technology and will report promptly to Licensor any infringement of such rights of which Licensee becomes aware. Licensee will cooperate with Licensor in obtaining registrations of Intellectual Property Rights in and to the MarketWatch Technology and otherwise protecting Licensor's proprietary interests in the MarketWatch Technology. Disclaimer of Warranty 5. THE MARKETWATCH TECHNOLOGY IS PROVIDED "AS IS" AND, TO THE EXTENT PERMITTED BY LAW, WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT. Services and Service Fees 6.1 Licensor will provide the right to use existing technology development, implementation, technical management, and hosting services (the Services), as agreed by Licensor and JV from year to year during the Term. 6.2 Licensee will pay the Services Costs to the Licensor quarterly with the each payment due thirty (30) days after receipt of the statement described in Section 6.2(a) below. Within thirty (30) days following each Accounting Period, Licensor will deliver to Licensee: (a) a statement showing Services Costs for the prior Accounting Period; and (b) any other information reasonably required in order to understand the calculation for Services Costs and corresponding fees payable, as may be requested by Licensee from time to time. 6.3 All Services Costs to be paid under this Technology Agreement will be made together with any value added tax (or other similar tax) chargeable thereon. 6.4 All Services Costs due hereunder will be paid in full without deductions, except only for such tax as Licensee is obligated to deduct under any applicable law. Licensee will give Licensor all reasonable assistance without charge to Licensor to recover (under the provisions of double tax conventions or other lawful manner) any tax so withheld and to obtain any necessary authorizations and the like to enable Licensee lawfully to pay without deduction of tax or to enable Licensor to recover such tax or to obtain a tax credit in respect of any amount of tax so withheld. 6.5 In the event that any Services Costs are not received by Licensor on or before the due date of payment, interest will be payable on the past due amount both before and after judgment at the rate of three percent (3%) above the base rate of Barclays Bank plc (or, if such rate is not available, the nearest equivalent rate of another clearing bank in the City of London nominated by Licensor and reasonably acceptable to Licensee) for the time being in force from the due date for payment to the date when payment is actually received. In the event of any other rate being substituted for the base rate, such substituted rate will apply for the purpose of this Section 6. 6.6 If any dispute arises between the parties hereto as to any payment to be made hereunder, such dispute will be determined by an accountant mutually agreed upon by the parties or, if they cannot agree, an accountant appointed by the then current President of the Institute of Chartered Accountants in England and Wales. In any case, the accountant so selected will act as an expert and not as an arbitrator. The fees and expenses of the accountant will be borne equally by the parties unless the accountant directs otherwise. 6.7 All payments to be made by Licensee to Licensor will be made in a mutually agreed manner. 6.8 Licensee shall have the right, at its own expense, to use certified accounting representatives reasonably acceptable to Licensor to make examinations and audits, by prior arrangement, during normal business hours, and not more frequently than semi-annually, of Licensor's accounts that contain information supporting or reflecting Licensor's calculation of the Services Costs. Any information so revealed shall be maintained in strict confidence by both the certified accounting representative and Licensee, shall not be disclosed by either of them to any third party, and shall be used solely to verify Licensor's calculation of the Services Costs. Infringement 7.1 (a) Except as provided in Section 7.1(b) below, Licensor will have the exclusive right in its sole and absolute discretion, and at its own expense, to assume the conduct of all actions and proceedings relating to the MarketWatch Technology in any country in the world. Licensee agrees to provide to Licensor, at Licensor's reasonable expense, all assistance that Licensor may reasonably require in connection therewith. Any costs or damages recovered as a result of any such actions or proceedings will be for the account of Licensor, unless any such infringement has clearly caused financial loss to Licensee. In such case, the parties agree to negotiate in good faith an appropriate allocation of any damages so recovered. 7.1 (b) If Licensor decides not to bring any action for infringement of the MarketWatch Technology in any jurisdiction, Licensor will at the request of Licensee cooperate to enable infringement proceedings in that jurisdiction by Licensee. However, such cooperation may be conditioned upon Licensor receiving an indemnity from Licensee in respect of costs or liabilities incurred by Licensor and Licensor having the right to approve all matters relating to the conduct of any proceedings taken in its name such approval not to be unreasonably withheld or delayed. Any costs or damages recovered as a result of proceedings taken by Licensee will be for the account of Licensee unless the infringement has clearly caused financial loss to Licensor. In such case, the parties agree to discuss in good faith an appropriate allocation of any damages so recovered. 7.2 Licensee will stop using the MarketWatch Technology in a jurisdiction as soon as reasonably practicable after receipt of written notice from Licensor (or Licensor's legal advisers from time to time) which reasonably demonstrates that such use infringes the intellectual property rights of any third party in that jurisdiction. Term And Termination 8.1 This Agreement will commence on the Effective Date and will, subject only to the other provisions of this Section 8, expire automatically without need for further notice on the expiration of the Term. 8.2 Licensor may terminate this Technology Agreement by giving written notice to Licensee and Financial Times forthwith: (a) if Licensee challenges, by formal action taken with any governmental agency, Licensor's right to use or license the MarketWatch Technology; or (b) if Licensee commits a material breach of any term or condition of this Technology Agreement and such breach continues unremedied for more than 45 days after Licensor has served a notice in writing on Licensee giving details of the breach requiring its remedy by Licensee or Licensee commits a material breach of any term or condition of this Technology Agreement that is not capable of remedy or Licensee commits persistent breaches of any term or condition of this Technology Agreement (whether or not material and whether or not capable of remedy); or (c) if, except for purposes of a voluntary reorganisation, reconstruction or amalgamation, an order is made or a resolution is passed for the winding-up of Licensee or if a provisional liquidator is appointed in respect of Licensee, or if an administration order is made in respect of Licensee, or if an administrative receiver or other receiver is appointed in respect of Licensee or all or any of its assets and is not discharged within a period of 30 days, or if Licensee is unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world, or if any voluntary arrangement is proposed in respect of Licensee under Section 1 of the Insolvency Act 1986 or any analogous or equivalent legislation in any country of the world. Effects Of Termination 9.1 The License to use and to sub-license the use of The MarketWatch Technology granted by Section 2.1 above will survive termination of this Technology Agreement for any reason other than termination by the Licensor pursuant to Section 8.2 above, in which case the Licensee shall cease all use of the MarketWatch Technology within 90 days of termination. 9.2 Termination of this Technology Agreement will be without prejudice to the rights of either party, which may have accrued up to the date of such termination. General Successors in Title/Assignment/Sub-Licensing 10.1 The rights and obligations of Licensee under this Technology Agreement are personal to Licensee and Licensee may not (and may not purport to) assign, transfer, charge, sublicense, or otherwise part with all or any of its rights and/or obligations under this Technology Agreement (except that Licensor hereby expressly consents to the novation of this Technology Agreement in favour of the Licensee). Notices 10.2.1 Any notice or other communication to be given by one party to the other under, or in connection with the matters contemplated by, this Technology Agreement will be in writing and signed by or on behalf of the party giving it and may be served by leaving it or sending it by fax, prepaid recorded delivery registered post or internationally recognised courier to the address and for the attention of the relevant party set out in Section 10.2.2 (or as otherwise notified from time to time hereunder). Any notice so served by hand, fax, post or internationally recognised courier will be deemed to have been received: (a) in the case of delivery by hand, when delivered; (b) in the case of fax, twelve (12) hours after the time of transmittal; (c) in the case of post, 48 hours after posting; (d) in the case of prepaid internationally recognized courier, 48 hours from the date of transmittal. 10.2.2 The addresses of the parties for the purposes of Section 10.2.1 are as follows (a) Address for notices to Licensor: · 825 Battery Street San Francisco, California 94111 U.S.A. Attention: CEO (b) Address for notices to Licensee: · Number One Southwark Bridge London SE1 9HL England Attention: Company Secretary Entire Agreement 10.3 This Agreement represents the entire agreement and understanding between Licensor and Licensee in relation to the license and use of the MarketWatch Technology by Licensee and supersedes all arrangements or agreements relating to the MarketWatch Technology previously entered into or made between the parties and all such arrangements or agreements are hereby terminated. Precedence of Agreements 10.4 In the event of any inconsistency between the provisions of this Technology Agreement and the JV Agreement, the provisions of the JV Agreement will prevail. Legal relationship 10.5 Nothing in this Technology Agreement will be construed to constitute either party the partner, joint venturer, agent or employee of the other party and, except as expressly provided in this Technology Agreement. Neither party by virtue of this Technology Agreement has authority to transact any business in the name of the other party or on its behalf or incur any liability for or on behalf of the other party. Variation 10.6 Any right, power, privilege or remedy of a party under or according to this Technology Agreement will not be capable of being varied or waived, other than by an express waiver or agreement signed by both parties. Waiver 10.7 No failure or delay by any party in exercising any right, power, privilege or remedy under this Technology Agreement will impair such right, power, privilege or remedy, or operate or be construed as a waiver or variation thereof or preclude its exercise at any subsequent time or on any subsequent occasion and no single or partial exercise of any such right, power, privilege or remedy will preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Counterparts 10.8 This Agreement may be executed in counterparts, each of which will be considered an original, with the same effect as if the parties or their representatives signed the same instrument. Severance 10.9 If any provision of this Technology Agreement is held to be invalid or unenforceable, then such provision will (so far as invalid or unenforceable) be given no effect and will be deemed not to be included in this Technology Agreement but without invalidating any of the remaining provisions of this Technology Agreement. The parties will then use all reasonable efforts to replace the invalid or unenforceable provisions by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision. Limitation of Liability 10.10 EXCEPT FOR LICENSEE'S BREACH OF ITS OBLIGATIONS UNDER SECTIONS 3 OR 6.8 OF THIS TECHNOLOGY AGREEMENT, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER OR IN CONNECTION WITH THIS AGREEMENT FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR INDIRECT DAMAGES OF ANY KIND OR NATURE, AT LAW OR EQUITY, AND WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL LICENSOR BE LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT FOR ANY DAMAGES OF ANY KIND OR NATURE IN EXCESS OF FEES PAID TO LICENSOR HEREUNDER. Further Assurance 10.11 Each party agrees to execute such documents and waivers and generally do everything further that may be necessary to fulfil its obligations under this Technology Agreement. Law and jurisdiction 10.12 This Agreement will be governed by and construed in accordance with English law and the parties irrevocably agree that the English Courts will have exclusive jurisdiction to settle any disputes, which may arise out of or in connection with this Technology Agreement. In Witness Whereof the parties have executed this Technology Agreement on the date hereinbefore mentioned: SIGNED by duly authorised for and on behalf of MARKETWATCH.COM, INC., SIGNED by duly authorised for and on behalf of LIMITACE LIMITED